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November 2022

Market movements and the global outlook

Welcome to our latest market update

Hello and welcome to the latest edition update. Today, we’re providing a brief round-up of the latest factors that are likely to affect the market and some detail on the global economic outlook.

Perhaps the biggest news from last week was the steep interest-rate rises on both sides of the Atlantic, but a diverging outlook for the path of rate rise from now on. The US Federal Reserve indicated the pace of increases will slow, but Chair Jerome Powell signalled that US rates would go higher than expected. In the UK, interest rates are not expected to be increased much from here as the economy remains extremely fragile.

Over the week, the blue-chip FTSE-100 index was up 3.5% by mid-session on Friday, with the more UK-focused FTSE 250 was 1.7% ahead.

We're grateful to our friends at Charles Stanley for their in put into this content. And, as always, we hope you find it both useful and insightful. Should you have any questions or wish to discuss anything in more detail then please just get in touch with your adviser.


The conflict in Ukraine

US President Joe Biden said he’d seek to impose higher taxes on oil companies that record “windfall” profits without reinvesting in production.

Companies that don’t show they’re reinvesting are “going to pay a higher tax on their excess profits and face other restrictions,” he said, blasting the industry’s profits as “a windfall of war.” However, unless the Democrats do especially well in the looming mid-term elections, Mr Biden is unlikely to be able to get such legislation passed into law.

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Chinese stocks listed in the US surged early last week, boosted by market rumours that Beijing was preparing to phase out its ‘zero-Covid’ policy.

However, the rally was reversed after China’s top health body said the nation’s zero-tolerance approach remained the overall strategy for fighting Covid-19. Indeed, authorities locked down a district in Zhengzhou city, home to Apple’s largest iPhone factory, under the policy. The lockdown started on Wednesday and is set to last for seven days. The move may have an impact on production of the new iPhone 14, which is made at Foxconn's plant in the city. Officials said they would "resolutely crack down on all kinds of violations of regulations". Apple said the complex would keep operating within a “closed loop” – a self-contained bubble that limits contact with the outside world.


UK Budget, 17th November

Chancellor Jeremy Hunt’s delayed budget will be delivered on 17 November and is said to be targeting a 50/50 split between spending cuts and tax rises. It has been reported that Mr Hunt has asked officials to look at raising the dividend taxation rate as well as cutting the tax-free allowance for dividends.

Prime Minister Rishi Sunak and Mr Hunt have refused to commit to the triple lock on pensions, meaning millions could face real-term cuts in April. The pledge of defence spending increasing to 3% of GDP by 2030 is also under review. Mr Sunak has also not committed to Boris Johnson’s promise to raise benefits in line with inflation. Cuts in infrastructure spending are also on the table, with cost savings on the HS2 rail link between Leeds and Manchester sought and construction of the Sizewell C nuclear plant put under review.



Federal Reserve Chair Jerome Powell warned that US interest rates will go higher than markets expected. The US central bank raised rates by 75 basis points for the fourth time in a row, lifting its benchmark interest rate to a range of 3.75% to 4%, from nearly zero in March. Mr Powell also indicated the path may be smaller rate hikes ahead, but this initial optimism was punctured following his hawkish comments on peak interest rates.

The Bank of England (BoE) warned the UK is facing its longest recession since records began, as it raised interest rates by the most in 33 years. The central bank said the UK would face a "very challenging" two-year slump with unemployment nearly doubling by 2025. Governor Andrew Bailey warned of a "tough road ahead" for UK households, but said it had to act forcefully now or things "will be worse later on" as interest rates were lifted to 3% from 2.25%, the biggest jump since 1989. However, the bank indicated that rates will not be pushed much higher.

The BoE become the first major central bank to launch quantitative tightening (QT) – selling some of the bonds bought in past crises to keep interest rates low. The central bank holds almost £850bn of gilts purchased in past quantitative easing (QE) programmes, which need to be unwound. The BoE sold £750m of short-term government debt as it embarked on an effort to trim its balance sheet. The sale marks a reversal of more than a decade of successive waves of QE, which followed the global financial crisis, the Brexit vote in 2016 and the onset of the Covid-19 pandemic.

UK house prices fell for the first time in more than a year, according to Nationwide, which said the turmoil sparked by Liz Truss' government's ‘mini budget’ had hit housing sales. Prices fell by 0.9% month-on-month in October, the first decline in 15 months, the mortgage lender said. The fall was the largest since June 2020, at the height of the Covid-19 pandemic.

Central banks, bonds and paying for government: All national central banks with national currencies are owned by the state. Recent profits have been passed quietly to their governments – but what happens now these bonds are making losses?

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The US and Taiwan will hold face-to-face trade talks in New York next week, a move that will displease Beijing. The US-Taiwan trade initiative aims to reach agreements in areas including regulatory practices and anti-corruption standards.

It was announced weeks after US President Joe Biden launched the Indo-Pacific Economic Framework in May, a deal designed to counter China’s influence in the region, which did not include Taipei. China remains opposed to the dialogue.


Corporate news

We will finish with news from around the corporate world, including the goings on at Twitter, now controlled by the world'd richest man, Elon Musk.

J Sainsbury posted a fall in profits in the first six months of the year, noting that shoppers are "watching every penny and every pound". Simon Roberts said the grocer understands "how tough it is for millions of households" and is trying to keep prices low.
Soren Skou, chief executive of shipping giant AP Moller-Maersk, said global trade is likely to slow this year as western economies tip into recession. The bellwether of global trade expects earnings, demand and shipping freight rates to shrink because of falls in consumer confidence and consumption. “Every indicator we are looking at is flashing dark red,” Mr Skou said.
Elon Musk dissolved Twitter's board of directors – cementing his control over the social media platform. The multi-billionaire will be its chief executive after buying the company. Reports suggest that between 25% and 50% of staff at the social-media group are facing redundancy. Mr Musk is now the chief executive of three companies: Tesla, SpaceX and Twitter.
Netflix launched its 'Basic with Ads' streaming plan in 12 countries – which it intends to expand over time. It's a massive change for the tech giant, which pioneered the world of ad-free, subscription-based streaming. However, as the rising cost of living and offerings from new rivals prompt audiences to quit, the company had to act.
Credit Suisse’s long-term rating was downgraded to one level above junk by S&P Global Ratings, which cited “material execution risks” related to its restructuring plan.

In conclusion

As we always say, there is no one-size fits all approach to financial planning. At Financial Framework Wealth & Estate Planning we continually monitor the market and work with you to ensure your investments and other financial plans are working as hard as they can for you in these challenging times. If you’d like to discuss this or anything in this update then please get in touch.

And please note
This newsletter is for information only and should not be seen as advice or a recommendation to act. The investment updates represent the opinion of Financial Framework Wealth and Estate planning only. Investments can go down as well as up and you may not get back the original capital invested.

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