In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
China’s GDP rose 3.9% in the July to September quarter but remains on track to deliver among the weakest growth in almost four decades
China released a set of economic figures which had been postponed from the previous week.
Their economy expanded faster than economists expected in the September quarter. Still, the poor performance of the nation’s property market and weak retail and import data underscored the nation’s ongoing growth challenges.
Official figures showed that China's economy grew 3.9% in the July to September quarter from the same time last year, beating estimates.
That marked a pick-up from the 0.4% increase in the second quarter when China’s economy was battered by widespread Covid lockdowns. Shanghai, the nation’s financial centre and a key global trade hub, was shut down for two months in April and May.
But the newly released 3.9% growth rate was still below the annual official target that the government set earlier this year.
Japan made a second intervention this month to stop the Yen from falling
Japanese authorities are likely to have spent more than $30bn last week in their second intervention to stop the Yen from falling any lower.
The intervention took place on Friday after the yen hit ¥151.94 to the dollar, causing it to briefly surge to ¥144.50 during a typically quiet time of the week for trading.
The yen closed around ¥147 on Friday.
The Bank of America estimated after last month’s intervention that the Japanese government, which has $1.3tn in foreign reserves, could execute up to 10 more interventions by selling liquid assets.
The Pound gains as Rishi Sunak leads the race to become Prime Minister
Rishi Sunak, the former chancellor is on course to become Britain’s new prime minister, after Boris Johnson quit the contest on Sunday night.
The Sterling rose on Monday after the risks of further immediate political and economic upheaval receded.
The pound gained 0.3 per cent against the dollar to reach $1.1336 in morning trading in London and advanced 0.6 per cent against the euro to €1.1525.
Is the US heading for a recession?
Most economists now expect the world’s largest economy to tip into a recession in 2023 as job losses mount.
So far this year, monthly job growth has averaged 420,000 positions. Still a healthy clip, which is down from 562,000 a month in 2021.
Inflation, meanwhile, continues to run rampant with volatile items such as food and energy up to 6.6 per cent.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Consumer prices in the US rose more than expected last month in a sign that the inflation fight in the world's largest economy is far from over.
Inflation in the US is being closely watched as the US central bank's efforts to tame the problem push up the dollar and global borrowing costs.
The rate is well above the central bank's 2% target and means the Federal Reserve is likely to continue to keep raising interest rates in an attempt to combat the rising prices.
Inflation in the US has dropped back since hitting 9.1% in June, helped by a fall in fuel prices at the pump. This was also supported by costs for clothing and used cars dipping over the last month.
But the issue continues to affect other parts of the economy. Grocery prices have jumped 13% over the past 12 months, and housing and medical costs are also rising sharply.
Excluding food and energy, inflation has jumped by 6.6% - the fastest rate since 1982.
The Federal Reserve has already raised interest rates five times since March, opting for unusually large hikes in recent months that have unsettled financial markets and led to sharp slowdowns in sectors like housing.
By making borrowing more expensive, the Federal Reserve is hoping to reduce demand, especially for big ticket items such as cars and homes, and ease the pressures that are pushing up prices further.
But by slowing activity, this also risks tipping the economy into a recession. Analysts see that outcome as increasingly likely, since inflation has proven stubbornly resistant to the efforts introduced so far.
With midterm elections looming in November, President Joe Biden has tried to make the case that the slowdown in economic activity is a healthy shift from the growth surge that followed the pandemic, pointing to robust job creation and low unemployment.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
The UK economy grew by 0.2% in July, according to official data, following a sharp drop in the previous month.
The Office for National Statistics said the services sector was the biggest contributor to growth, helped by the UK hosting the Women's Euro Championship. However, while the economy expanded in July, the growth was slower than the 0.3% expansion analysts had expected.
Gross domestic product (GDP) fell by 0.6% in June because of two fewer working days.
Analysts have said the bank holiday for Queen Elizabeth's state funeral on 19 September, as well as the 10 days of national mourning, could impact economic growth and push the UK into recession sooner than originally expected.
Last month, the Bank of England said it expected the UK to fall into recession by the end of this year.
A recession is defined as two consecutive quarters, or three-month periods, of shrinking output and between April and June, the UK economy contracted by 0.1% compared with the previous quarter.
In July, the economy was helped by the Women's Euro Championships, which was won by England, and the Commonwealth Games, with second-hand car sales also adding some strong impetus.
However, there was evidence elsewhere that consumer spending remained under pressure because of rising prices, as inflation reached a four decade high of 10.1% in July.
The ONS said that between May and July, economic growth was flat compared with the previous three months.
