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.