A sense of gloom persists across the UK—not only because daylight now fades before 5 PM, but also due to lacklustre economic performance. GDP expanded by just 0.1% in Q3, marking a sharp deceleration from the 0.7% growth that surprised markets in Q1. Since then, momentum has steadily eroded, with Q2 growth slowing to 0.3%.
UK GDP contracted by 0.1% in September alone, with the Office for National Statistics pointing to a staggering 28.6% monthly collapse in automotive manufacturing. This sharp decline follows the cyber-attack on Jaguar Land Rover, which forced production to halt across all three UK factories. The hack is estimated to have cost the UK economy and Chancellor Reeves around £2 billion, affecting up to 5,000 organisations. With such weak economic data, markets now see this as a likely tipping point for the next Bank of England meeting, where expectations for a rate cut have surged to 80%.
This wasn’t the only data point from the UK. Unemployment rose to 5% in September, the highest level since May 2021, while wage growth (excluding bonuses) slowed further to 4.6%. The labour market is clearly weakening. The government’s decision to increase the national insurance burden on businesses has likely backfired, and as the autumn budget approaches, uncertainly around what approach Chancellor Reeves will take continue to mount. A softer labour market should help ease inflationary pressures and strengthen the case for deeper and quicker rate cuts, which in turn should help support the consumer and boost economic growth.
AstraZeneca shares climbed throughout the week, surpassing their previous record high set in September 2024. The rally was driven by strong third-quarter earnings and the announcement of an upcoming blood pressure drug, reinforcing its position as the largest UK-listed stock. Sentiment was further boosted after US President Trump confirmed a three-year tariff extension for the company—a significant win given that the US accounts for over 40% of AstraZeneca’s total sales.
Staying in Europe, Switzerland has returned to negotiations with US President Trump, seeking to reduce the 39% tariff on exports. Trump acknowledged that his stance toward Switzerland had been uncompromising and indicated that a potential agreement could be reached, recognizing the impact on Swiss access to critical markets for machinery and watches. On the back of this positive tone, shares in luxury conglomerates surged, with Richemont—owner of Cartier and Van Cleef—and Swatch—owner of Tissot and Omega—posting strong gains for the week.
In the US, the government shutdown finally ended after a historic 43 days, following support from eight Senate Democrats for the Republican spending measure. Around 1.4 million federal workers who went without pay will begin receiving back pay by the end of the week, though many contractual workers are unlikely to qualify. It’s worth noting that the new deal only funds the government until the end of January, setting the stage for another head-to-head over health subsidies—the very issue that triggered the shutdown in the first place.
Cracks in the artificial intelligence (AI) narrative widened this week as CoreWeave, an AI cloud computing firm, slashed its revenue forecasts due to data centre disruptions. Despite securing major deals with OpenAI and Meta, the company faces soaring infrastructure costs and intensifying competition for computing power. As a result, its share price tumbled nearly 25% over the week.
Gold and silver prices rallied at the start of the week after a challenging month for the precious metals. Gold broke through $4,200 an ounce, while silver made new all-time highs above $54 an ounce. Prices did soften towards the end of the week, along with risk assets, as equities pulled back on concerns around the AI theme.
Here in the UK a potential U-turn on increasing income tax at the budget led to further uncertainty with only 12 days to go until the Chancellor delivers the much-anticipated budget. The positive slant on their rumoured policy stance is that the Office for Budget Responsibility (OBR) has upgraded its forecasts, meaning the Chancellor can now forego income tax rises.
Nathan Amaning, Investment Analyst
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