1. UK mortgage approvals beat expectations in October, but consumer credit slows as markets focus on the BoE’s December rate decision. The Bank of England reported that mortgage approvals dipped to 65,018 in October, slightly below September’s 65,647 but still exceeding economists’ forecast of 64,200. Net mortgage lending for completed home purchases fell to £4.273 billion from £5.223 billion. Meanwhile, consumer credit growth softened to £1.1 billion, below the expected £1.35 billion, signaling cautious household spending amid fiscal tightening expectations.
Market analysts attribute the housing market’s resilience to pre-budget uncertainty, with tax hikes on high-value properties weighing on sentiment. However, approval levels remain near pre-pandemic averages. Attention now shifts to potential BoE rate cuts in December.
2. UK services sector optimism plunges at the fastest pace in three years as tax hikes deepen business concerns. The CBI’s services optimism index plummeted to -50 in November, the lowest since 2021, reflecting profit erosion from rising costs. Business volumes also contracted further (-38 vs. -30). Post-budget surveys by the IoD showed minimal improvement in business confidence (-72), underscoring SME pessimism.
3. UK manufacturing PMI returns to expansion but remains weak, with employment still shrinking. The S&P Global UK Manufacturing PMI edged up to 50.2 in November, marking the first expansion since September 2024, driven by domestic demand. However, growth was narrow—limited to investment goods and large firms—while job cuts persisted. Input price pressures eased, with selling prices dropping for the first time in over a year.
4. US manufacturing contracts for the ninth straight month amid tariff and demand headwinds. The ISM Manufacturing PMI fell to 48.2, with new orders (47.4) and employment remaining weak. Tariffs and supply chain uncertainties continued to pressure the sector, despite some AI-driven optimism.
**Economic Snapshot** UK manufacturing shows tentative recovery signs, but domestic demand stays cautious. The housing market remains resilient despite tax uncertainties, while consumer credit growth slows. The BoE maintains a cautious stance, with MPC member Megan Greene emphasizing the need for clearer labor market softening before supporting rate cuts.
**Political Developments** UK PM Keir Starmer defends Chancellor Rachel Reeves’ contentious budget, which raises £26 billion in taxes but avoids income tax hikes. Opposition parties accuse the government of exaggerating fiscal deficits to justify tax increases. Starmer insists the measures ensure stability and public service funding.
**Market Performance** UK stocks closed lower on December 1, with the FTSE 250 down 0.7%. Aerospace and housing sectors lagged, while gold miners rallied. Mixed economic data—weak services but rebounding manufacturing—kept investors cautious ahead of Fed Chair Powell’s speech.
**Geopolitical Updates** Ukraine faces continued missile attacks despite diplomatic efforts, with US-Russia talks ongoing. In Israel, PM Netanyahu’s request for a corruption case pardon sparks political turmoil, drawing both domestic backlash and US support.
**Technical Outlook** GBPUSD hit a five-week high (1.3274) amid Fed rate-cut bets but faces resistance near 1.3270. A sustained break above 1.3200 could target 1.3400, while a drop below risks a retest of 1.3000. The 4-hour chart shows consolidation, with RSI neutral, suggesting a pending breakout.
**Trading Strategy** Key levels to watch: - Upside: 1.3270–1.3310 - Downside: 1.3200–1.3150 A decisive move above resistance or below support will dictate near-term direction.
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