The mood across global markets was steadier this morning after a stronger-than-expected UK growth report and a calmer tone from investors worldwide.
New data from the Office for National Statistics showed that the UK economy expanded by 0.3 per cent in November, reversing October’s dip and easing fears of a winter slowdown. The figures were boosted by services and construction activity, giving the government and the Bank of England a little breathing space as they assess the road ahead.
Earlier this week, a senior BoE policymaker said inflation is expected to hit the 2 per cent target by the summer – a signal that further rate cuts could be on the way. That tone has already fed through to gilt markets, where yields have fallen to their lowest in over a year. Traders are now betting that the Bank will keep easing gently through the spring.
Across Europe, policymakers are also preaching caution. France’s central bank governor warned that a budget deficit above five per cent of GDP would push the country into a “danger zone”, raising fears of renewed fiscal tension inside the eurozone. That reminder of how fragile confidence can be helped keep the euro in a narrow range.
Global politics continue to hum in the background. A World Economic Forum survey released ahead of the Davos summit ranked economic conflict between major powers as the world’s biggest short-term risk. With trade disputes, election cycles and security concerns converging, markets have every reason to stay alert as the year unfolds.
Even so, investors are cautiously optimistic. Softer inflation, resilient corporate earnings and falling energy prices have steadied nerves after a volatile start to the year.