The production and construction sectors both shrank in July. Production was hit by a fall in demand for energy such as electricity.
Other economists estimated the UK might see some growth following the government's decision to limit the rise in gas and electricity prices, as well as new Prime Minister Liz Truss's pledge to reverse a 1.25% rise in National Insurance.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Germany has announced a €65bn (£56.2bn) package of support to ease the threat of rising energy costs, as Europe struggles with scarce supplies after Russia's invasion of Ukraine.
The package, much bigger than two previous ones, will include one-off payments to the most vulnerable and tax breaks to energy-intensive businesses.
Energy prices have soared since the February invasion, and Europe is trying to wean itself off Russian energy.
The stand-off with Russia has forced countries like Germany to find supplies elsewhere, and its stores have increased from less than half full in June to 84% full today.
German Chancellor Olaf Scholz told journalists that Germany would get through the winter, adding that Russia was "no longer a reliable energy partner" with further disruption forecast.
The package announced by the German government would involve one-off payments to pensioners, people on benefits and students and further caps on all energy bills.
Some 9,000 energy-intensive businesses would receive tax breaks to the tune of €1.7bn as a swooping set of changes look to ease the burden faced by individuals and businesses alike.
A windfall tax on energy company profits would also be used to mitigate bills, Mr Scholz said.
The latest package brings the total spent on relief from the energy crisis to almost €100bn, which compares to about €300bn spent on interventions to keep the German economy afloat during the Covid-19 pandemic.
Countries all across Europe are considering similar measures, with EU energy ministers due to meet on 9 September to discuss how to ease the burden of energy prices across the bloc.
A document released about the meeting says the agenda will include price caps for gas and emergency liquidity support for energy market participants.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
The governor of the Bank of England has defended its decision to raise interest rates, saying there is a major risk that soaring prices may become embedded.
Interest rates rose to 1.75% - the biggest rise in over 27 years - with inflation values now set to hit more than 13%.
The UK is forecast to fall into recession this year, with the longest downturn since 2008 predicted. Increasing interest rates is one way to try and control inflation as it raises borrowing costs.
This in turn should encourage people to borrow and spend less. It can also encourage people to save more. However, many households will be pressured further following the interest rate rise, including some mortgage-holders.
UK inflation - the rate at which prices rise - is currently at 9.4%, which is the highest level for more than 40 years.
But the Bank has warned it could peak at more than 13% and stay at ‘elevated levels’ throughout much of next year, before slowly returning to the Bank's 2% target in 2024.
The main reason for the high inflation and low growth is soaring energy bills, which have been driven by Russia's invasion of Ukraine.
Households have also been hit by higher petrol, diesel and food costs, with real post-tax household incomes forecast to fall this year and into the next.
At its current rate, the economy is forecast to shrink in the final three months of this year and keep shrinking until the end of 2023.
The expected recession would be the longest downturn since 2008, when the UK banking system faced collapse, bringing all lending to an abrupt halt.
The slump is not set to be as deep as 14 years ago, but may be prolonged for a similar amount of time.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Gas prices jumped after Russia further cut gas supplies to Germany and other central European countries after threatening to earlier this week.
European gas prices rose by almost 2%, trading close to the record high set after the Russian invasion of Ukraine.
Russia has been cutting flows through the Nord Stream 1 pipeline to Germany, with it now operating at less than a fifth of its normal capacity.
Before the Ukraine War, Germany had imported over half of its gas from Russia through the Nord Stream 1 pipeline - with the rest coming from land-based operations. By the end of June, this capacity had reduced to just over a quarter.
Russian energy firm Gazprom has sought to justify the latest cut by saying it was needed to allow maintenance work on a turbine.
The German government, however, said there was no technical reason for it to limit the supply.
The UK would not be directly impacted by gas supply disruption, as it imports less than 5% of its gas from Russia. However, it would be affected by prices rising in the global markets as demand in Europe increases.
European wholesale gas prices closed at €204.85 (£172.08) per megawatt hour - the third highest price on record. The all-time high was achieved on 8 March when prices closed at €210.50 (£176.76) per megawatt hour.
However, this time last year the wholesale gas price in Europe was at just above €37 (£31.08) per megawatt hour.
UK gas prices rose 7% on Wednesday with the price now more than six times higher than a year ago. However, it is still well below the peak seen in the aftermath of Russia's invasion of Ukraine earlier this year.
UK energy bills rose by an unprecedented £700 in April, and are expected to rise again with a stark warning that a typical energy bill could hit £3,850 a year by January.
