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Moody’s blues

14 Nov 2023 | 5 minutes to read

A good week for

  • US and EM equities, rallying +2.7% and 1.4% respectively in dollar terms
  • The US dollar strengthened by +1.3% versus sterling

A bad week 

  • Oil and gold, which slid -4.1% and -2.6% respectively
  • UK equities, which retreated -0.5%


UK GDP growth was flat over the third quarter of 2023. While this represents the weakest quarter since Q3 2022, it was better than consensus expectations forecasting a 0.1% contraction. The stunted growth defers the risk of a technical recession - defined as two consecutive quarters of negative growth. The latest economic forecasts from the Bank of England point to zero growth throughout 2024, but with the UK economy continuing to avoid recession. This quarter’s figures were aided by a better-than-expected September print, reporting growth of 0.2% rather than 0.1%. This growth was driven by the services sector, with the manufacturing sector continuing to act as a detractor, albeit the construction sector did manage to grow by 0.4% from the -0.8% in August. The current growth forecasts for the final three months of the year are between 0% and 0.1%. UK growth remains tepid.

China trade data

China’s trade surplus shrunk in October. Despite registering the first positive print for growth in imports since February, exports continued their downward trend for the sixth consecutive month reflecting weak demand from abroad for Chinese goods. Exports fell by 6.4% in October, surprising markets that had expected a 3.3% decline. There was some positivity, however, as imports grew by 3% - significantly better than expectations of a 4.8% decline - as policymakers continue to look to stimulate domestic demand. In addition to concerns regarding weak global demand, China’s Consumer Price Index (CPI) fell by 0.2%, renewing worries about deflation. The weaker print was mostly due to food prices declining by 0.8% month-on-month, compounding a 4% decline on a year-over-year basis, driven mostly by cheaper pork and vegetable prices.

UK house prices

UK house price rose last month after a run of six straight monthly falls as sellers took a more cautious attitude, leading to a shortage of supply on the market. According to mortgage lender, Halifax, the average price of a property rose to £281,974, up 1.1% from September. Compared with October 2022, annual UK prices have fallen 3.2%. South-East England continues to experience the largest annual decline in house prices, down 6%, while in Scotland prices fell 0.2% during the same period. Consensus expectations forecast house prices to fall further in the coming months, and to return to growth from 2025. The Bank of England leaving interest rates unchanged at 5.25% for a second consecutive meeting has also translated into a modest dip in mortgage costs.

US credit outlook

Credit ratings agency Moody’s cut its outlook for the US’s debt profile from stable to negative last week. Whilst Moody’s reaffirmed its highest credit ranking of Aaa for Uncle Sam, the move reflected the continuing political dysfunction in Washington. The possibility of a US Government shutdown by 17 November persists despite officials eventually selecting Mike Johnson, a Republican from Louisiana, as Speaker of the House after a prolonged stalemate. Given that the cost of servicing interest due on outstanding US debt is set to climb sharply, possibly exceeding the budget for defence spending, Moody’s revised outlook may arguably be considered a comment on the need for political cohesion. Whilst Moody’s move may initially prove inconsequential to markets, how Washington funds itself, and how that impacts budgets for the wars in Ukraine and Israel/Gaza among other issues, will matter as the US heads into a presidential election year.

Eurozone retail sales

Weak consumer demand driven by higher borrowing costs and high inflation weighed on Eurozone retail sales data released last week. The print of -0.3% was worse than consensus expectations of -0.2%. Whilst sales of non-food items slumped, those of food, drinks and tobacco jumped. Data on a year-on-year basis surprised to the upside, with retail sales data shrinking by -2.9% versus -3.1% expected. More generally, weak retail sales data may presage gloomier times ahead for the Eurozone which itself is currently skirting a recession, though data remains mixed at country level.


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