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Market Monday

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June 27, 2022

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.

Surging inflation led interest payments on government debt to hit the highest amount for May on record.

Interest payments paid by the government for the month of May hit £7.6bn, up by just over £3.1bn from the year before.

 

Government borrowing fell in May from the year before, but still remained higher than pre-Covid levels.

 

Borrowing - the difference between spending and tax income - was £14bn, down £4bn from a year earlier, the Office for National Statistics stated.

 

But the figure was still the third-highest May borrowing since monthly records began in 1993 and was also £3.7bn more than the Office for Budget Responsibility (OBR) had predicted.

 

The recent high levels of debt interest payments are largely a result of higher inflation, the ONS said. This rise is due to the interest paid on government bonds rising in line with the Retail Prices Index measure of inflation, which hit almost 12% in May 2022.

 

The ONS said May's figure was the third highest debt interest payment made by a government in any single month.

The OBR estimates that debt interest payments will cost the government £87.2bn over the financial year ending in March 2023.

 

So far this financial year, interest payments have totalled £14.1bn, up £4.7bn year on 2021.

 

Central government receipts were £66.6bn in May 2022, £5.7bn more than May 2021, with an annual increase of £3.4bn in taxes. Tax revenues in total rose to £48.3bn in May, with National Insurance Contributions (NICs) raising £2bn more than last year.

 

Employees, employers and the self-employed started paying 1.25p more in the pound for National Insurance from 6 April 2022.

 

June 6, 2022

In the U.S., stocks rose Monday as the indexes aim to rebound from a week of losses on the heels of strong May jobs data that affirmed Federal Reserve officials were likely to continue sharpening monetary conditions.

The S&P 500 was up 1%, and the Dow Jones Industrial Average gained 200 points, or 0.6%. The tech-heavy Nasdaq advanced 1.7%.

Oil prices are rose on Monday following announcements of a price hike from Saudi Arabia for its crude sales. According to Saudi state oil producer, Aramco, the official selling price for its flagship Arab Light crude to Asia will be going up to a $6.50 premium in July. This is a notable jump from its previous selling price of $4.40 in June. As a result of all this, Brent crude futures hit an intraday high of $121.95 earlier today. At the same time, U.S. West Texas Intermediate crude futures peaked at $120.99 per barrel, a three-month high. This comes after a 1.7% gain on Friday last week.

New car registrations plummeted by 20.6% in May as ongoing supply chain shortages continued to damage the automobile industry.

124,394 units were made, which was the second lowest May in 30 years, SMMT said.

The market, which cannot keep up with pent-up demand, was reported to be approximately a third below pre-pandemic levels of 2019.

The FTSE 100 was up 96 points at 7,629, showing no worries that prime minister Boris Johnson is set to face a confidence vote from the parliamentary Conservative party.

Four-day work week trials began on Monday, with at least one FTSE 100 company participating, as working from home during the pandemic changed people’s perspective on office life.

Over 3,000 employees from 70 companies will work a shorter week for the same pay until December as the dynamics of working life in Britain may be set to change forever.

The six-month nationwide pilot scheme has been named the largest four-day trial in the world.

Asian markets are setting the tone with recoveries in Hong Kong and Japan after the roller coaster in the US on Friday with the non-farm payroll numbers.

China announced a further easing of restricitons in Beijing over the weekend, which is seeing some Asian equity markets and US futures trading in positive territory.

Other glimmers of relief are that officials in Washington are considering a selective removal of tariffs on Chinese imports to aid the inflation fight.

May 30, 2022

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.

Inflation in Germany has risen to 7.9% in May - the highest level seen in the country since reunification and similar to rates not seen since 1973.

Surpassing the already record-breaking levels seen in April of this year, statistics agency Destatis highlights Russia’s invasion of Ukraine and the alarming rise in energy prices as drivers for the increase.

The country is planning a package of policies to try and ease the burden on consumers, including cheap monthly tickets for regional public transport between June and August and a discount for drivers at petrol stations.

In the UK, the price of budget pasta, bread and beef mince has soared according to the Office for National Statistics. ONS figures showed prices rose at rates far higher than the standard level of inflation - with pasta rising by 50%, more than five times higher.

