North Korea returned to the forefront of investors’ awareness in November following its decision to fire another ballistic missile towards Japan. The move was roundly condemned by world leaders. Despite further evidence of the eurozone’s economic recovery, investor sentiment was dented by political uncertainties in Germany and Ireland; meanwhile, Brexit talks between the UK and Europe showed some signs of progress.
- UK base rate was raised from 0.25% to 0.5%
- US economic growth was stronger than expected in Q3
- Consumer demand remained subdued in Japan
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North Korea returned to the forefront of investors’ awareness in November following its decision to fire another ballistic missile towards Japan. The move was condemned by world leaders including US President Donald Trump. Nevertheless, US investors were cheered by the progression of proposed tax reforms designed to reduce corporate taxes and cut inheritance taxes.
“UK interest rates rose for the first time since 2007 during November”
The US economy seemed to shrug off the impact of recent hurricane activity to post strong annualised expansion of 3.3% during the third quarter. Despite a slowdown in consumer spending growth, overall growth was boosted by investment and export activity, fuelling expectations of a further increase in interest rates before the end of 2017. President Trump announced that he will be replacing current Federal Reserve Chair Janet Yellen with his own preferred candidate, Jerome Powell, early in 2018. The Dow Jones Industrial Average Index rose by 3.8% over November.
In the UK, interest rates rose for the first time since 2007 during November as the Bank of England – as expected – increased base rate from 0.25% to 0.5%. The Autumn Budget took place during the month, and was notable primarily for swingeing cuts to the Office for Budget Responsibility’s official GDP growth forecasts. The downgrades were largely attributed to low productivity rates and Brexit-related uncertainties. Chancellor of the Exchequer Philip Hammond also allocated £3 billion for the UK’s Brexit preparations, and confirmed that more money will be available if necessary. The FTSE 100 Index fell by 2.2% during November.
The European Commission expects the eurozone’s economy to expand by 2.2% this year and 2.1% next year, easing to 1.9% in 2019. Despite further evidence of the eurozone’s economic recovery, investor sentiment in Europe was dented during the month by fresh political uncertainties. In Ireland, an escalating political scandal was averted by the resignation of the country’s deputy Prime Minister . Meanwhile, Germany faced a political crisis following the failure of coalition discussions between Chancellor Angela Merkel’s CDU/CSU and the Green Party. Germany’s Dax Index fell by 1.6% over November, while France’s benchmark CAC 40 Index dropped by 2.4%
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