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 UK economy grew faster than initially expected in the second quarter of 2021 thanks to a stronger performance from the healthcare and arts sectors than estimates had anticipated.
Figures from the Office for National Statistics revealed that the UK’s gross domestic product had increased by 5.5% in the second quarter - higher than the initial 4.8% expectation. As a result, the economy is now 3.3% lower than the fourth quarter of 2019 - before the pandemic.
The boost brings the country’s economy in line with its European neighbours such as Germany, also at 3.3% below pre-pandemic levels and France at 3.2%.
In the United States, the large-cap benchmarks and Nasdaq Composite index recorded their biggest weekly drops since February and rounded out the worst monthly declines since the onset of the pandemic - seemingly weighed down by inflation and interest rate fears. The S&P MidCap 400 and small-cap Russell 2000 indexes ended with only modest losses. Declines within the S&P 500 were broad with only energy shares notching a gain. Growth stocks fared worse than value shares, which was mirrored in the underperformance of the technology-heavy Nasdaq Composite Index.
Japanese stocks followed the lead of US markets and declined during the previous week. The Nikkei 225 Index lost 4.89% with losses concentrated on Wednesday and Friday, but remained in positive territory for the year-to-date period. The broader TOPIX Index also lost about 5% for the week. The Japanese yen weakened versus a strong US dollar through Thursday but recovered somewhat on Friday; the yen traded around 111.20 against the dollar at the end of the week.
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.
Forecourts across the United Kingdom have seen unprecedented demand as motorists flock to fill their vehicles amid fears of a potential fuel shortage.
The Petrol Retailers Association has warned that as many as two-thirds of its membership of nearly 5,500 independent outlets are out of fuel, with the rest of them "partly dry and running out soon".
The frenzy comes as fears grow over the widespread shortage of HGV drivers affecting deliveries and supplies of fuel to filling stations. The UK Government has suspended competition laws to allow oil firms to work together to address the issue and offered temporary three-month visas to European workers but has stopped short of calling in the army to drive fuel tankers to stations.
In the United States, the week’s jobs data appeared to defy hopes for a resurgence in the labour market, with first-time jobless claims rising to 351,000, well above consensus forecasts and the highest number in a month. IHS Markit’s survey of both manufacturing and services sector activity in September also came in below expectations but still indicated healthy expansion, especially in the former. Conversely, housing data mostly came in on the upside, with both housing starts and permits easily surpassing expectations. New home sales in August also hit their highest level (740,000) in four months, although they remained well below their peak a year earlier (977,000).
Mainland Chinese stocks ended a holiday-shortened week broadly flat from the previous Friday after being closed Monday and Tuesday for the Mid-Autumn Festival. The market’s subdued performance was noteworthy after Hong Kong’s Hang Seng Index fell more than 3.0% on Monday amid the mounting debt crisis surrounding China’s Evergrande Group. A series of large cash injections by China’s central bank during the week helped ease worries about a disorderly debt resolution for the indebted developer. However, some of Evergrande’s offshore bondholders did not receive their portion of USD 83.5 million in interest payments by Thursday’s deadline, according to Reuters.
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.
Inflation in the United Kingdom jumped to 3.2% in August - reaching its highest level in more than nine years.
The Office for National Statistics said that much of the spike was due to a substantial drop in restaurant and café prices last year and meaningful increases this year. Because the inflation rate came in well above the Bank of England’s target, Governor Andrew Bailey must write a letter to the finance minister explaining how the central bank plans to bring it back in line.
Meanwhile, UK company payrolls rose by a record 241,000 in August while the unemployment rate fell to 4.6% in the three months to the end of July. Retail sales unexpectedly fell for a fourth month, contracting 0.9% versus July. Economists had forecast growth of 0.5%.
In the United States, the Labor Department reported that core consumer prices increased 0.1% in August, below consensus expectations for a 0.3% increase and the smallest gain since February. Declines in airfares and used car prices drove much of the shortfall. On Thursday, the Commerce Department reported that August retail sales outside the volatile auto sector jumped 1.8%, defying consensus expectations for a small decline.
Confidence levels among Japanese manufacturers fell to a five-month low in September. Weakness was attributed to the latest coronavirus wave with activities and broader demand impeded by the health crisis, while carmakers reported the deepening impact of a global chip shortage. Some manufacturers have also had to contend with higher raw material prices.
