Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.

Today, we’re looking at UK spending cuts, the Canada-EU alliance, and copper’s price surge.

But first, our number of the week…

10.9%

That’s the estimated size of China’s 2025 deficit, according to analysts at Gavekal Research. Due to an enormous spending package, this figure is expected to soar past the government’s official 4% target. 

Sidekick Takeaway: China’s record-breaking stimulus measures could end up offering a significant boost to the sluggish global economy. Unfortunately, many investors still operate with the antiquated notion that China is an export-only economy. In fact, China is the world’s second-largest global importer and has a rapidly expanding consumer class. 

Now to our main stories…

Only have a minute to read? Here’s the TL;DR:

• Chancellor Reeves is widely expected to announce austerity-level spending cuts in her Spring Statement next week. Unfortunately, these cuts could come at exactly the wrong time for the UK, with growth slowing following a small contraction in January.
• Mark Carney visited the UK and France in his first international trip as Canadian PM. Canada and Europe are forging a stronger bond as economic and military rifts with the US deepen. Nearly half of Canadians now say they would favour joining the EU.
• Historically, ‘Dr. Copper’ has been seen as a bellwether for the global economy. Copper prices hitting a six-month high, however, may not be bullish at all. Rising tariffs are driving much of this increase and making the metal less useful as an economic indicator. 

It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.

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Bad Timing: UK Cuts Spending as Growth Slows

In a sign of the mounting pressures on the British economy, the OECD cut the UK’s growth forecast to just 1.4% this week. 

That follows an unexpected contraction in January, showing an economy vulnerable to a sustained slowdown.

Despite growth concerns, the BoE elected to hold rates steady on Thursday. Policymakers are increasingly concerned about the possibility of stagflation, given underlying price pressures.

All this adds up to a concerning outlook for Chancellor Reeves, whose widely anticipated spending cuts could come at exactly the wrong time for the UK.

Reeves expected to cut spending, welfare

Last October, Reeves committed to a suite of self-imposed fiscal rules. These included balancing the government budget and limiting borrowing to long-term investments.

Having effectively ruled out additional tax hikes, those constraints now leave her little choice but to slash spending:

• In her Spring Statement next week, Reeves is expected to announce some of the most significant spending reductions in decades. 
• Departmental spending cuts are expected to reach nearly £10 billion over the next five years. 
• Some of these cuts are expected to target welfare programs. Reeves has stated that the UK needs to ‘get a grip’ on the country’s welfare bill, prompting backlash from Labour MPs. 

Unfortunately, these measures reflect a gap between where the country was when Reeves established her rules and where it is today.

Since October, the UK economy has consistently performed below expectations, and tariffs have emerged as a new threat.

Several economists have already publicly urged Reeves to update her rules to reflect the new reality. 

Sidekick Takeaway: Stabilising government finances is not an inherently flawed goal, but it needs to be pursued at the right time. With growth continuing to slow, attempting to slash government spending right now risks pushing the UK into a more significant and protracted contraction. 

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Stronger Together: Canada & Europe Foster Ties

In his first trip abroad as Canada’s new prime minister, Mark Carney made a pointed decision to cross the Atlantic. 

In trips to the UK and France, Carney expressed the importance of Canada strengthening its relationship with ‘reliable allies.’ The visit comes at a tense time for Canada’s foreign relations. 

Amid Donald Trump’s increasingly aggressive posturing about absorbing Canada, the US has slapped large tariffs on Canadian goods.

Canada’s pursuit of closer ties with European allies is no surprise – but it could also come with significant and underappreciated benefits. 

Taking CanadEU seriously

The idea of Canada joining the EU has been around for decades as a half-serious proposal.

But it's been gaining traction both in leading publications and in public opinion (44% of Canadians now support the idea).

In reality, there are likely insurmountable legal hurdles to Canada formally joining the EU. Moreover, Canada shares a monarch with the UK, a non-EU country.

But both Canada and Europe could certainly benefit from far closer ties – in terms of both defence and economics:

• Canada is a resource-rich nation with ample natural gas reserves at a time when Europe is attempting to wean off Russian gas.
• Meanwhile, the EU has a mutual defence clause at a time when Canada is dealing with expansionist threats from the US.
• Expanding an existing free trade agreement while pursuing joint defence spending & training could serve both sides’ interests. 

Sidekick Takeaway: Carney’s trip to Europe is an indication that CanadEU is being taken seriously, if not literally. As Trump’s volatility fractures the America-led global order, both Europe and Canada could have much to gain by securing closer formal and informal ties.

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Dr. Copper: Misdiagnosing the Economy?

Though often overlooked, copper is a hugely important input in a variety of industrial and manufacturing processes. As a result, the metal has long been viewed as a bellwether for the broader economy. 

When copper prices rise, the outlook is meant to be bright. This predictive power has earned the metal the nickname ‘Dr. Copper’ for its ability to outforecast PhD economists.

It might seem like a bullish sign, then, that copper prices have surged to their highest level in more than six months. But is this diagnosis correct?

Copper rises on both supply & demand 

Bullishness based on copper’s performance is usually based on rising demand for the metal.

There is some evidence that copper prices are climbing due to increased demand. Prices surged after China vowed to unleash stimulus to boost domestic consumption.

But on the other hand, copper’s price has also been impacted by supply-side factors.

US tariffs on steel and aluminium have led to fears that levies could be implemented on copper as well. As a result, copper’s value as an economic indicator is far lower than it once was. 

Indeed, while rising commodity prices as a whole were once a sign of economic expansion, that relationship is far more questionable in a protectionist era. 

Sidekick Takeaway: As Trump’s policies reorder the US economy, investors need to be cautious about leaning on past indicators that now need fresh context. Copper is just one instance of this phenomenon. Sentiment surveys, for instance, may now reflect policy uncertainty more than fundamental economic weakness.

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Notices

Sidekick Money Ltd is a company registered in England and Wales (No. 13882980). Sidekick Money Ltd is authorised and regulated by the Financial Conduct Authority (FRN 984829). Our address is 21-33 Great Eastern St, London, EC2A 3EJ.

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