This week

In a study only conducted last year, it was revealed that only 20% of the population enjoy the perks of waking up naturally, whereas 71% of us have to rely on various types of alarm clock to drag us out of bed. Whilst it may seem difficult to wake up on time naturally, the report says the benefits might be worth it. Those waking up without assistance were 10% more likely to feel well rested than those using an alarm according the survey’s results, whilst those using a phone alarm reportedly took an average 28 minutes extra to fully gain compos mentis.

Spare a thought then for those working on domestic currency or fixed income markets on Monday morning, who would have almost have certainly preferred to wake up to a simple digital bleep rather than the almost deafening alarm bells heard across the Square Mile and Westminster.

Doubling down on his tax cut pledges over the weekend, Kwasi Kwarteng’s announcement that there would be “more to come” saw the market fall out of bed in a big way on Monday, leaving the pound to plummet to its lowest level in history. Sinking to $1.0327, the pound saw a staggering total 8.5% drop since the initial mini-budget’s announcement on Friday morning. Bond markets fared little better, with the yield on the 2-year gilt enduring a nightmare rise of 54bps to 4.3555%, its highest since 2008.

Such a rude awakening led many commentators to look towards the Bank of England (BoE) to introduce an emergency rate rise and prop up the ailing pound. Those dreams were soon quashed, as Tuesday saw Huw Pill, the bank’s chief economist rule out any such move until at least November, although he did promise “a significant monetary policy response" when it comes. In the meantime, the BoE would rely on communicating its intentions, an approach that would require respect for the central bank's independence from the government.

Such a move came the following day, as the bank sought to steady the gilt market, announcing it would buy up to £5 billion a day of British government bonds with a residual maturity of at least 20 years, starting at 2pm that very day.

In company news, in a possible reaction towards the cost of living crisis, discount supermarket, Aldi, has become the 4th largest UK supermarket in terms of market share, moving ahead of Morrisons.

Back at the start of the 2010s, Tesco, Sainsbury's, Asda and Morrisons together accounted for over three quarters of the supermarket sector, but little over a decade later, cover just over 60% of consumer spend. With the cost of staples such as milk having risen up to 50% since the beginning of the year, cheaper retailers are unsurprisingly taking increasing amounts of market share, helping a besieged consumer to quite literally wake up and smell the coffee.

Next week

After the start to the previous week, many investors could be forgiven for wanting a slightly quieter Monday morning this time around. Although currency markets will stay open in all countries, a bank holiday in both China and Germany, should add some solace through the closure of stock and fixed income exchanges.

The economic data still carries on coming though, with attention turning towards the US as both manufacturing PMI data vehicle sales numbers should give us a comprehensive view of the world’s largest economy. Acting as a leading indicator of economic health, the PMI data, taken from businesses, is useful as firms tend to react quickly to market conditions, and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.

The US should hold investor gaze for the majority of the week’s opening as their Bureau of Labour Statistics releases the nation’s job opening numbers. Excluding the seasonally volatile farming industry which usually skews the data, the figures will detail the strength of the US labour market, proving a particularly pertinent indicator as the US Federal Reserve continues to attempt to engineer a soft landing for the economy.

With the IMF even struggling to make a constructive case for the UK government’s “mini-budget” the end of the week should prove interesting as domestic construction numbers are made public. With the building blocks for a recession now firmly in place it seems, economists will be hoping for a strong reading to round the week off on a positive note, however, with the sector having slipped into contractionary territory recently, there seems very little foundation for this.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 30 September 2022.