UK markets pulled back this week, with the FTSE 100 Index falling 2.12% to trade at around 10,495 points at the time of writing.
Despite the broader weakness, UK housebuilders rallied after the government announced plans to introduce a new version of the Help to Buy scheme, providing a boost to an industry facing a prolonged housing market slowdown. The new “Your First Home” scheme, announced by Prime Minister, Andy Burnham, will allow eligible first-time buyers to purchase new-build properties with a deposit of just 2.5%, supported by a 20% government equity loan.
The loan will initially be interest-free. The scheme represents a revival of the Help to Buy initiative, originally introduced by the Conservative government in 2013 and which ran for a decade. The announcement comes as housebuilders contend with relatively high borrowing costs, elevated construction expenses and subdued consumer confidence.
Weak building volumes are also threatening the government’s target of delivering 1.5 million net additional dwellings during the five-year parliament. Government estimates showed that the number of net additional dwellings in England fell 4.4% year on year to 199,500 in 2025-26. The original Help to Buy scheme, which combined a mortgage guarantee and equity loans, supported hundreds of thousands of first-time buyers in purchasing homes. However, the full details of the new scheme are yet to be finalised and are expected to be announced at the Budget on October 28th. The government has indicated that developers will contribute towards its cost through a fee linked to property values.
Meanwhile, the UK economy grew more strongly than initially estimated in the second quarter, suggesting some resilience despite the ongoing Middle East energy shock.
GDP expanded by 0.5% in the three months to June, according to the Office for National Statistics, compared with the initial estimate of 0.4% and growth of 0.6% in the first quarter. The upward revision was driven primarily by stronger growth in the services sector, which expanded by 0.6%, compared with the previous estimate of 0.5%.
Business investment, including spending related to artificial intelligence, was also revised higher to 1.8% quarter on quarter. Real household income per head increased by 1% during the quarter, indicating that households continued to maintain relatively substantial financial buffers. Separate monthly data showed that the economy expanded by a further 0.4% in July.
Elsewhere, the S&P Global UK Manufacturing PMI increased marginally to 51.9 in September, from 51.7 in August. The reading was broadly in line with the preliminary estimate and market expectations and remained above the 50-level separating expansion from contraction. Manufacturing activity therefore expanded for an 11th consecutive month, although the pace of growth eased slightly towards the end of the third quarter.
Commodity markets
In the commodity markets, Brent crude futures traded around $99 per barrel on Friday and are set for a weekly decline as the November Brent futures contract expired on Wednesday. Oil prices began rising towards the end of the week after China halted fuel exports, while the Wall Street Journal reported that the US is sending more troops and aircraft carriers to the Middle East as it also tries to make Europe draw down more emergency diesel.
The Wall Street Journal said the US was sending a third aircraft carrier and up to 10,000 more troops to the Middle East as President Donald Trump weighed resuming strikes on Iran after the US midterm elections.
China started a week long holiday on Thursday and have restricted major oil refiners from exporting to regions other than Hong Kong and Macau in October. It is not clear yet whether Beijing will permit resumption of export to countries outside of these regions after the holiday ends on October 7th.
The Trump administration has told Germany and France to draw down emergency diesel inventories to help ease soaring global fuel prices or face a potential US diesel export ban.
A source told Reuters that the US has asked the European Union to release 120 million barrels of diesel over the next six months. EU countries hold nearly 109 million tons of emergency crude and fuel stocks.
Gold prices traded around $4,180 an ounce on Friday and are set for a weekly fall, pressured by a firmer US dollar and elevated Treasury yields.
Equity markets
US equity futures rose on Friday as investors awaited the September jobs report, which could provide further insight into the health of the labour market and influence expectations for Federal Reserve monetary policy.
In Thursday’s regular trading session, the Dow Jones Industrial Average and Nasdaq Composite were broadly unchanged, gaining 0.04%, while the S&P 500 rose 0.19%. Investors were also assessing the latest inflation data, with the US Personal Consumption Expenditures (PCE) Price Index rising 0.3% in August, below economists’ expectations of 0.3% on a monthly basis and 3.7% annually. The annual increase was 3.4%. Core PCE, which excludes food and energy, increased 0.2% month on month, taking the annual rate to 3%, compared with forecasts of 0.3% and 3.3% respectively.
While the Federal Reserve officially targets headline PCE inflation, policymakers generally regard the core measure as a useful indicator of underlying price pressures. Despite the softer-than-expected annual readings, both measures remain above the central bank’s 2% inflation target. The latest figures were also affected by methodological changes introduced by the Bureau of Economic Analysis, which revised its approach to measuring prices for legal services, software and computer accessories, as well as portfolio management. The changes reduced the reported core PCE level for July by 0.36%. Energy costs were the main contributor to August’s monthly increase, with petrol prices rising 4.4%, transportation services increasing 1.4% and energy goods and services climbing 2.3%.
The continued strength of inflation, particularly in services and energy, leaves the outlook for interest rates uncertain following the Federal Reserve’s September rate increase.
Meanwhile, the US economy expanded at an annualised rate of 2.2% in the second quarter, according to the final estimate from the Commerce Department. This represented a significant upward revision from the previous estimate of 1.5%, reflecting stronger contributions from consumer and government spending and investment. Inflation measures for the second quarter were also revised slightly lower, with headline PCE inflation recorded at 5% and core PCE at 3%, both 0.3 percentage points below the previous estimates. The combination of resilient economic growth and inflation that remains above the Federal Reserve’s target leaves the forthcoming labour market data particularly important for assessing the potential path of monetary policy.