Faisal Islam

Hello all - I’m back on here, back in economics and after a few weeks wilfully getting lost in transit, am newly on here👇🏾, and shortly on air in a new role as Economics Editor of the BBC..

first take on data, trade wars, Brexit, fiscal gymnastics...👋 bbc.co.uk/news/business-…

Well worth a listen on the new WH Kremlinology, as it were:

Is the midterms AI & data centre backlash turning boom to bust? And will the PM be tempted to follow his Dem allies politics on this, or at the exact moment AI is boosting UK growth and investment, go the other way? From yesterday’s six and ten.

youtu.be/Rqs6IGGRDsw?si…

WATCH:

Not just a rate rise. Bank of England v interesting on UK growth strength. Bailey to me on EU rapprochement/ single market for financial services too.

GROWTH:

UK Q3 is coming in at 0.7%., the Bank says. For context, outside the pandemic rebound, the joint fastest quarterly growth since 2017.

Actual data is on Thursday, but absent massive revisions, it has to be 0.6-0.8%. Way above the consensus forecast even a few weeks ago. The OBR at the Budget (forecast closed in September) implied Q3 growth of …. 0.27%.

Bank did quite a detailed study of the strength. AI and consumer. Both obviously now have clouds in Q4, Bank has 0.3% for that.

I asked the Governor about the UK economy performing much better than forecast, he said: “it has, and this is obviously encouraging. We're seeing more resilience in terms of activity in the economy. It's probably quite sectorally concentrated…. For the first time we've been able to say... we think AI is part of that story".

On UK-EU closer relations:

I asked Bailey if the new Burnham push for closer relations would boost growth he said while he does not take a position on Brexit as a public official: “the broader question that underpins that, which you rightly ask, is would the UK being able to trade more openly with its nearest neighbours, to have that trade, to have that market openness, be beneficial for growth in the UK? My view is yes, it would”

And then I further asked him if that would stretch to single market membership for financial services [where in the past as FCA chief, in this area he is chief regulator, he has not embraced “rule-taking”]… he was sounding very neutral on this:

“I think that's very interesting. So, one thing I would say about the last decade, let's go back 10 years from now to the post-referendum period. I mean, people were predicting sort of doom and gloom and the end of the city of London, and that hasn't actually happened. And there's all sorts of reasons why that hasn't happened. But we're not in the single market. That's true, and I'm not taking a position on whether we should be, by the way. But financial services has remained one of the more open markets, actually, and I'm very pleased with that. I mean, we at the Bank of England have been very strongly supportive of that because we believe in open financial markets, and we will go on believing in open financial markets and working closely with our partners in other parts of Europe.”

FULL interview - growth and EU stuff at the end.

“Is this it?”

The very sharp share falls in the US were concentrated in data centre buildout adjacent stocks and Elon Musk adjacent stocks.

Falls in Asia also a bit wider. In Europe more widespread but much shallower falls.

Clearly given the astonishing investment cycle and build up in valuations, a reckoning was always coming. S&P futures are up from here though. For now it feels like a corrective reappraisal brought on by the less supportive political environment in the US. It could be the trigger, the pin in the bubble. Fridays can be perilous especially towards the end of trading.

For now there is some degree of discernment rather than outright panic.