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 sharp rise in coronavirus infections across Europe has cast doubt over the continent’s economic recovery, as some countries prepare to reintroduce measures.
Attributed to the highly transmissible Delta variant, ministers in France warn that the country could face a fourth wave before the end of the month. Cases in Spain have also soared, forcing some regions to reimpose strict controls to curb the spread of the virus. Meanwhile, despite recording cases in excess of 30,000, officials in the UK look set to continue with the country’s planned removal of restrictions on July 19th as Health Secretary Sajid Javid claims vaccinations have reduced the risk of contagion and serious illness.
In the US, the major benchmarks closed mixed with large-caps and growth stocks outperforming for the second consecutive week. Within the S&P 500 Index, the interest rate-sensitive real estate sector performed best as longer-term Treasury yields decreased sharply. Energy stocks fared worst on concerns that disagreements among major oil producers would result in some violating output restrictions. Weakness among media firms also weighed on the communication services sector.
Finally, there’s fresh optimism of a strong economic recovery in Japan despite the government placing Tokyo under another state of emergency as a result of high coronavirus infection rates. It also means the upcoming Olympic Games will be held behind closed doors. Bank of Japan (BoJ) Governor Haruhiko Kuroda reiterated that the central bank is keeping a close eye on the economic impact of the pandemic and won’t hesitate to take additional monetary easing steps as needed. The BoJ will focus on maintaining a range of pandemic-relief measures that aim to channel cash to smaller firms hit by state of emergency curbs via commercial banks.
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.
Wall Street experienced its fifth straight quarterly gain last week, as the United States economy continues to recover from the effects of the coronavirus pandemic.
The S&P 500 Index and Nasdaq Composite Index moved to new highs and closed out a fifth consecutive quarterly advance. Large-cap growth stocks led the gains, with the Russell 1000 Growth Index stretching its weekly winning streak to eight. Technology and healthcare stocks led the gains within the S&P 500 whilst consumer discretionary stocks were also strong - boosted by a solid rise in Nike shares. Small and mid-caps underperformed after strong gains the previous week. Traders are also optimistic that the Federal Reserve will keep interest rates low for a while longer.
The Delta variant of coronavirus continued to disrupt European markets, with the majority of markets recording small declines. Germany’s Xetra DAX Index rose 0.27%, while France’s CAC 40 Index fell 1.06% and Italy’s FTSE MIB Index declined 0.89%. The UK’s FTSE 100 Index gave up 0.18% of its value. However, in more positive news, the continent’s unemployment rate decreased slightly from 8.1% to 7.9% in tandem with a significant growth in the manufacturing sector.
Meanwhile, it was a disappointing week on the markets in Asia with both China and Japan recording negative returns. In China, the non-manufacturing PMI came in weaker than expected, which some link to a resurgence of coronavirus infections in the southern province of Guangdong. In Japan, industrial production contracted by more than expected - falling 5.9% compared to May amid expectations of a 2.1% decline. The contraction was primarily due to manufacturers cutting back on production due to the global semiconductor chip shortage.
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 another blow to the UK’s travel industry, some European nations may scrap quarantine-free entry for UK travellers to prevent spread of the Delta variant of coronavirus.
The number of COVID-19 cases in the UK rose to more than 16,000, the highest since February, driven by the more transmissible Delta variant of coronavirus. The UK expanded the number of countries on its travel green list after pressure from the travel and aviation industries but reports from The Times claim the European Union is planning to scrap quarantine-free visits by UK nationals, although there is speculation that Spain and Greece may not follow suit.
Elsewhere, the United States inflation rate has risen at its fastest pace (3.4%) since 2008. The headline rate now stands at 5%, which is also the highest it has reached since August 2008. However, with the S&P 500 touching a new high, traders anticipate that the inflationary surge would be temporary, allowing the Federal Reserve to put off tapering a bond-buying policy that has pumped money into global markets.
In Asia, Japan has reached its target of administering one million coronavirus injections per day early, with the original target set for the end of June. The government aims to finish vaccinating all eligible people in Japan who wish to be inoculated by November. With the start of the Tokyo Olympics less than a month away, the figures still lag other developed nations, however.
In Latin America, a surprise move from Mexico’s central bank has seen them raise its key lending rate by a quarter percentage point to 4.25%. It was the bank’s first interest rate hike since 2018 and caught markets off guard, with the rate hike coming just three weeks after Banxico released its quarterly inflation report where it had highlighted upward risks to inflation.
In our weekly Market Monday insights, Prosperity Investment Management examine the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
Japan’s export market saw a considerable increase on last year - its highest in more than 40 years - whilst the UK’s inflation rate rose higher than expected last month. In this week’s Market Monday, we break down the key stories of the past week.