Separate data showed that Japan’s exports rose 26.2% year-on-year in August, less than expected and following a 37.0% gain in the previous month. The spread of the highly contagious Delta variant of COVID-19 in Asia and supply chain blockages impeding auto shipments both constrained export growth. While shipments of cars fell, exports of iron, steel, chip making equipment and automotive parts led gains over the month.
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.
Workers in the United Kingdom will see their monthly tax payments increase by 1.25% from April 2022, as the Government seeks to bring in extra funding to help the country’s National Health Service (NHS) and social care sector recover from the coronavirus pandemic.
Earmarked to generate an extra £12bn of funding per year, the tax increase will be introduced from April next year initially as a rise in National Insurance before becoming an entirely new tax on pay cheques from 2023. The money will be ring-fenced to only go towards health and social care costs.
The onset of the coronavirus pandemic has seen the NHS struggle with demand as waiting lists and backlogs continue to build. Earlier in the month, it was revealed that an estimated 5.6 million people are currently waiting for treatment.
Elsewhere, President Joe Biden’s $3.5 trillion stimulus package faces opposition from within his own Democratic party. Forming the USA’s fourth stimulus package to help weather the storm of the pandemic, some members of the Democrats, such as Senator Joe Manchin, believe the amount is too much and are pushing for a lower figure to be agreed upon with a possible $2trn ceiling.
In Japan, data showed that household spending grew by 0.7% year-on-year in July compared with expectations of a 2.4% rise, as a resurgence in COVID-19 cases hindered consumer activity. A positive contribution came largely from transportation, followed by a smaller degree of support from the food and beverage sector. Most other categories dragged, led by furniture and household goods as well as health care.
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.
Job growth in the United States slowed through the month of August but hourly earnings saw a sharp rise, almost double the expected rate.
Recording employment gains of 235,000 jobs, the month missed estimated projections of 750,000 by almost 70% with the hospitality and leisure industries virtually grinding to a halt as the Delta variant of COVID-19 tightens its hold on the country. However, whilst growth slowed, average hourly earnings saw a steep rise in comparison. Roughly doubling compared to previous estimates, hourly earnings increased by 0.6% across the month.
The jump in hourly earnings appeared to spur inflation fears and an increase in the benchmark 10-year U.S. Treasury note yield on Friday morning, leaving it modestly higher for the week.
Eurozone inflation accelerated more than forecast to 3% in August—up from 2.2% in July and well above the ECB's 2% target. Higher energy, food, and industrial goods prices drove the increase, according to the EU's statistics agency.
News of Prime Minister Yoshihide Suga’s resignation contributed to a strong rally in Japanese equities, removing some political uncertainty and raising expectations of increased economic stimulus. Gains were underpinned by Japan’s accelerating COVID-19 vaccination drive. The Nikkei 225 Index soared 5.38%, while the broader TOPIX Index rose 4.49%, reaching a 30-year high.
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.
Stock markets in the US saw a boost last week as the Food & Drug Administration granted its full approval of the Pfizer-BioNTech COVID-19 vaccine.
Furthering prospects of an economic recovery, the news of the FDA’s approval of the Pfizer-BioNTech vaccine - which could convince more employers to mandate use of the vaccine - boosted stocks early in the week.
The tech-heavy Nasdaq Composite index outperformed the broad market S&P 500 Index and the large-cap Dow Jones Industrial Average. The Russell 2000 Index of small-cap stocks posted particularly impressive gains. Stocks in the energy sector jumped higher as crude oil prices gained about 10% for the week.
The eurozone economy appeared to remain in expansion mode in August, with the early headline number for IHS Markit’s composite Purchasing Managers’ Index (PMI) coming in at 59.5, a strong reading that was only slightly down from the 15-year high of 60.2 registered in July. The pace of growth in both the manufacturing and services sectors also dropped subtly from the preceding month but remained robust relative to historical levels. Inflation in input costs and selling prices remained elevated, likely reflecting the combination of supply chain constraints and the rebound in demand.
