🛍 UK consumers catch a break

What’s going on here?

Consumer prices in the UK rose at their slowest pace in over two years, and that has Brits wondering when their central bank might start talking about interest rate cuts.

What does this mean?

British prices climbed by 3.9% in November – well below the 4.4% economists had expected. That no doubt had shoppers stepping out from under their umbrellas: just a month earlier, inflation was at 4.6% (to say nothing of the double-digit pace at the start of the year). Sure, the latest slowdown was mainly driven by lower energy and food costs. But even core inflation, which excludes these more volatile prices, fell sharply – to 5.1% from 5.7% the month before.

Why should I care?

For markets: Good news for stocks

This cooldown came after the Bank of England (BoE) unleashed a barrage of icy-cold interest rate hikes to chill the economy and its red-hot inflation. Now the question is when the BoE will start to warm things up again. Traders seem to think that’ll happen soon: they’re already expecting the central bank to fire off five cuts next year. And that’s sent the British pound lower, since smaller interest rates make a currency less attractive to international investors and savers. But it’s given a boost to big stocks in London. After all, cheaper borrowing costs and a weaker pound would be good for major British companies that sell their wares overseas.

The bigger picture: Not so fast.

Nobody said markets are patient. Traders were already betting on four rate cuts next year, even before this data. And it seems like nothing the central bank can say will convince them otherwise. Just a week ago, the BoE was trying to tamp down expectations, warning that there are still miles to go in the battle against rising prices. And it’s got a point: inflation is still almost double the Bank’s 2% target and considerably higher than in the US and eurozone.

What’s going on here?

Norway’s gas behemoth Equinor signed a record €50 billion ($55 billion) deal with the German state energy group Sefe this week.

What does this mean?

Germany has its industrial gas needs squared away for a while now, with Equinor set to supply a honking 129 billion cubic meters of the stuff through 2039 – enough to cover a third of its cravings. That’s a blast of good news for the country: the deal puts it a step closer to energy security. And it’s an encouraging sign for governments across the European Union too – they’re all on the lookout for stable fuel sources that aren’t Russia. This latest contract is also part of a growing strategy among EU nations to secure steady supplies while driving toward net-zero emissions by 2050.

Why should I care?

For markets: Not all heroes wear capes.

Equinor seems to keep coming to Europe’s rescue. Its number of contracts has doubled since 2021 – with more of them for longer terms – as countries twig to the fact that the transition to greener energy is going to take a lot more time. That realization is also fueling fresh interest in low-emission nuclear energy. No surprise, then, that uranium – the key component in nuclear tech – has been a top-performing commodity this year, even with a sharp slowdown in Chinese consumption.

Zooming out: Long winters.

A steady gas supply is vital for an economy, so securing this deal must have Germany feeling warmer. Just last year, it shivered through an energy crisis when Russia cut its supply, sending monthly bills skyrocketing for households and businesses. Folks were turning their thermostats to near-frosty levels and factories were cutting operating hours, or shutting down altogether. But the country’s not out of the woods: in October, its industrial output fell 0.4% – hitting a low not seen since August 2020.