Markets suffered tough losses this week returning to yearly lows as banks around the world hike rates. The pound continues to slide.

Major Indices in the US fell about 5% this week

Major index averages, the S&P500, Dow Jones and Nasdaq fell around 5% each this week as investors digested the heavy interest rate hikes from central banks. With Q2 earnings around the corner, Costco and FedEx are 2 good examples of how this quarter's results could turn into a rough ride over the next few weeks. Commodities also saw declines too with oil dropping 6.8% this week and gas dropping around 9.8%. The UK and Europe are yet to see the cold weather but when they do, it could cause some serious volatility in the commodity markets. 

Eurozone continues to feel the pinch

The downturn in business activity across the eurozone increased in September month, with consumers reining in spending due to the cost of living crisis. Manufacturers continue suffering as the war between Russia and Ukraine seems never-ending, therefore leaving the gas prices on a high. Data showed that the downturn in German business activity deepened, with firms seeing huge dips in business (investing.com). And according to a Reuters poll done earlier in the month, there is a 60% chance of a recession within a year in the eurozone, including Europe’s largest economy (German). As a result of this and the release of PMI data today, German stocks, government bond yields and the euro, all FELL.  

A Dark day for the UK?

Kwasi Kwarteng, the Chancellor, has unveiled some of his plans regarding the mini-budget which intends to boost the economy. Part of the plan is to deliver billions of pounds worth of tax cuts and including a surprise move (standard.co.uk). The government is labelling this a “growth plan”, during a time when the UK is within touching distance of a recession due to soaring inflation and further interest rates. The Chancellor informed MPs that the initial plan of increasing corporation tax would be scrapped as a result of the cap on banker bonuses being cancelled. Furthermore, Kwasi added that the basic rate of income tax would be shaved to 19p for every pound from 2023, while abolishing the 45% higher rate of income tax as well (standard.co.uk). While some of this seems good the value of the pound shed another 3% today vs the dollar. This is going to cause some serious issues with the balance of payments in and out of the UK. While it does attract investment into the UK, trading abroad will become ever more difficult.