The Japanese government extended its COVID-19 state of emergency to eight more prefectures, with the measures set to last until September 18. Prime Minister Yoshihide Suga said that infections are spreading on an unprecedented scale in most regions across the country and acknowledged that the medical system is in a severe situation. However, Japan has been speeding up its belated vaccination drive in recent months, and Suga highlighted that about 60% of the country’s population will have been fully vaccinated by the end of September. Despite this, the country’s stock markets still gained by more than 2% over the week.
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.
Retail sales in the United States decreased in the month of July, driven by the automotive industry amid the global shortage of semiconductors.
Stunted by the global semiconductor shortage, vehicle sales have struggled in America throughout 2021 and weighed in at 3.9% lower throughout July. This is thought to be the biggest factor behind the 1.1% total drop in retail sales in the same month. However, spending increased in the hospitality sector, with restaurants and bars seeing increased footfall.
In the UK, retail sales also declined with a month of poor weather earmarked as one of the reasons for the 2.5% reduction - along with the country’s increasing number of citizens forced to self-isolate after being ‘pinged’ by the NHS COVID-19 contract tracing app. At its peak, more than 700,000 people were asked to isolate in a single week. In more positive news, new data from the Office for National Statistics revealed the unemployment rate dropped to 4.7% in the second quarter, down from 4.9% in the previous.
Japan’s gross domestic product expanded by an annualised 1.3% in the second quarter of 2021, ahead of consensus estimates. It followed a 3.7% contraction in the first quarter of the year. Growth momentum was marginally positive despite pandemic headwinds; the main driver was domestic private demand, helped by strength in private consumption, capital spending, and residential investment. The rebound in Japan’s GDP is much weaker, however, than that seen in other developed economies, highlighting the country’s struggles to contain the pandemic.
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 major European markets all registered advances last week as coronavirus cases begin to stabilise, and even decrease, in areas across the continent.
Aided by a strengthened vaccination programme, which has overtaken the US in terms of first and second doses administered, the pan-European STOXX Europe 600 Index ended the week 1.25% higher whilst France’s CAC 40 Index gained 1.16%, Germany’s Xetra DAX Index ended 1.37% higher and Italy’s FTSE MIB Index climbed 2.51%.
In the UK, the economy expanded by 4.8% in the second quarter, driven by a rise in household consumption as lockdown rules were lifted. The quarterly rate was below the Bank of England’s forecast for 5%. The level of gross domestic product is 4.4% below where it stood at the end of 2019, lagging other advanced economies. However, UK exports to the EU strengthened in June - rising 1.2% and exceeding the pre-Brexit level of December 2020 for a second month.
Over in the United States, the Senate passed a roughly USD $1 trillion bipartisan infrastructure package, including about $550 billion in new spending that aims to rebuild traditional transportation infrastructure, improve access to broadband connectivity in rural areas and upgrade the electric grid and water systems.
In Asia, China has released a five-year blueprint calling for increased regulation affecting key parts of the economy. The document signalled Beijing’s intention to draft new laws covering national security, technology, monopolies, and education. In the technology sector, new legislation will cover areas such as online finance, artificial intelligence, big data, and cloud computing.
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.
Job growth in the United States exceeded expectations in the month of June, with payrolls climbing by 943,000 despite ongoing concerns over coronavirus.
The statistics were unveiled in a Labour Department report, along with the revelation of a pandemic low unemployment rate of 5.4%. The biggest gains came from the leisure and hospitality sector, with 380,000 new workers employed as the industry battles back from the pandemic’s devastating effects. The report, the best showing since strict lockdown measures were removed in the summer of 2020, offers the country renewed confidence as it moves towards autumn and winter.
Elsewhere, the Bank of England has suggested that “some modest tightening of monetary policy over the forecast period is likely to be necessary” should the economy evolve broadly in line with the bank’s central projections. The BoE, which left its monetary policy and quantitative easing program unchanged at its latest meeting, now expects interest rates to rise from 0.1% to 0.2% in 2022 and to 0.5% in August 2024.
In Asia, household spending unexpectedly fell 5.1% year-on-year in June. Domestic demand remained weak due to state of emergency restrictions, while cuts to employees’ summer bonuses also hit consumption. This weakness casts doubt on the Bank of Japan’s forecast that the benefits of the previously reported export-driven recovery will spread to households.
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.
