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Gold hits another record
Gold hit yet another high on Thursday morning, climbing to US$2,161.48 after assurances that US base rates could come down this year from Federal Reserve chair Jerome Powell.
“If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year,” he told lawmakers on Wednesday.
“But the economic outlook is uncertain, and ongoing progress toward our 2% inflation objective is not assured.”
The yellow metal’s most recent climb takes gains to around 9% since mid-February, with Finalto’s Neil Wilson noting a weaker dollar and demand from central banks were buoying the price.
A “primary driver [...] is a continued decline in real yields” as inflation expectations cool, SP Angel analysts added, “pushing buyers into gold from money market accounts and Treasuries”.
US stocks called higher at the open
The Nasdaq is expected to lead gains as US markets open higher on Thursday following reassurances that rate cuts are likely to take place this year.
Futures had the Nasdaq adding 67 points to hit 18,111 on Thursday’s opening bell, while the Dow Jones and S&P 500 were expected to tick up by 37 and 10 points respectively to 38,743 and 5,122.
This follows gains seen on Wednesday, after Federal Reserve chair Jerome Powell told lawmakers that rate cuts were still likely this year.
That said, jobs data is a “concern” for the wider economy, as per Finalto’s Neil Wilson, with Friday set to bring the week’s key non-farm payroll report.
“Falling real income, weaker disposable spend, high borrowing costs and depletion of savings generated during the pandemic is going to weigh later this year,” he said.
Among equities, New York Bancorp grabbed headlines on Thursday morning with news the troubled bank was set to receive US$1 billion through a capital raise.
Victoria’s Secret plummeted nearly 30% in pre-market trading meanwhile, after the chain unveiled weak first-quarter sales guidance on Wednesday evening.
And finally, Tesla shares continued a week-long losing streak ahead of the market’s opening, after Elon Musk’s firm was dealt a downgrade by Morgan Stanley (NYSE:NYSE:MS).
Hunt’s tax-cutting Budget slammed as burden set to soar
Chancellor Jeremy Hunt’s supposed ‘tax-cutting’ budget has been hammered by analysts, with the true burden on households and Hunt’s ability to stick to fiscal rules in question.
Though Hunt cut national insurance by a further 2p to 6% for many and extended freezes on the likes of alcohol and fuel duty, hikes elsewhere are set to shadow the effects of these, commentators said after Wednesday’s statement.
“Taxes are going up not down,” Resolution Foundation warned on Thursday, “this will be the greatest tax-raising Parliament since the Second World War”.
Tax relative to gross domestic product (GDP) will rise from 33.1% in 2019, to 36.5% by 2024, before then climbing then to 37.1% in 2028, as per the group.
Think tank IFS echoed the view, noting that by 2028, tax as a share of national income would be close to a “record level”.
Even so, according to IFS forecasts Hunt is “barely” set to keep within OBR fiscal rules, whereby debt must fall as a percentage of GDP in the final year of five-year forecasts.
The Chancellor is barely meeting his target to have debt falling in the fifth year of the forecast.It is set to fall by the tiniest of margins between 2027/28 and 2028/29. pic.twitter.com/iMJ0t6uWut
— Institute for Fiscal Studies (@TheIFS) March 7, 2024
“The combination of elevated debt and low nominal GDP growth makes it extremely difficult to get debt falling,” the think tank said, with this set to meet the five-year target “set to fall by the tiniest of margins”.
To make matters worse for Hunt, Citi analysts said OBR forecasts for GDP to rise 8% this year may be way off, leaving the UK with as much as a £60 billion fiscal black hole.
“We think post-Covid fiscal headwinds are only just beginning,” the bank said in a note, as it warned further “supply shocks” were likely in the future.
Hunt had described the statement, which is expected to be the government’s last before the next general election, as a “tax-cutting budget,” with handouts likely key in securing votes.
UK housing market ‘coming back to life’ - analyst
A fifth consecutive month of rising house prices in the UK demonstrates that the market “is coming back to life,” commentators have said.
“Buyers that were put off by higher rates are slowly returning in light of lower fixed rate offerings and easing inflation,” as per Aaron Milburn, director at credit firm Pepper Advantage.
His comments come after Halifax reported a 0.4% rise in house prices between January and February on Thursday.
This represented a £1,091 jump to £291,699, with prices increasing by 1.7% on an annual basis.
However, prices had climbed to 2.3% in the year to January, meaning the rate of increase had slowed.
“The drop in growth reflects the tenuous nature of this recovery,” Milburn said, “much depends on the Bank of England's decision later this month”.
Here's a recap of today's big stories
The FTSE 100 dipped early on after a bullish post-budget performance on Wednesday.
Grabbing headlines was Nationwide, which unveiled a deal to take over Virgin Money in a move which would create a group with combined assets of £366.3 billion.
Elsewhere, Aviva (LON:AV) shares jumped in early trading after the insurer unveiled a 9% increase in full-year pre-tax profit to £1.47 billion and hiked its dividend by 8% to 33.4p.
ITV (LON:ITV) also enjoyed a strong start, after announcing solid growth in its production and streaming wings had largely offset a wider downturn in advertising spend last year.
And finally, Halifax said 2024 had so far brought relative stability for the housing market, as the lender reported prices had climbed by 1.7% in February.
UK could face £60 billion fiscal black hole, Citi analysts warn
Britain’s growth projections could be overly optimistic for the year ahead as the likes of supply shocks are left unaccounted for, analysts have said.
Though the Office for Budget Responsibility forecast UK gross domestic product (GDP) to climb by 0.8% for the year, Citi analysts said on Tuesday that a more realistic figure would be around 5%.
Indeed, Citi noted the 8% forecast would see UK GDP grow far quicker than has been seen so far since the pandemic.
“We think post-Covid fiscal headwinds are only just beginning,” the bank said in a note, as it warned further “supply shocks” were likely in the future.
According to the bank, the OBR’s fiscal spending forecast is short by about £30 billion to £35 billion, while cuts unveiled in Wednesday’s budget are also likely “undeliverable”.
The government will have to spend in the region of £20 billion to £25 billion extra than is planned therefore, the bank said, taking the UK’s so-called fiscal black hole to between £50 billion and £60 billion.