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UK Gov: Cameron as Foreign Secretary


UK Government Scrambles 

2023 keeps throwing up surprises: Who had David Cameron as foreign secretary on their bingo card? It smacks of panic. Letters of no confidence in the PM are already being delivered. Does that really change things? Probably not – Labour have a thumping poll lead and it seems like the last throes of a 13-year Tory corpse. 


Bated Breath 

Little change for stocks and bonds ahead of the US CPI inflation report later today. European stocks are flat at the open after rising on Monday on a catch-up trade with Wall Street following its big gains on Friday. The FTSE 100 gained 0.9% and is flat today just above 7,400, whilst European indices are a little firmer after rising 0.6% on Monday. Yesterday was a nothing-burger of a session for the US with the Dow up a touch, the Nasdaq off a tad and yields are steady ahead of the inflation data, whilst the dollar is holding fast against major peers. 


The CPI Signpost 

The CPI is important for the market because we’ve seen a big pivot in yields, but it won’t change the outlook for the December Fed meeting much because no one thinks the Fed will change that quickly. It will however, be a fair indication of what moves the Fed will make in the medium term. What will matter is the persistence of inflation over the coming months and the resilience in the labour market to withstand rate hikes already carried out. The CPI is forecast at 3.3% in October, whilst the core CPI is expected to remain at 4.1%.  


UK Labour Market Cooling? 

UK pay data shows wages outstripping inflation by the biggest margin in two years … on the face of things it’s hard to see the BoE taming inflation whilst pay growth is this strong...but the direction of travel is the right one for the MPC; wage growth has cooled and there are signs of softness in the labour market that means this data does not change the sense that the BoE could be cutting next summer. Pay rose at 7.7% vs the 6.7% inflation rate. Tomorrow’s CPI is expected to show inflation down below 5%.  


Policy Failures 

The US plans to buy 1.2 million barrels of oil to help replenish its Strategic Petroleum Reserve. Meanwhile the price cap on Russian oil is being almost totally circumvented. Oil prices rallied again on Monday to build on Friday’s gains, now just about clear of the 200-day line, and watching for a MACD signal. 

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