Just time for one more interest rate rise… from Tunisia.

Tunisia’s central bank has raised its key interest rate by 75 basis points to 8% from 7.25%.

The move will combat high inflation, the bank said, marking the third hike this year.

The UK’s rail strikes have cost bars, pubs, restaurants and hotels in the UK at least £1.5bn in December alone and – coupled with the cost of living crisis – will result in a “huge swathe of businesses and jobs lost”, industry bodies have warned.

Kate Nicholls, the chief executive of UKHospitality, said the financial impact of train strikes on the sector was worse than expected, resulting in a “perfect storm” for businesses battling soaring energy bills and inflation that meant “undoubtedly we will see more business failures” in the next three months.

Michael Kill, the chief executive of the Night Time Industries Association (NTIA), said:

“Industrial action and cost inflation pressures have decimated trade across the night-time economy, with many hugely concerned that New Year’s Eve and New Year’s Day will be further impacted by train strikes.”

Retailers have failed to benefit from a post-lockdown boost in UK high street activity this year after soaring energy bills and the cost of living crisis forced households to rein in their spending.

Despite an increase in face-to-face shopping after the lifting of Covid 19 restrictions, Barclaycard data released for the whole of 2022 showed retail spending fell 0.8% on the previous year.

Germany’s DAX share index has recorded an annual loss of 12.3%.

That’s its worst performance since 2018, Reuters reports.

The more UK-focused FTSE 250 index of medium-sized companies had a rough year, falling 19.7% in 2022.

“The FTSE 250 is more closely correlated to the UK economy and has been weighed down by this year’s domestic economic and political uncertainty,” explains Victoria Scholar, head of investment at Interactive Investor.

The FTSE 100 has gone out with a whimper and not with a bang, with its 0.8% drop today.

It’s a forewarning of fresh turbulence ahead for 2023, warns Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

As central banks still seem set on the path of hiking interest rates further, the turmoil which has roiled financial markets is set to continue and as global growth worries rise, the international focused FTSE 100 will not be immune to the headwinds.

Housebuilders led the downwards pack on the FTSE 100, as concerns mount about buyers’ nervousness amid expectations of significant house price falls next year. The toxic combination of stubborn inflation, and the end of the era of cheap money, has seen low mortgage deals evaporate, and sky-high prices are becoming unaffordable for increasing numbers of people.

Over in Spain, inflation has slowed this month, and by more than expected.

Spanish consumer prices rose by 5.8% in the year to this month, preliminary data from Spain’s national statistics office show, down from 6.8% per year in November.

It’s a sharper fall than economists had expected, and may signal that price pressures are easing across the eurozone.

Earlier this week, Spain’s government announced a new €10bn package to protect consumers from inflation.

The package includes a one-off bonus of €200 for about 4.2 million households with annual incomes up to €27,000 and the extension of tax cuts for energy bills into the first half of next year, prime minister Pedro Sanchez told reporters.

After a thoroughly turbulent year, oil is on track for its second annual gain in a row.

But 2023 could be challenging for oil, as Victoria Scholar, head of investment at interactive investor, explains:

“Oil prices are trading higher and are on track to log their second consecutive annual gain. Brent crude hit a 14-year high of $137 a barrel in March following Russia’s invasion of Ukraine. However since the 2022 peak, oil prices have been mostly trading lower shedding almost 40% across the rest of the year. Concerns about weaker global demand and a particular slowdown from China given its aggressive covid lockdowns have pushed oil prices lower.

This year’s dollar strength has also put pressure on oil markets. OPEC+ tried to offset this year’s price decline by agreeing to cut production by 2 million barrels per day in October. In December, the cartel held off from cutting output further as it waits to assess the impact of slowing Chinese demand and the G7’s price cap on Russian oil.

Heading into 2023, severe covid outbreaks in China and fears of recessions around the world look set to keep a lid on oil demand and prices. However, OPEC+ could intervene to offset any major declines and provide a floor if oil prices fall too aggressively.”

Here’s a breakdown of UK house prices in the last quarter of this year, and the annual price change, from Nationwide’s housing report:

• South West, £307,588, 4.3%

• East Midlands, £233,459, 5.3%

• Wales, £205,666, 4.5%

• West Midlands, £240,975, 6.1%

• North West, £208,600, 6.0%

• East Anglia, £285,776, 6.6%

• Yorkshire and the Humber, £199,615, 4.6%

• Outer South East (includes Ashford, Basingstoke and Deane, Bedford, Braintree, Brighton and Hove, Canterbury, Colchester, Dover, Hastings, Lewes, Fareham, Isle of Wight, Maldon, Milton Keynes, New Forest, Oxford, Portsmouth, Southampton, Swale, Tendring, Thanet, Uttlesford, Winchester, Worthing), £344,027, 4.3%

• Northern Ireland, £176,637, 5.5%

• Outer Metropolitan (includes St Albans, Stevenage, Watford, Luton, Maidstone, Reading, Rochford, Rushmoor, Sevenoaks, Slough, Southend-on-Sea, Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate & Banstead, Runnymede, Spelthorne, Waverley, Woking, Tunbridge Wells, Windsor and Maidenhead, Wokingham), £428,201, 4.2%

• North East, £156,892, 5.9%

• Scotland, £178,269, 3.3%

• London, £528,000, 4.1%

Mike Staton, director of Mansfield-based mortgage broker Staton Mortgages, predicts the UK housing market could ‘reset’ next year, rather than crash.

