Key Takeaways
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Despite data and news supporting rate cuts in Europe, market sentiment continues to be driven by a focus on the US.
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Recession fears raised by the Sahm rule have evaporated and expectations of deep rate cuts in the US have receded.
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In Europe, pessimism about economic prospects is all pervasive. However, we think this is overdone and expect European growth to steadily improve over the next year.
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UK attention is focused on the upcoming budget at the end of the month
Source: Macrobond as at 07-Oct-24
Meanwhile over in Europe, pervasive pessimism about economic prospects stands in marked contrast. This is exaggerated by the data’s focus on Germany and manufacturing, respectively areas of considerable relative weakness. But there are areas showing recovery, notably housing. Of course, individual countries differ but the message is clear: improving confidence combined with falling inflation and interest rates is leading to a steady rise in house prices. Housing is both a leading indicator and an important transmission mechanism for monetary policy. I expect European growth to steadily improve over the next year.
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Back in the UK attention is focussed on the upcoming budget at the end of the month. This will be a huge event, not least for UK financial markets. Our client webinar on 15 October will discuss this in detail and I’ll be joined by James McBride from Forefront. He’s an expert in this area having worked across Whitehall and the Labour Party. Contact your CTI rep for more details.