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 US economy has grown at its fastest pace in almost 40 years as it launched a stern fightback from pandemic lockdowns.
Official figures from the Commerce Department revealed the economy grew by 5.7% - the highest growth since 1984.
However, as the Federal Reserve raises interest rates and the Government prepares to scale back stimulus packages, analysts expect growth to slow throughout this year.
The World Bank expects the economy to grow by 3.7% in 2022, in line with other forecasts.
Meanwhile, the labour market recovered 19 million of the 22 million jobs lost in 2020 due to the enforced shutdowns.
In Europe, Denmark said it would remove almost all coronavirus restrictions on February 1st, except for testing travelers from abroad. Denmark follows the UK, Ireland, and the Netherlands in scrapping measures aimed at reducing the spread of COVID-19, even though infections remain at or near record highs across the continent. Sweden, Norway, and Finland announced that they were likely to ease their restrictions in the coming days and weeks.
The debt crisis in China’s property sector has drawn attention to the role of local government financing vehicles (LGFVs), a tool used by local governments to borrow money without it appearing on their balance sheets. According to several reports, LGFVs have eclipsed private developers as the leading buyers of land parcels in China. The increase in off-balance sheet debt amid the pandemic is a key concern for policymakers as they try to manage growing risks to the economy. China’s LGFV debt totals roughly CNY 53 trillion, or roughly one-half of gross domestic product, Goldman Sachs estimates.
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.
Bank of England Governor Andrew Bailey has suggested that the UK’s current inflation pressures may prove longer-lasting than initially thought.
Reflecting on the revelation that the country’s inflation rate has reached its highest level since 1992, Bailey told the Treasury Committee that surging energy costs are one of the leading causes and that pressures are beginning to feed into wage demands.
Last week, Office for National Statistics figures showed consumer price inflation rose to 5.4% in December from 5.1% in November, the highest since March 1992 and far above the BoE's 2% target.
When quizzed on what can be done to help citizens deal with the rising cost of living, Bailey said "we will do everything we can do, I can assure you of that."
Similar worries weighed heavily in the US too as the S&P 500 suffered its worst decline in more than 14 months. The Nasdaq Composite index slumped roughly 7.5% in its biggest weekly drop since the start of the pandemic. Meanwhile, weakness in semiconductor shares weighed on technology stocks whilst weakness in vehicle manufacturers and home improvement retailers dragged down the consumer discretionary sector.
Major Latin American markets were mixed, as pressures from rising US Treasury yields were countered by news that China was accelerating some infrastructure projects and reducing certain interest rates to stimulate its economy. Growth in China usually bodes well for demand for commodities produced by Latin American countries.
Brazilian shares, as measured by the Bovespa Index, returned about 1.9%. Chilean shares returned about 3.5% and investors seemed generally satisfied with President-Elect Gabriel Boric’s cabinet appointments announced on Friday.
Mexican stocks, however, returned -4.0%. The market was hurt in part by Mexico’s proximity to the weak U.S. equity market. Sentiment was also hurt by news that Mexico’s economy, which contracted in the third quarter of 2021, appears to have contracted in December as well - raising concerns that the country may already be in a recession.
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 has grown beyond pre-pandemic levels for the first time, as figures from the Office for National Statistics suggest the economy in November 2021 was 0.7% bigger than February 2020 - the last comparable month before the country entered its first lockdown.
The figures come following a strong end to 2021, as the economy grew 0.9% sequentially, more than double initial estimates. However, figures don’t account for the sweeping wave of Omicron cases and Plan B measures seen in December - leading to concern growth may have slowed once again.
"The economy grew strongly in the month before Omicron struck, with architects, retailers, couriers and accountants having a bumper month," said ONS chief economist Grant Fitzner. "Construction also recovered from several weak months as many raw materials became easier to get hold of."
The initial boost was helped, for the most part, by a 3.5% growth in the construction sector.
Industrial output in the eurozone surged 2.3% sequentially in November - well above a consensus forecast for 0.5%. However, Eurostat revised its October industrial production number to a 1.3% contraction from an earlier estimate that showed a 1.1% uptick.
In the US, weekly jobless claims rose unexpectedly to 230,000, the highest number since mid-November. However, continuing claims fell more than expected to 1.56 million - the lowest number since June 1973. The University of Michigan’s index of consumer sentiment ticked down to a new pandemic-era low of 73.2, with many surveyed citing inflation worries.
