Although UK equity indices ended November in positive territory, their overall performance was muted compared with many other leading equity markets.
- Mid-caps outperformed blue chips in November
- The Chancellor released his Autumn Statement
- The CPI rate fell to 4.6% YoY
Mid-caps outperform: although UK equity indices ended November in positive territory, their overall performance was muted compared with many other leading equity markets. The FTSE 250 Index – representing medium-sized companies – performed better than the FTSE 100 Index, boosted by speculation that interest rates might have peaked; returns from blue-chip stocks were curbed by a stronger pound . The FTSE 250 Index rose by 6.7% during the month, while the FTSE 100 Index climbed by only 1.8%.
“Let me be very clear: it is far too early to be thinking about rate cuts” (BoE Governor Andrew Bailey)
Autumn Statement: the Chancellor of the Exchequer’s Autumn Statement included cuts to National Insurance contributions, increases to the State Pension and the National Minimum Wage, as well as simplifications to the ISA system and potential changes to pensions. The Office for Budget Responsibility (OBR) predicted that Government spending on debt interest will reach its second-highest level since WW2; at the same time, the UK’s tax burden will rise to a post-WW2 high of 37.7% .
Rates unchanged: the Bank of England (BoE) held its key interest rate at 5.25% in November but emphasised that it remained ready to raise rates again if necessary. Later in the month, BoE Governor Andrew Bailey stated: “Let me be very clear: it is far too early to be thinking about rate cuts”. The rate of consumer price inflation fell from 6.7% year on year in September to 4.6% in October, dampened by the impact of lower fuel prices.
Lacklustre outlook: the OBR expects the UK economy to expand by 0.6% this year, 0.7% in 2024, and 1.4% in 2025. In comparison, the Organisation for Economic Cooperation & Development (OECD) predicts growth of 0.5% in 2023, 0.7% in 2024, and 1.2% in 2025. Activity is anticipated to be hampered by lingering inflationary pressures, high interest rates, and fiscal pressures on businesses and households.
Sentiment brightens: UK consumer confidence picked up in November as households appeared more inclined to spend. Nevertheless, the November survey undertaken by GfK found that consumers remained preoccupied by “acute cost-of-living pressures”. Elsewhere, sentiment amongst UK businesses improved during the month, according to a survey conducted by Lloyds Bank , boosted by hopes that interest rates have peaked.
FTSE reshuffle: in the quarterly review of FTSE’s UK index constituents, alternative asset manager Intermediate Capital Group replaced investment platform Hargreaves Lansdown in the FTSE 100 Index. Companies joining Hargreaves Lansdown in the FTSE 250 Index include AO World, Tullow Oil and Trustpilot Group.
To view the series of market updates through November, click here