Beginning in the UK inflation jumped again in May, accelerating to 2.1% on higher prices for clothing, fuels, and meals in restaurants and bars. The increase was above economists’ forecasts and the Bank of England’s target. Governor Andrew Bailey has said that he would not hesitate to tighten monetary policy if the inflation rate consistently exceeded the BoE’s target. Meanwhile, UK payrolls rose for a sixth consecutive month - driven by hiring in the recovering hospitality industry with the unemployment rate averaging 4.7% in the three months to 30th April.
Elsewhere in Europe, the European Commission has signed off on the first two national recovery plans—those of Spain and Portugal—supported by the €800bn Next Generation EU fund. Italy’s plan is next in line, with approval expected in coming days.
Over in the United States, the early part of the week was relatively quiet on subdued trading volumes as investors looked forward to the end of the Federal Reserve policy meeting on Wednesday. Policymakers acknowledged that progress on vaccinations has allowed the economic recovery from the pandemic to gain strength.
In Asia, Chinese consumer spending was cautious during the Dragon Boat Festival holiday. Tourist numbers declined slightly from 2019 levels, but total spending fell 25% - a similar shortfall with the May Day holiday. Weak box office revenue at China’s cinemas also offered evidence of a sluggish recovery in consumer services whilst in Japan, exports rose 49.6% year-on-year in May - the highest growth since 1980.
The jump in exports largely reflected a rebound in shipments from last year’s plunge in the wake of the pandemic shock. The highest export growth was to the U.S., driven by cars and vehicle parts while exports to China were also strong, led by chip production equipment and hybrid cars.
In this week's Market Monday insight, where we analyse some of the globe's major markets; the UK prepares to make its final decision on whether to end coronavirus restrictions later in the month, oil prices reached a two-year high in the US and markets in China saw a small decline compared to the previous week.
Beginning in the UK, a sharp increase in cases of the highly transmissible Delta variant of coronavirus stoked concerns among scientists and government officials - sparking a debate on whether lockdown measures should be fully lifted on June 21. Although the number of new cases rose to levels not seen since late March, Prime Minister Boris Johnson said there was not yet enough evidence to delay a full reopening.
Heading to the US, energy shares performed best within the S&P 500 Index as oil prices reached their highest level in two years. Consumer discretionary shares lagged, weighed down by a decline in Tesla. Trading volumes were generally light, as is typical of the start of the summer holiday season.
In Asia, Chinese stocks retreated after recording three weeks of gains. The CSI 300 Index shed 0.7% and the benchmark Shanghai Stock Exchange edged down 0.2%, according to Reuters. Meanwhile, foreign investors bought USD $8.7bn of Chinese stocks in May, the highest single month this year.
Examining the major markets in this week's edition of Market Monday; the UK has seen a rise in retail sales following the further easing of coronavirus restrictions, US exchanges experienced a mixed week of trading and China records a slowdown in domestic construction.
Starting in the UK, consumer price inflation accelerated to 1.5% in April from 0.7% in March, driven by bigger regulated gas and electricity bills and higher clothing prices. Meanwhile, as some lockdown restrictions were lifted, retail sales volumes jumped 9.2% year-over-year in April. A survey by GfK also found that UK consumer sentiment had risen back to levels last seen in March 2020.
Heading to the US, stocks posted mixed results in a volatile week of trading, with the large-cap S&P 500 Index ending modestly lower and the tech-heavy Nasdaq Composite Index gaining a little ground. These mixed results likely reflect strength in the U.S. economy, as well as concerns about inflation and the timing of when the Federal Reserve might begin to rein in its accommodative policies.
In China, economic data is mixed with strong external demand offsetting softer domestic demand as residential construction and infrastructure investment slowed. Retail sales growth slowed to 4.3% in April on the two-year average, down from March retail sales growth of 6.4%. A resurgence of coronavirus cases in several Chinese provinces has raised worries that COVID-19 still has potential to stifle a recovery in household consumption.
Prosperity Investment Management provides you with a weekly update from markets across the globe, including major markets such as the United Kingdom, United States of America and China.
Beginning in the UK, gross domestic product grew a stronger-than-expected 2.1% in March, led by the reopening of schools, vaccine rollouts, and pickups in the retail and construction sectors. The expansion helped reduce the rate at which the economy contracted in the first quarter to 1.5%. Bank of England Governor Andrew Bailey said the central bank is watching the inflation situation carefully but does not think that the factors driving up consumer prices will last.
Moving to the US, the week brought more surprises on the heels of the previous Friday’s weaker-than-expected jobs report for April. On Wednesday, the S&P 500 Index had its worst day since February 25—and the Dow Jones Industrial Average had its worst since October 28—after the Labor Department reported that core consumer prices jumped by 0.9% in April, the most in nearly four decades and roughly triple consensus estimates.
Finally, in China, vehicle sales increased for the 13th straight month in April, rising 8.6% over a year ago. China’s producer price index jumped 6.8% in April - the largest gain since 2017 - as raw materials prices surged. However, the CPI rose a less-than-expected 0.9%, restrained by lower food prices. Despite the muted CPI reading, analysts see core consumer inflation on the rise as prices in the services sector start to normalise after the coronavirus pandemic.