China suspended dozens of international flights and issued more restrictions in response to the global surge in Omicron cases. Hong Kong, which had reported no local infections for months, reimposed some social and travel restrictions after a string of positive cases, dealing a setback to the city’s reopening hopes. Shanghai curbed tourist activity as it rushed to head off local infections as imported cases rose.
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 the eurozone rocketed to a record high in December, as soaring food and energy costs pushed consumer prices to rise by 5%.
As a result of the record levels, German inflation also reached a near 30-year high leading Finance Minister Christian Lindner to announce that the government was considering financial aid for lower-income households to pay for rising heating bills.
German factory orders rebounded more than expected in November, rising 3.7% sequentially in seasonally adjusted terms, on increased international demand for capital and intermediate goods.
In the US, figures on jobs offered decidedly mixed views. The latest monthly payroll figures suggested that employers had added only 199,000 jobs throughout December, 50% down on consensus estimates. However, the household survey suggested that unemployment levels had fallen to 3.9% - close to levels last recorded just before the onset of the pandemic.
Japan’s manufacturing and services sectors were buoyed by signs of a gradual recovery from the pandemic in December. However, the improvement in operating conditions for manufacturers was slightly softer compared with the previous month. Rates of growth in production and incoming business were stronger than the average seen over 2021. However, rising raw materials prices continued to add to manufacturers’ cost burdens.
In our special Christmas insight, 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 ahead of the festive period.
As Christmas approaches, new studies into the Omicron variant of COVID-19 offer early glimmers of hope that it causes a milder illness than initially thought, providing markets with a welcome boost entering the festive period.
In the US, stocks rebounded from last week’s losses in response to the news whilst some signs also indicated that hopes remained for the White House’s fiscal stimulus plan. Reports surfaced that Senator Manchin and the White House had been very close to reaching a deal, and the president and top Democratic congressional leaders stated that they would continue working to secure Manchin’s swing vote.
Despite the new information on Omicron, many European nations continue to air on the side of caution - introducing new restrictions to stem the rising numbers of infection.
In the UK, plans differ between the devolved nations as Scotland, Wales and Northern Ireland all move to bring in restrictions from Boxing Day whilst Prime Minister Boris Johnson has, for the time being, refused to introduce measures in England.
In our weekly 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 Omicron variant of COVID-19 continues to disrupt major markets around the world, with many countries reintroducing strict curbs in the immediate run-up to Christmas.
The Netherlands became the first European nation to impose a full, nationwide lockdown in the face of the growing case numbers. All non-essential shops and hospitality have closed along with gyms and hairdressers with citizens required to stay at home. The restrictions will last until 14th January at the earliest.
Many other European nations are following in their footsteps with a suite of restrictions - such as Denmark, who have closed theatres, concert halls, museums and amusement parks over the holiday period.
Ministers in the UK are weighing up further measures, with the Government set to discuss at least three options to limit the spread of the virus. Boris Johnson will discuss them with his Cabinet on Monday.
US markets endured a turbulent week as Omicron led to some considerable volatility. Treasury yields also decreased on Friday morning as headlines surrounding Omicron caused risk sentiment to weaken, pushing the 10-year Treasury note yield below 1.40% for the first time in nearly two weeks.
In economic readings, data showed that China’s factory output grew faster than expected in November, but new pandemic curbs hit retail sales and fixed asset investment growth lagged forecasts. November data also revealed that new home prices suffered their biggest month-on-month decline in six years, with the country’s lower-tier cities and developers bearing the brunt of the downturn. Government revenue from land sales fell for the fifth straight month in November, another sign of stress for the wavering property sector.
In our weekly 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 United Kingdom has imposed its Plan B set of coronavirus restrictions - including controversial immunity passports for England - as Europe prepares for a “tidal wave” of infections due to the more transmissible Omicron variant.
Stopping short of introducing any further draconian measures, the UK Government hopes to use Plan B as a means of slowing the spread of COVID-19 whilst it ramps up its vaccination booster programme.
Despite the national alert level being raised to level four, all shops, hospitality and businesses remain open with no restrictions. However, as part of Plan B, so-called immunity passports are set to be voted through by MPs during the week. Under these plans, visitors to any indoor venue in England holding more than 500 people or outdoor venue with a capacity greater than 4,000 will have to provide proof of full vaccination, natural immunity or a negative lateral flow test to gain entry. Similar regulations are already in place in Scotland and Wales.
Meanwhile, the rest of Europe is also bracing for a wave of Omicron infections. Denmark and Norway have tightened their measures, following similar moves in Germany, Italy, France and Ireland. Poland has made vaccines mandatory for public sector workers whilst in Austria, Chancellor Karl Nehammer said the national lockdown there would be lifted on Sunday but that restrictions would still apply to unvaccinated citizens.
