This week just ended

They say “an apple a day keeps the doctor away…” however, after a busy week in the markets (not least for Apple) perhaps it should be “a Wegovy a day”, with the revolutionary weight-loss drug hitting UK pharmacies on Monday. Effectively blunting appetite so its users regularly feel full and subsequently eat less, the drug has been branded a “game-changer” by Prime Minister, Rishi Sunak, and is predicted to save the NHS nearly £6.5 billion a year.

Although the drug looks to be a hit with doctors, it seems it’s also been worth the weight for investors as well, as its manufacturer, Danish drugmaker Novo Nordisk, graduated to become Europe’s largest listed firm during the week. The surging demand for the effective diabetes drug has sent both the company’s shares and earnings to record highs, jumping 41% this year alone, ending French Luxury conglomerate, LVMH’s, two-and-a-half-year reign as Europe’s largest company in the process.

In a week where weight loss was the talk of European markets, it was interesting to see that investors were also shedding their pounds, as sterling came under pressure from an increasingly strong US dollar. Enjoying its best run since 2014, the greenback made its way higher as oil prices crossed the $90 mark after Saudi Arabia and Russia extended their voluntary supply cuts until the end of the year. Higher oil prices have brought about worries that the US Federal Reserve will be forced to raise rates further in an attempt to quell potentially resurgent inflation.

Staying with Europe, the middle of the week gave us the continent’s monthly retail sales figures, making for mixed reading. Even without Novo Nordisk’s new wonder drug, it seems European consumers have been tightening their belts already, as the data showed a 0.2% fall in purchasing from June to July. Consumption has been sluggish as incomes in real terms on the continent fall. Households are now spending a larger part of their incomes on energy bills and higher credit and mortgage repayments, in turn eroding demand for other goods. However, sales of food, drink and tobacco did all increase by 0.4%, and a 3.8% rise for online sales of goods was also noteworthy.

As previously mentioned, it seems Apple has been keeping more than the doctor away this week as investors rushed to underweight positions on the US technology behemoth, after news emerged that China's widening curbs on iPhone use by government staff would intensify. With tensions between China and the US rising, Apple shares tumbled 6.4% over two days, taking a $190 billion bite from its market capitalisation in the process.

Jobs data from the US on Thursday showed that the American economy still has plenty of appetite for workers, as the number of Americans seeking jobless benefits for the first time fell unexpectedly to its lowest since February. Those making initial claims for state unemployment benefits fell to 216,000 from 229,000 last week, and below the 234,000 forecast by economists. The report also showed that wages, a key focus of the US Federal Reserve as it attempts to control inflation, rose at 2.2% annually, a somewhat faster pace than the 1.6% rate initially reported last week. However, to add context, the rise in remuneration was still the slowest since the fourth quarter of 2021.

The end of the week also brought us property news on domestic shores as Halifax released its House Price Index numbers for public consumption. The data showed that house prices are now falling at their fastest pace since 2009, reflecting the impact higher interest rates are having on the sector. The report also highlighted that said house prices were 4.6% lower than when they reached their peak in September 2022. Prices fell 1.9% during the last month alone — the biggest monthly fall since November 2022, and far more than the 0.3% decline forecast — allowing more than a little food for thought this week.

This coming week

With the worst of the recent heatwave behind us, the coming week will hopefully act as an indicator that not only have outside temperatures begun to drop, but that the hot inflation we’ve experienced over the past 18 months is also beginning to cool.

Our first clue should arrive as early as Tuesday morning in the form of UK claimant count figures, detailing the change in the number of people requesting unemployment-related benefits during the previous month. Acting a proxy for the strength of the domestic labour market but generally considered as a lagging indicator, the number of jobseekers is an important signal of overall economic health due to its high correlation with consumer spending and therefore inflation. Alongside the data, we’ll also receive the average hourly earnings numbers for the previous three months, again giving us a good gauge on what consumer spending and inflation should look like, as the more people earn, the more they tend to spend.

Wednesday should prove to be a pivotal day for investors across the globe. Not only does the Office for National Statistics release the broadest set of data for the UK economy in the form of gross domestic product, there’s also key data from the US released in the afternoon. With the Federal Reserve’s ongoing fight with inflation still in the balance, many investors are still unsure whether the central bank has reached the peak of its rate hiking cycle just yet — Consumer Price Index data should be crucial in forming our understanding. The readings will come in two parts, core and non-core, with core stripping out the more volatile sectors of the reading, such as energy and food prices, to give a more accurate gauge on how price rises are behaving. 

The week will be rounded off with a host of further US economic data, including retail sales and consumer confidence, however it’s in Europe that investor’s gaze will settle. Thursday will see the European Central Bank (ECB) announce the latest in a long line of rate hikes. Although a further 0.25% rise has been largely priced in by investors, it’s the central bank’s forward guidance that should really pique our attention. Much like the US Federal Reserve and the Bank of England, the ECB should be close to halting their rate cycle, and so the bank’s accompanying press conference should take on added significance for any hints as to what they will opt for next.

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 8 September 2023.