The latest reduction in flows puts pressure on EU countries to reduce their dependence on Russian gas even further, and will likely make it more difficult for them to replenish their gas supplies ahead of the upcoming winter months.
Since the invasion of Ukraine European leaders have held talks over how to reduce its dependence on Russian fossil fuels.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
The European Central Bank (ECB) has raised interest rates for the first time in more than 11 years as it tries to control soaring eurozone inflation levels.
The ECB increased its key interest rate by 0.5 percentage points to 0.0% and plans further hikes this year. The rate has been negative since 2014 in a bid to boost the region's economy after years of continued weak growth.
But consumer prices rose at a record 8.6% in the 12 months to June as food, fuel and energy costs soared, well above the bank's 2% target.
This rise comes after the Bank of England and the US Federal Reserve also put up their rates to try and rein in the rising prices.
The Ukraine war and Covid supply chain issues have dramatically driven up everyday costs across the world, putting pressure on households and businesses alike.
The eurozone is particularly vulnerable because it relies heavily on Russia for its oil and gas supplies. This week it urged member states to begin rationing supplies amid fears Moscow will halt gas deliveries this year, causing yet further price spikes.
Explaining its decision to raise rates, the ECB justified that slowing economic activity is directly linked to Russia's unjustified aggression towards Ukraine, which has become an ongoing source of drag on growth.
Experts are predicting inflation to remain undesirably high for some time owing to continued pressure from energy and food prices alongside pipeline pressures in the pricing chain.
However, there are concerns about how these higher borrowing costs will affect highly indebted European nations, including Italy and Greece.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
US stocks have seen their worst first half of a year since 1970, as concerns grow over how the steps taken to curb inflation will affect economic growth.
In the last six months, the benchmark S&P 500 index fell 20.6%, while other major US indexes also dropped sharply.
Stocks in the UK, mainland Europe and Asia have also suffered steep losses. It comes as central banks around the world attempt to manage soaring living costs, with prices of essential goods like food and fuel rising rapidly around the globe.
Some economists expect the US, which is the world's biggest economy, to go into a recession as early as this year as interest rates continue to rise.
Shares are likely to see continued short-term volatility as central banks continue to tighten as they look to combat high inflation, the war in Ukraine continues and fears of recession remain high.
Another major US stock index, the Dow Jones Industrial Average, fell by more than 15% in the first half of this year, marking it the biggest drop for this period since 1962.
Major stock market indexes outside the US have also fallen drastically this year. The UK's FTSE 250 has dropped by more than 20%, whilst Europe's Stoxx 600 index has slipped by almost 17% and the MSCI index of Asia-Pacific markets has fallen by more than 18%.
It comes as many of the world's biggest central banks introduce measures to slow the rising cost of living, including raising interest rates.
Earlier this week, the bosses of three of the world's biggest central banks warned that the era of moderate inflation and low interest rates had ended.
At an annual meeting in Portugal, the heads of the US Federal Reserve, European Central Bank and Bank of England said action must be taken swiftly to prevent price rises from getting out of control.
However, they also cautioned that measures to rein in an inflation shock caused by the Ukraine war and pandemic may have a significant negative impact on global growth.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Surging inflation led interest payments on government debt to hit the highest amount for May on record.
Interest payments paid by the government for the month of May hit £7.6bn, up by just over £3.1bn from the year before.
Government borrowing fell in May from the year before, but still remained higher than pre-Covid levels.
Borrowing - the difference between spending and tax income - was £14bn, down £4bn from a year earlier, the Office for National Statistics stated.
But the figure was still the third-highest May borrowing since monthly records began in 1993 and was also £3.7bn more than the Office for Budget Responsibility (OBR) had predicted.
The recent high levels of debt interest payments are largely a result of higher inflation, the ONS said. This rise is due to the interest paid on government bonds rising in line with the Retail Prices Index measure of inflation, which hit almost 12% in May 2022.
The ONS said May's figure was the third highest debt interest payment made by a government in any single month.
The OBR estimates that debt interest payments will cost the government £87.2bn over the financial year ending in March 2023.
So far this financial year, interest payments have totalled £14.1bn, up £4.7bn year on 2021.
Central government receipts were £66.6bn in May 2022, £5.7bn more than May 2021, with an annual increase of £3.4bn in taxes. Tax revenues in total rose to £48.3bn in May, with National Insurance Contributions (NICs) raising £2bn more than last year.
Employees, employers and the self-employed started paying 1.25p more in the pound for National Insurance from 6 April 2022.