An 8% slump in the share price of online retail giant Amazon has sparked a degree of caution in the consumer discretionary sector, as the online marketplace missed its quarterly sales estimate for the first time since 2018.
The drop comes as economies gradually reopen around the world and stay-at-home orders surrounding the coronavirus pandemic are lifted, during which Amazon saw a 220% increase in its profits as physical shops and locations closed throughout 2020.
Shares in several of the globe’s big technology companies, such as Facebook & Google owners Alphabet, also dropped with Wall Street ending the week lower as a result - as the Dow Jones, NASDAQ and S&P 500 all recorded losses.
Elsewhere, the Eurozone economy bounced back from recession in the second quarter, growing by a faster-than-expected 2% relative to the first three months of 2021. It’s year-on-year growth of 13.7% also exceeded estimates as output expanded in Germany, France, Italy, and Spain - although the uptick in Germany fell below forecasts because of supply bottlenecks that hindered its manufacturing sector.
Finally, Japan’s major stock benchmarks faced difficulty as coronavirus cases in the country reached a record level of 10,000 - leading the government to extend a state of emergency to combat the spread of the virus by a further 10 days and expand its enforcement area. The 2020 Tokyo Olympics are currently being held with strict measures in place.
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.
After a sharp sell-off early last week, attributed to fresh concerns about the Delta variant of coronavirus, stocks in the United States rebounded towards the latter end of the week.
Many observers linked the steep declines at the start of the week to growing fears about the spread of the Delta variant of coronavirus. Cases and hospitalisations rose in many parts of the country, particularly in states with low vaccination levels. Stocks tied to the reopening of the economy, such as cruise operators and airlines, fared particularly poorly with much of the gains concentrated in technology and internet-related giants.
European economies continued to reopen despite a sharp rise in coronavirus infections. New cases climbed by 40% over the past week in the UK, where workforce shortages have been exacerbated by a government-backed smartphone app that alerts people who may have crossed paths with an infected person and advises a period of self-isolation. After the UK lifted all remaining restrictions last Monday, both Prime Minister Boris Johnson and Leader of the Opposition, Sir Keir Starmer, had to quarantine.
Meanwhile, the French government said that it could not rule out the reintroduction of curfew measures if infections continue to climb at such a fast rate. In Spain, several regions requested the reintroduction of some restrictions.
Japan’s government updated its basic energy plan, with the draft expected to be approved by the cabinet later this year. It outlines ambitions to drastically increase the country’s renewable energy use and reduce fossil fuel consumption over the next decade to meet carbon emission targets. Prime Minister Yoshihide Suga has pledged that Japan will strive to achieve carbon neutrality by 2050. The plan also states that Japan will aim to reduce its reliance on nuclear power as much as possible, but that it remains an important energy source. The country’s nuclear industry has struggled since the 2011 Fukushima power plant disaster and anti-nuclear sentiment is strong among the public.
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.
In the United Kingdom, England has removed most of its remaining coronavirus restrictions on the economy and daily life with nearly all rules - including capacity limits and social distancing - scrapped.
Alongside removing restrictions, the UK government has allowed the economy to reopen fully with all sectors, including nightlife, operating at full capacity with little-to-no social distancing measures for the first time since March 2020. Citing its vaccination programme as a huge success, it’s one of a small number of countries worldwide to lift all restrictions. It’s in stark comparison to some European nations such as France and the Netherlands, who have reintroduced strict measures to control a surge in coronavirus cases.
In the United States, retail sales defied expectations to record a 0.6% rise in June after an initial projection of a 0.4% contraction. It comes despite a backdrop of diminishing consumer confidence, the lowest since February. Attributed mostly to the rise in inflation, consumer complaints about rising prices for homes, vehicles and household durables reached an all-time high according to a study by the University of Michigan.
Finally in China, increased regulatory scrutiny of US-listed Chinese internet companies like ride-hailer Didi Chuxing is continuing to concern foreign investors. Commercial law firms in Hong Kong said that Beijing's stricter cybersecurity and anti-monopoly regulations could accelerate the trend for Chinese companies to list in Hong Kong. While the valuations of China's leading internet companies could suffer in the short term, analysts said a more transparent legal and regulatory regime could benefit the sector in the long term.