Prosperity Investment Management provides you with a weekly update from markets across the globe.
Starting in Europe, shares climbed on stronger-than-expected earnings results and growing confidence in an economic recovery as the UK, Belgium and the Netherlands continue to ease coronavirus restrictions. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.72% higher. The German and French stock indexes rose by more than 1.5%. Italy’s FTSE MIB Index added 1.95%. The UK’s FTSE 100 Index gained 2.29%.
In the US, earnings season continued to wind down over the week, with 442 of the S&P 500 companies expected to have reported first-quarter results by the end of the week. Earnings over the quarter have generally surpassed analysts’ estimates by a wide margin, with analysts polled by FactSet currently expecting overall profits for the S&P 500 to have grown by over 49% relative to the year before.
In China, mainland markets reopened last Thursday after being closed for the Labour Day holiday. Consumer stocks were among the best performers as preliminary holiday sales and travel data were positively received by investors, though a 40% surge in tourism in Macau was seen as disappointing. The yield on China’s 10-year sovereign bond declined three basis points to 3.17%. China’s economy has peaked in momentum terms, according to some analysts, a view that has supported those who think that bond yields in China may also be near a peak.
Prosperity Investment Management provides you with a weekly update from markets across the globe.
Shares in Europe slipped on concerns that a rising coronavirus caseload could slow the pace of the economic recovery - these fears overshadowed strong corporate earnings. Core eurozone bond yields ended the week roughly flat despite optimism about the vaccine rollout driving yields higher early in the week.
In the US, initial unemployment claims fell to the lowest level since the onset of the pandemic in March 2020, according to weekly data from the Department of Labor. The report showed that the labor market is continuing to improve, although weekly jobless claims remain well above pre-pandemic averages.
Chinese stocks rose steadily since Monday, when mainland equity markets received inflows totalling USD 2.5 billion from Hong Kong via Stock Connect, marking the third-largest single-day inflow from Hong Kong investors. In the bond market, the yield on China’s sovereign 10-year bond increased one basis point to 3.18%.
Prosperity Investment Management provides you with a weekly update from markets across the globe.
Official data has shown that the UK economy grew 0.4% in February, helped by an uptick in factory output led by the automotive sector alongside retail and wholesale output. The 2.9% contraction that the economy suffered in January was revised to a 2.2% slowdown.
In the US, most of the major benchmarks recorded their fourth consecutive week of gains and moved to record highs whilst economic signals also seemed supportive. March retail sales, reported on Thursday, grew by 9.8% - the most since May. Gains were broad-based and reflected both the continued reopening of restaurants and other retail operations, as well as a recovery from a 2.7% pullback in February due to the exceptionally severe weather.
China’s economy surged 18.3% year-over-year in the first quarter of 2021, albeit versus a very low base in 2020 when stringent shutdowns were imposed to contain the initial COVID-19 outbreak. Earlier in the week, China's Customs reported that exports rose 30.6% in March in U.S. dollar terms - exports were a key growth driver for China in 2020.
Prosperity Investment Management provides you with a weekly update from markets across the globe.
Starting in the UK, England moves to the second phase of its “road map” for lifting the lockdown today - with outdoor pubs, non-essential shops, hairdressers, indoor gyms, and other facilities allowed to reopen. The UK government has also announced a framework for the resumption of international travel, which could begin to take effect on May 17, at the earliest.
The Labor Department reported that employers added 916,000 jobs in March, well above consensus estimates of around 650,000, and the most since last August. The reopening of bars and restaurants and the rebound in travel were clearly at work, with 280,000 jobs added in leisure and hospitality industries.
Economic data over China’s Qingming holiday weekend (April 3 to 5) showed a recovery in domestic tourism close to pre-pandemic levels. Box office and cinema admissions also rebounded strongly from 2019 levels to set new records. However, tourism revenue over the long weekend slumped from 2019, a drop that analysts attributed to shorter visits and price discounts.
Prosperity Investment Management provides you with a weekly update from markets across the globe.
Britain and the European Commission issued a joint statement saying they discussed developing a “reciprocally beneficial relationship” to tackle the pandemic after a row over vaccine supply. Both sides said they would work together “to create a win-win situation and expand vaccine supply for all our citizens.” It comes as markets saw a small rise amid hopes of an economic recovery, reversing earlier losses.
The United States’ major indexes were mixed for the week, as investors seemed to continue weighing optimism about reopening against inflation and interest rate concerns. Small-cap stocks lagged for the second consecutive week, signalling a potential pause or reversal in their recent market leadership.
Chinese stocks recorded a weekly gain, thanks to a rally on Friday after the country’s central bank signalled that it was not about to tighten monetary policy. The Shanghai Stock Exchange Composite (SSEC) Index rose 0.4% to 3418.3, while the large-cap CSI 300 Index ended up 0.6% at 5038.0, its first weekly gain after five straight weeks of losses.