UK markets made modest gains this week, with the FTSE 100 Index rising 0.3% to trade at 9,240 points at the time of writing.
UK businesses cut jobs at the fastest pace for four years this summer and reported the worst employment outlook since the pandemic, pointing to the continuing impact of Chancellor Rachel Reeves’ decision to raise payroll taxes.
British companies reduced employment by an annual rate of 0.5% in the three months to August, the worst figure since 2021, according to a Bank of England survey of chief financial officers published on Thursday. Businesses also told the central bank last month that they expect to cut employment by 0.5% in the year ahead. This is the lowest reading since October 2020, when the economy was starting to recover from the hit of the Covid pandemic and some restrictions were still in place.
Nearly half of the 2,130 companies surveyed by the Bank of England said they were cutting the number of employees as a result of the £25 billion increase in national insurance contributions, which took place in April along with a rise in the minimum wage. Some 20% reported lowering wages and 34% said they were increasing prices, according to the Decision Maker Panel survey. Two-thirds of businesses reported lowering profit margins.
As ministers confront a hole in the public finances that some economists estimate at £20 billion, the Treasury is examining a host of tax increases ahead of Reeves’ second Budget on November 26th.
Activity in the UK services sector rose at the fastest pace in more than a year in August, helped by a rebound in orders, lower borrowing costs and fading uncertainties over trade.
The S&P Global Purchasing Managers’ Index for Britain’s services sector, the largest contributor to the UK economy, rose to 54.2 in August from 51.8 in July, reaching its highest level since April 2024. New orders returned to expansion, following a moderate decline in July, helped by greater domestic businesses and consumer spending, and the first increase in export sales since March.
Elsewhere, the Office for National Statistics has revised down its retail sales numbers for the first half of the year, admitting to failures in compiling the figures that underline the scale of the difficulties in providing key economic statistics. As a result of the changes, the UK statistics agency lowered retail sales growth to 1.1% over the first six months of the year, compared with an initial estimate of 1.7%.
Commodity markets
In the commodity markets, Brent crude futures traded around $66 per barrel on Friday and are set to end the week lower, on a surprise build in US crude inventories last week and expectations that OPEC+ producers will increase output targets at a meeting this weekend.
The US Energy Information Administration said energy firms added 2.4 million barrels of crude into storage during the week ended August 29th. This was a surprise build in crude stocks compared with the 2.0 million barrel withdrawal analysts forecast in a Reuters poll.
Eight members of the Organisation for Petroleum Exporting Countries and allies like Russia in OPEC+ will consider further increases to production in October at a meeting on Sunday, two sources familiar with the discussions told Reuters.
A potential OPEC+ hike would send a strong signal that regaining market share takes priority over price support. OPEC+ has already agreed to raise output targets by about 2.2 million barrels per day from April to September, in addition to a 300,000 barrel per day quota increase for the United Arab Emirates.
US President Donald Trump told European leaders on Thursday that Europe must stop purchasing Russian oil that he said is helping Moscow fund its war against Ukraine, a White House official said.
Any reduction in the amount of crude Russia may export could boost prices. Russia was the second biggest producer of crude in 2024 after the US.
Gold prices traded around $3,550 an ounce on Friday, hitting record highs this week, as weak job opening data confirmed expectations of US rate cuts and lingering uncertainties supported safe haven demand.
Equity markets
US equity futures were mixed on Friday as Investors awaited the August jobs report, seen as pivotal in cementing expectations for a Federal Reserve rate cut this month. In Thursday’s regular trading session, the Dow Jones Industrial Average rose 0.77%, the S&P 500 gained 0.83%, whilst the Nasdaq Composite advanced 0.98%.
US job openings fell to a 10-month low in July and there were more unemployed people than positions available for the first time since the Covid-19 pandemic, data showed, supporting expectations that the Federal Reserve will cut interest rates this month.
Despite cooling demand for workers, layoffs remained relatively low, the Labor Department report showed on Wednesday. Fewer workers are also engaging in job-hopping. There were 0.99 job openings for every unemployed person, down from 1.05 in June and the first drop below the 1.0 mark since April 2021, when the US economy was digging out of the pandemic-induced slump.
The labour market has slowed, with economist blaming President Trump’s sweeping import tariffs. Labour supply has also declined amid the Trump administration’s immigration crackdown. Labour market softness was reinforced by the Federal Reserve’s “Beige Book” report, which noted an “increase in the number of people looking for jobs” in most districts in August.
Job openings, a measure of labour demand, had dropped 176,000 to 7.181 million by the last day of July, the Labor Department’s Bureau of Labor Statistics said in its Job Openings and Labor Turnover Survey. This was the lowest level since September 2024. Job openings have decreased by more than 300,000 over the past two months. Economists polled by Reuters had forecast 7.378 unfilled jobs. Some economists have argued that the labour market remains in good shape, noting the decline in job openings was concentrated in the healthcare and social assistance industry.
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