In the United States, manufacturing output and new orders were strong but the S&P Global Flash PMI receded to 57.5 in May, down from 59.2 in April. The survey indicated that input costs and output charges also increased meaningfully. 

Finally, in Japan, a further surge in coronavirus cases in Beijing ignited fears of an economic slowdown amid supply chain concerns. Worries about tightening global financial conditions and the potential impact on economic growth similarly weighed on Japanese sentiment. Further losses in the U.S. tech space also hurt investor confidence.

May 23, 2022

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.

The European Commission has cut its gross domestic product growth forecast for 2022 whilst simultaneously raising its estimate for inflation amid soaring energy costs.

Despite the eurozone economy performing more resilient than initially expected throughout the first quarter of the year, with growth of 0.3% compared to an expected 0.2%, the EC has revised its 2022 forecast to 2.7% - down from 4.0%.

Reflecting the sharp rise in energy prices seen across the continent, the group has also raised its inflation forecast, almost doubling it from 3.5% to 6.1%.

In a similar vein, the United Kingdom’s rate of inflation accelerated to its highest level since 1982 as it topped 9.0%.

In the United States, comments from Federal Reserve officials over the week did little to calm similar inflation and interest rate fears. The week’s economic data offered mixed signals about whether a recession was imminent. On Tuesday, investors seemed to welcome news that retail sales, not including the volatile vehicle sector, had risen more than expected in April (0.6% versus approximately 0.4%), while March’s gain was revised upward to 2.1%. Industrial production, manufacturing production and capacity utilisation figures in April also came in higher than anticipated.

Finally, economic data released last week pointed to slowing growth in China. Retail sales and industrial output data for April fell behind estimates amid continued pandemic lockdowns - reflecting China’s zero-COVID approach. Fixed asset investment rose 6.8% from January to April from a year ago but also missed the consensus forecast. Home prices in China fell in April for the eighth straight month, declining 0.3% from March, which marked the fastest decline in five months.

May 16, 2022

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.

New data has revealed that the UK economy unexpectedly shrunk by 0.1% in March as households and consumers continue to cut back in the face of the cost of living crisis.

Gross domestic product fell 0.1% from February, when growth was flat, the Office for National Statistics said Thursday. It meant the economy expanded just 0.8% in the first quarter, less than the 1% forecast by economists.

While the quarterly growth takes output back above its pre-pandemic level for the first time, it’s almost certain to mark the high point of the year with the worst bout of inflation since the 1980s expected to see the economy rapidly lose momentum and possibly slide into a recession. 

Elsewhere in Europe, both Finland & Sweden have formally announced their decision to join NATO. The Russia foreign ministry threatened unspecified “military-technical” retaliation. Previously, Russian officials have warned that they might place nuclear weapons in the Kaliningrad enclave on the Baltic coast.

In the United States, stocks recorded another week of losses as investors appeared to grow increasingly sceptical that the Federal Reserve will be able to achieve a “soft landing” for the economy - by raising rates enough to tame inflation without causing a recession. The Cboe Volatility Index (VIX) remained elevated but slightly below its recent high. Many cryptocurrencies plunged in value, further suggesting a strong risk-off environment.

Finally, against the backdrop of the war between Russia and Ukraine, Japan’s government agreed in principle on a ban of Russian oil imports with other G7 nations. Prime Minister Fumio Kishida stressed the importance of G7 coordination. However, he emphasised that it had been a difficult decision given the resource-poor country’s dependence on Russian fuel and that Japan will take its time to reduce or suspend imports as part of a phased approach to minimise the negative impact on people’s lives and business activities.

May 9, 2022

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.

The Bank of England has raised its base interest rate to 1%, the highest since 2009, in a renewed effort to stem the growing cost of living crisis.

Amid the backdrop of an increasingly volatile economy, the BoE approved the rise as a means of battling rising inflation - which is already at a 30-year high and is widely tipped to exceed 10% in 2022.

Despite raising the figure, the BoE has also issued a stark warning about a potential recession ahead.