In the U.S., stocks rose Monday as the indexes aim to rebound from a week of losses on the heels of strong May jobs data that affirmed Federal Reserve officials were likely to continue sharpening monetary conditions.
The S&P 500 was up 1%, and the Dow Jones Industrial Average gained 200 points, or 0.6%. The tech-heavy Nasdaq advanced 1.7%.
Oil prices are rose on Monday following announcements of a price hike from Saudi Arabia for its crude sales. According to Saudi state oil producer, Aramco, the official selling price for its flagship Arab Light crude to Asia will be going up to a $6.50 premium in July. This is a notable jump from its previous selling price of $4.40 in June. As a result of all this, Brent crude futures hit an intraday high of $121.95 earlier today. At the same time, U.S. West Texas Intermediate crude futures peaked at $120.99 per barrel, a three-month high. This comes after a 1.7% gain on Friday last week.
New car registrations plummeted by 20.6% in May as ongoing supply chain shortages continued to damage the automobile industry.
124,394 units were made, which was the second lowest May in 30 years, SMMT said.
The market, which cannot keep up with pent-up demand, was reported to be approximately a third below pre-pandemic levels of 2019.
The FTSE 100 was up 96 points at 7,629, showing no worries that prime minister Boris Johnson is set to face a confidence vote from the parliamentary Conservative party.
Four-day work week trials began on Monday, with at least one FTSE 100 company participating, as working from home during the pandemic changed people’s perspective on office life.
Over 3,000 employees from 70 companies will work a shorter week for the same pay until December as the dynamics of working life in Britain may be set to change forever.
The six-month nationwide pilot scheme has been named the largest four-day trial in the world.
Asian markets are setting the tone with recoveries in Hong Kong and Japan after the roller coaster in the US on Friday with the non-farm payroll numbers.
China announced a further easing of restricitons in Beijing over the weekend, which is seeing some Asian equity markets and US futures trading in positive territory.
Other glimmers of relief are that officials in Washington are considering a selective removal of tariffs on Chinese imports to aid the inflation fight.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Inflation in Germany has risen to 7.9% in May - the highest level seen in the country since reunification and similar to rates not seen since 1973.
Surpassing the already record-breaking levels seen in April of this year, statistics agency Destatis highlights Russia’s invasion of Ukraine and the alarming rise in energy prices as drivers for the increase.
The country is planning a package of policies to try and ease the burden on consumers, including cheap monthly tickets for regional public transport between June and August and a discount for drivers at petrol stations.
In the UK, the price of budget pasta, bread and beef mince has soared according to the Office for National Statistics. ONS figures showed prices rose at rates far higher than the standard level of inflation - with pasta rising by 50%, more than five times higher.
In the United States, manufacturing output and new orders were strong but the S&P Global Flash PMI receded to 57.5 in May, down from 59.2 in April. The survey indicated that input costs and output charges also increased meaningfully.
Finally, in Japan, a further surge in coronavirus cases in Beijing ignited fears of an economic slowdown amid supply chain concerns. Worries about tightening global financial conditions and the potential impact on economic growth similarly weighed on Japanese sentiment. Further losses in the U.S. tech space also hurt investor confidence.
In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
The European Commission has cut its gross domestic product growth forecast for 2022 whilst simultaneously raising its estimate for inflation amid soaring energy costs.
Despite the eurozone economy performing more resilient than initially expected throughout the first quarter of the year, with growth of 0.3% compared to an expected 0.2%, the EC has revised its 2022 forecast to 2.7% - down from 4.0%.
Reflecting the sharp rise in energy prices seen across the continent, the group has also raised its inflation forecast, almost doubling it from 3.5% to 6.1%.
In a similar vein, the United Kingdom’s rate of inflation accelerated to its highest level since 1982 as it topped 9.0%.
In the United States, comments from Federal Reserve officials over the week did little to calm similar inflation and interest rate fears. The week’s economic data offered mixed signals about whether a recession was imminent. On Tuesday, investors seemed to welcome news that retail sales, not including the volatile vehicle sector, had risen more than expected in April (0.6% versus approximately 0.4%), while March’s gain was revised upward to 2.1%. Industrial production, manufacturing production and capacity utilisation figures in April also came in higher than anticipated.
Finally, economic data released last week pointed to slowing growth in China. Retail sales and industrial output data for April fell behind estimates amid continued pandemic lockdowns - reflecting China’s zero-COVID approach. Fixed asset investment rose 6.8% from January to April from a year ago but also missed the consensus forecast. Home prices in China fell in April for the eighth straight month, declining 0.3% from March, which marked the fastest decline in five months.