In more positive news, the US Labor Department reported that 184,000 Americans applied for unemployment benefits in the previous week - the lowest number since 1969. The number of open jobs in the U.S. also rose much more than expected to a record 11 million, with most of the gains coming in accommodation and food services.
Revised figures for economic growth released by Japan’s Cabinet Office showed that gross domestic product contracted by an annualised 3.6% in the third quarter, more than the preliminary estimate of 3.0%. Private consumption fell by more than expected, primarily due to a surge in coronavirus cases over the summer.
In our weekly 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 newly-discovered Omicron variant of coronavirus has sparked a raft of border closures alongside increased restrictions and testing as countries scramble to contain its spread.
First detected in South Africa just over a week ago, fears continue to grow over Omicron’s transmissibility and severity as case numbers rise across several continents. To curb the spread of the variant, many countries were quick to reimpose strict border controls. Most European nations, along with the UK, suspended all travel to South Africa along with six neighbouring countries.
The Netherlands is facing its worst crisis of the pandemic so far as case numbers rocket to record levels. The country already introduced a strict two-week quarantine to battle the increase.
Eurozone business activity unexpectedly accelerated in November, according to purchasing managers’ indexes (PMI). Even so, the average reading of the main output index in the past two months came in lower than in the third quarter, indicating that the economic recovery is slowing. Optimism about the immediate future for economic activity declined due to further coronavirus waves. Inflation warning signs also intensified, with firms’ costs and average selling prices rising to record levels. Meanwhile, German business confidence fell for a fifth successive month, the Ifo Institute said.
In the US, stocks declined for the holiday-shortened week after news about the emergence of the Omicron triggered a sharp sell-off in riskier assets such as equities. Before the Thanksgiving holiday, information technology stocks suffered as rising Treasury yields made expected corporate profits far in the future less valuable in today’s terms. Yields decreased on Friday amid the flight to assets viewed as safe havens. Value stocks held up better than growth companies despite Friday’s selling pressure on stocks related to leisure and travel.
Meanwhile, the Japanese yen skidded to a three-year low on Friday, dropping sharply to finish at 113.99 versus the U.S. dollar, its worst week since March 2020. Earlier in the week, the yen hit 115.53 - a level not seen since January 2017, as expectations for higher U.S. interest rates increased. Policy outlooks between the Federal Reserve and the Bank of Japan diverged further after the latest Fed minutes showed increasing acceptance among U.S. policymakers of faster tapering and earlier rate hikes to tame inflation.
In our weekly 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 Nasdaq Composite Index registered an all-time high towards the end of a broadly lacklustre week for US markets, owing to pandemic concerns.
As the Nasdaq Composite Index closed above 16,000 for the very first time, thus recording its 46th all-time high this year, the Dow Jones Industrial Average and S&P 500 both ended in negative territory as coronavirus cases across Europe and the US continue to climb once again.
UK inflation hit its highest level in almost a decade in October, reaching 4.2% on an annual basis - up from 3.1% in September. Higher energy costs were a big part of the uptick in consumer prices. Meanwhile, the number of payroll employees increased by 160,000 to 29.3 million between September and October. These developments prompted speculation that the Bank of England (BoE) might increase interest rates in December. BoE Governor Andrew Bailey told a Parliamentary committee that “the labour market looks tight” and that he was “very uneasy about the inflation situation.”
The European Automobile Manufacturers’ Association said that new vehicle registrations in the European Union dropped by 30.3% month-on-month in October to a record low of 665,001 units. This sharp contraction stemmed primarily from the continued shortage of semiconductors that has impacted on the supply of new vehicles.
Further to last week’s news, more European countries have begun reimposing stricter restrictions - including stay-at-home orders and movement controls - to curb the spread of coronavirus. In addition to The Netherlands, who announced a three-week partial lockdown, Germany has introduced a three-step system of progressively tougher controls depending on hospitalisation rates in each region.
Finally in China, data released at the start of the week showed that economic momentum stayed weak in October as the property downturn weighed on industry. Prices for new and resold homes fell amid deeper contractions in construction starts and investment by developers. Housing sales shrank 21.2% in October from September, while 52 of the top 70 cities recorded month-on-month price declines - 16 more than in September.
In our weekly 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.
A stark rise in coronavirus infections across Europe has left nations on the cusp of a fresh set of restrictions - leading to fears over an initial hit to the economy.
