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Market Monday

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November 22, 2021

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.

November 15, 2021

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.

November 8, 2021

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.

November 1, 2021

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.

October 25, 2021

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.


Negotiations in the US are continuing to advance surrounding President Biden’s social spending bill, as the infighting inside the Democrat party over the stimulus package appears to be settling with a deal near completion.


House Speaker Nancy Pelosi says that the party is “pretty much there” on the deal, which has undergone several revisions to reduce its cost from $3 trillion to under $2 trillion.


With an agreement within sight, plans are being made to vote on the deal and a further infrastructure bill in the coming weeks.


Elsewhere, UK inflation unexpectedly slowed to 3.1% year-over-year in September - down from the 3.2% registered in August but still well above the Bank of England’s 2% target. BoE chief economist Huw Pill said in an interview with the Financial Times that he would not be shocked to see UK inflation hit or exceed 5% in the coming months.


Eurozone business activity slowed for a third consecutive month in October, amid increasing supply-chain bottlenecks and ongoing coronavirus-related disruptions, according to early data for IHS Markit’s Purchasing Managers’ Index (PMI). The Eurozone PMI Composite Output Index fell to 54.3 from 56.2 in September. Activity in the manufacturing and services sectors remained above 50—the level denoting expansion—but average selling prices rose to the highest level since the survey began in 1998.


According to provisional data from Japan’s Ministry of Finance, the country’s export growth decelerated sharply in September, falling to 13.0% year on year from the previous month’s 26.2%. Positive contributors were steel, coking coal, and tech, while car shipments tumbled as supply chain disruptions in Southeast Asia caused by the coronavirus pandemic and the continuing global semiconductor shortage forced automakers to cut production.

October 18, 2021

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.


Figures from the Office for National Statistics showed the United Kingdom’s gross domestic product grew 0.4% in August, boosted by the full reopening of the hospitality sector.


Whilst still 0.8% lower than February 2020 - the last data available before the onset of the coronavirus pandemic - accommodation and food service activities, arts, entertainment and recreation were the top contributors to services growth in August. The ONS said accommodation and food service activities grew by 10.3 percent, while arts, entertainment and recreation grew by 8.5 percent.


The ONS also revised GDP for July 2021, amending it down from 0.1 percent growth to a 0.1 percent fall, due to a downward revision of data for the manufacture of motor vehicles, oil and gas, and improvements to how health output is measured.


Germany’s top five economic institutes slashed their forecast for economic growth in 2021 to 2.4% from a previous estimate of 3.7%, as supply chain bottlenecks curb manufacturing output. However, they said economic conditions would improve toward year-end and raised their forecast for 2022 growth significantly to 4.8% from 3.9%, as the impact of the coronavirus pandemic eases.


In the United States, evidence began to suggest that the drag on the economy from the delta variant of the coronavirus was easing. On Thursday, the S&P 500 Index recorded its biggest daily gain since March following news that weekly jobless claims had fallen to 293,000, a new pandemic-era low. Airline and cruise ship stocks rose after the White House announced an easing in border controls following the recent decline in coronavirus cases.


In its October economic outlook report, the Japanese government retained its overall assessment for the Japanese economy as continuing to pick up, pointing to signs of recovery in private consumption, but it said that the pace of recovery was slowing due to the severe situation caused by the coronavirus pandemic. However, the government stated that exports were “increasing at a slower pace,” instead of its previous assessment in September of exports “increasing moderately.”

October 4, 2021

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.


September 27, 2021

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.

September 20, 2021

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.

September 13, 2021

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.

September 6, 2021

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.

August 30, 2021

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.