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Morning Update

Rising house prices, three countries evicted from AGOA by the US, Federal Reserve data release this evening, and AI safety meeting.

House Prices Rise Unexpectedly

This morning’s Nationwide House Price Index indicated that prices rose over October as a lack of properties being listed for sale pushed up costs. Between September and October prices rose just under 1%, coming well above expectations of a further contraction. Here, Nationwide’s Chief Economist, said that “October saw a 0.9% rise in UK house prices, after taking account of seasonal effects. This resulted in an improvement in the annual rate of house price growth to -3.3%, from -5.3% in September”. Nevertheless, he caveated this by stating that housing market activity has remained week with 30% less mortgages being approved against the monthly average. While the UK housing market adjusts to monetary conditions being at their tightest level since 2008 and the cost of living continues to bite, the report indicated there has been little sign of forced selling given a strong labour market. The report highlights that affordability remains stretched and any forced selling it said, “would exert downward pressure on prices”. The index suggests that House Prices are down 3.3% on an annualised basis, above the consensus going into the print of a 4.8% contraction.

US Evicts Three Countries from AGOA

The United States has evicted three countries from its African Growth and Opportunities Act (AGOA). AGOA was introduced at the turn of this century and mostly allows US companies and consumers to import thousands of different products from specific countries without incurring import duties – therefore making trading with these countries for these products more attractive. Entry to the AGOA club is based on the country demonstrating respect for rule of law, human rights, and core labour standards. The Central African Republic and Uganda are being removed because of “gross violations” of human rights, whereas Gabon and Niger are being ousted because of their “failure to establish or make continual progress toward the protection of political pluralism and the rule of law”. The ejection will almost certainly have economic impacts for the countries but will also serve as a reminder that the US still holds some influence on the continent, and that though Russia are actively supporting across numerous countries’ leadership via the Wagner group and China is the largest funder of infrastructure projects across the continent, overseas trades with the US generates all important cash dollars.

 

All eyes on the Federal Reserve

At 18:00 this evening, attention will turn to the Federal Reserve where the FOMC are expected to maintain their benchmark policy target rate at 5.25-5.5% (its highest level in 22 years). The release of the Fed Minutes from their September policy meeting suggested that the majority of FOMC members were supportive of one more rate hike ahead of achieving their terminal rate, and markets are currently pricing in around a 27% chance of a 25bps hike in December. The Fed minutes also indicated that all members of the FOMC agreed that monetary conditions ought to be restrictive for some time to ensure that inflation gets down to their 2% target level. Indeed, since the writing of the minutes, headline CPI came in marginally higher-than-expected, with the month-on-month print for September coming in at 0.4% against expectations of 0.3%, while the year-on-year print came in at 3.7%. This comes as growth rose to 4.9% on a quarter-on-quarter basis for Q3 which represented the strongest level of growth since Q4 2021.

AI Summit

As we looked at yesterday, today will see politicians, policy makers, academics and business leaders gather in Bletchley Park to discuss AI safety. The meeting was earmarked by No10 as a means of establishing the UK as the centre of global regulation, though with political leaders’ focus elsewhere and the US also keen to hold such a position, many are suggesting that the Summit will be bring about little substantive change.  Amongst the list of attendees will include Prime Minister Rishi Sunak, Vice President Kamala Harris, president of the European Commission Ursula von der Leyen and Elon Musk.

Today’s Events

As discussed, today’s primary focus will be on the Fed’s interest rate decision at 18:00 and any subsequent rhetoric from the Press Conference held half an hour later. At 10:30, S&P Global/CIPS will release UK Manufacturing PMIs where markets will be looking for further insight into the current trends of the sector. From noon onwards, attention will turn to across the Atlantic with ADP employment figures released at 12:15 ahead of ISM Manufacturing PMIs at 14:00 and JOLTs at the same time.

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