As the continent enters the winter period, several European countries have seen an alarming rise in the number of coronavirus infections being reported. Beginning on Monday, Austria has imposed strict stay-at-home orders on unvaccinated citizens in two regions with a view to extending the mandate across the country.
The Netherlands has also imposed a three-week, partial lockdown. Bars, restaurants and essential retail stores must close at 20:00 whilst non-essential retail and services must close at 18:00. Sports events must be held behind closed doors once again, staff are encouraged to work from home and indoor gatherings are limited to four people.
UK economic growth slowed to a 1.3% rate in the three months to the end of September, down from 5.5% in the second quarter and below the 1.5% forecast by the Bank of England. Shortages of goods and components and rising coronavirus cases impacted activity. However, the monthly rate of expansion in September was 0.6% - an improvement from 0.2% in August - due to increased health care activity, although data for previous months were revised lower.
Following their convincing election win, Japan’s Liberal Democratic Party plan to compile an economic stimulus package of about JPY 30 trillion (approximately $265bn USD) which is said to include JPY 100,000 (approx. $880 USD) in cash handouts to children aged 18 or younger and a restart of the Go To Travel subsidy programme to promote domestic tourism. The package will also include wage hikes for care workers, nursery school staff, and nurses. The government is seeking to pass a supplementary budget by the end of the year to fund the package while some measures will also be financed by a budget for the next fiscal year starting in April.
In our weekly 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.
Industrial output in Germany and France dropped unexpectedly in September, with global supply chain issues pinned as the root cause of the contractions.
Impacting Europe’s two largest economies, the prolonged effects of supply constraints and semiconductor shortages hit hard. In France, the automobile sector was particularly weak with output contracting nearly 15% from August levels. By contrast, German makers of cars and car parts saw improvements, while production in other areas including mechanical engineering, electrical and data processing equipment and metal products contracted - with the country recording a 1.1% decline in output in September after an initial 3.5% decline in August.
In the United States, economic data released during the week was generally robust, showing that the economy gained strength as the late-summer wave of the Delta variant of COVID-19 eased. Factory orders increased 0.2% in September, slightly more than consensus expectations. The US Government’s October employment report, released on Friday morning, showed 531,000 jobs added, topping consensus estimates. The unemployment rate fell to 4.6%. The Labor Department also said that the economy gained 235,000 more jobs in August and September than it originally estimated.
In Japan, the central bank will not follow the US Federal Reserve in dialing back easing, given the country’s different circumstances, according to the bank’s governor, Haruhiko Kuroda. Notably, price momentum in Japan is much weaker than in other countries; the BoJ recently slashed its forecast for the consumer price index (CPI), a measure of inflation, to 0% in fiscal year 2021.
Elsewhere in Asia, China’s property sector is grappling with a deepening liquidity crisis reflected in a wave of offshore debt defaults, credit rating downgrades, and selling in the stocks and bonds of major developers. Seven of the top ten China-listed developers by revenue recorded steep declines in profitability in the July-to-September quarter, which has increased pressure on Beijing to support the stressed sector.
In our weekly 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.
Chancellor Rishi Sunak has announced a temporary 50% cut to business rates for shops, restaurants and gyms badly affected by the coronavirus pandemic.
As part of his Autumn Budget, Mr Sunak also scrapped the planned annual increase in rates in 2022 for a second year in a row. He also said that in the 2022-23 tax year, pubs, music venues, cinemas, restaurants, hotels, theatres and gyms would be able to claim a discount on their bills of 50% up to a maximum of £110,000 - a tax cut worth almost £1.7bn.
In Europe, the European Union’s statistical arm issued a preliminary estimate indicating that the Eurozone economy grew 2.2% sequentially in the third quarter - an uptick from the 2.1% expansion recorded in the second quarter and above the 2.0% consensus estimate. Among the major economies in the area, France and Italy posted stronger-than-expected growth in gross domestic product.
In the United States, the Commerce Department revealed its advance estimate that the economy expanded at an annualised rate of 2.0% in the third quarter - a sharp slowdown from the previous quarter’s 6.7% pace and below consensus estimates of roughly 2.7%. A decline in vehicle sales and a slowdown in spending on food services and accommodations, seemingly due to the delta variant of COVID-19, were largely to blame. Pending home sales also fell unexpectedly.
Japan’s factory output shrank for the third straight month in September, falling 5.4% versus expectations of a 3.2% drop, with the auto sector hit by a persistent supply shortage and weakness in general purpose machinery. The data raised some concerns that the country’s GDP may have turned negative in the third quarter; however, many observers believe a recovery in service sector sentiment following the easing of coronavirus restrictions is likely to support the economy in the coming months.