Here’s his take on the 0.1% drop in house prices this month.

“This data was no surprise given that we had a World Cup, a growing cost of living crisis and then Christmas, with most people putting their homebuying dreams on hold and demand dropping off.

January and February could be a good time to start looking as banks will be looking to get 2023 off to a great start and buyers will hold the bargaining power. However, due to the strong jobs market and weak supply, we are less likely to see a crash and more a housing market reset.”

The fourth consecutive monthly drop in UK house prices adds to concerns that a deeper slump may now be underway, warns Bloomberg.

Here’s their report:

Nationwide Building Society said its measure of property costs dropped 0.1% in December, marking the longest downturn since 2008 at the end of the global financial crisis.

For 2022 as a whole, Nationwide said property prices finished the year 2.8% above where they were at the end of last year, about a third of the pace of growth in 2021. The average price of a house in December fell to £262,068 ($315,660).

Soaring interest rates and the sharpest cost-of-living squeeze in memory strained affordability for many buyers, whose wages are falling further behind the worst bout of inflation in four decades. Mortgage rates are now near where they were in 2008 when housing costs were in the middle of a 16-month slump.

Higher mortgage costs, along with the rising cost of living, are having an inevitable impact on housing affordability, says Mark Harris, chief executive of mortgage broker SPF Private Clients.

’The swap rate volatility sparked by the the mini-Budget has largely dissipated and mortgage rates have settled on the back of this. Lenders continue to chip away at the pricing of their fixed-rate mortgages but even so, there are still many people coming off fixes who are in for a payment shock. We expect lenders to come to market with more attractive pricing in January as they start from scratch in terms of building their business for the new year.

’Further interest rate rises are on the cards in the coming year as the Bank of England continues in its efforts to bring inflation under control. However, a lower peak in rates than previously thought may be sufficient, making life easier for borrowers.’

Scotland was the weakest performing region of the UK, with annual house price growth of 3.3%.

Wales saw a significant slowdown – annual growth slowed from 12.1% in the third quarter of 2022 to 4.5% in Q4.

Northern Ireland saw prices increase by 5.5% during 2022, compared with a 12.1% rise during 2021.

The 0.1% drop in UK house prices in December is smaller than expected by economists, points out Victoria Scholar, head of investment at interactive investor:

“UK December Nationwide house prices fell by 0.1% month-on-month better than expectations for a drop of 0.7% but improving versus November’s decline of 1.4%. Year-on-year house prices grew by 2.8% also ahead of forecasts for 2.3% but falling versus November’s reading of +4.4%.

December saw the fourth consecutive month of negative house price growth, the worst run since 2008, driving the annual figure down significantly versus November with all regions suffering a slowdown. East Anglia was the strongest performing region while Scotland was the weakest. The housing market has been struggling amid pressures from the fallout from the mini-budget, the Bank of England’s rate hiking path, the cost-of-living crisis and a looming recession. Many potential buyers are holding off from looking for a property for now, hopeful that house prices will continue to soften and mortgage rates will come down next year.

Shares in the housebuilder sector have had a tough year with Taylor Wimpey down over 40%, Barratt Development down over 45% and Persimmon down over 55% YTD.”

Given the “chaotic backdrop” and elevated mortgage rates in recent months, potential house buyers may have opted to wait until the New Year to see how mortgage rates evolve before deciding to step into the market, suggests Nationwide’s chief economist Robert Gardner.

The pickup in activity in the New Year is likely to “remain tepid until the broader economic outlook improves”, Gardner predicts.

He’s hopeful, though, that “a soft landing” can be achieved next year, suggesting prices may fall by 5% in 2023 (other forecasters have suggested they could drop by 10%).

Gardner says:

“Longer-term interest rates, which underpin mortgage pricing, have returned towards the levels prevailing before the mini-Budget. If sustained, this should feed through to mortgage rates and help improve the affordability position for potential buyers, as will solid rates of income growth (with wage growth currently running at a c.7% pace in the private sector), especially if combined with weak or negative house price growth.

“But the main factor that would help achieve a relatively soft landing (especially for house prices) is if forced selling can be avoided, and there are good reasons to be optimistic on that front. Most forecasters expect the unemployment rate to rise towards 5% in the years ahead – a significant increase, but this would still be low by historic standards.