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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.