In the US, further sanctions have been imposed on Russia - targeting services, Russian media and the defence sector. They include a ban on the sale of US services to Russia such as accountancy, no more US advertising on three state-controlled television stations, technology export bans including industrial engines and bulldozers and further visa restrictions on another 2,600 Russian and Belarusian individuals - including military officials and executives from Sberbank and Gazprombank.

German manufacturing orders fell by a greater-than-expected 4.7% in March, driven by lower foreign orders - especially from outside the eurozone. Industrial production dropped 3.9% in the largest decline since the start of the pandemic. The statistics office attributed the decline to supply chain disruptions due to pandemic restrictions and Russia’s invasion of Ukraine. Meanwhile, EU retail sales volumes slipped 0.4%, with mail order and internet sales recording the biggest falls.

Chinese markets fell as Beijing showed no sign of relaxing its zero-tolerance approach to coronavirus - raising worries about the economic cost of widespread lockdowns. The Shanghai Composite Index fell 1.5% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, sank 2.7%.

April 25, 2022

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.

New data from the Office for National Statistics reveals that almost 90% of British households saw their cost of living rise last month as growing fuel, food and borrowing costs continue to compound.

The ONS also said a quarter of those surveyed said they were struggling to meet those costs. The figures represent November to March and do not include April’s rise in energy prices or national insurance contributions.

The figures come amid a backdrop of extenuating factors, including the coronavirus pandemic, the Russian invasion of Ukraine and a 30-year high in inflation, that have all seen prices hike in recent weeks and months.

Elsewhere in the UK, the impact of inflation and the war in Ukraine continued to be felt. Business activity grew at the slowest rate in three months in April, as orders in the services sector slumped. Retail sales fell by a worse-than-expected 1.4% in March from the month previous, also according to the ONS. Market research firm GfK said consumer confidence slumped in April, approaching its lowest level since the data series began 50 years ago.

Stock markets in China and Europe have fallen as fears that continuing Covid restrictions in China could hit supply chains and the wider global economy.

Authorities in Beijing have enforced mass testing in one area of the city following a small outbreak of cases. However, there are also concerns the capital could follow Shanghai by enforcing a lockdown to contain the spread.

London's leading FTSE 100 share index tumbled, led by commodities firms such as oil producers and miners. The FTSE dropped by 2.2% and stock markets in Germany and France also fell following a decline of more than 5% on China's Shanghai Composite Index earlier. Hong Kong's Hang Seng closed 3.7% lower while Japan's Nikkei index fell by nearly 2%.

However, China’s economy grew at a stronger-than-expected 4.8% pace in the year’s first quarter from a year ago, up from 4.0% in last year’s fourth quarter. On a quarter-on-quarter basis, the economy expanded 1.3% in the first three months of the year, slowing from the previous quarter’s 1.6% increase.

In the US, initial data for the S&P Global US Composite PMI Output Index, which tracks the manufacturing and services sectors, suggested that growth in business activity slowed in April but remained strong. The widely watched economic indicator came in at 55.1 compared with 57.7 in March.

April 11, 2022

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.

Economic growth in the United Kingdom slowed abruptly to 0.1% in February, official figures from the Office for National Statistics show.

After a 0.8% monthly rise in January, the stall in the country’s economic recovery has been attributed to a decline in production and construction output. 

The figures are a slight decline on economists estimates, who predicted growth would decline to 0.3% when polled by Reuters.

However, the UK economy is still 1.5% larger than in February 2020, just before the financial shockwave of lockdowns induced by the coronavirus pandemic took effect.

Driven by a sharp decline in production of cars and computer goods, which is exacerbated by the continuing global semiconductor shortage, the downturn was offset by growth in the services sector - including travel and tourism. Activity in the health sector dropped by 3.8% due to a decrease in Test & Trace and the NHS vaccination programme.

In Europe, investor morale in the eurozone fell to its lowest level in nearly two years in April, according to a monthly survey conducted by German market research group Sentix.

Economic data provided more evidence of a gathering slowdown in Germany. German factory orders fell sharply in February, mainly by a decline in foreign orders. It was the first drop in orders after three consecutive months of gains.

In the United States, new jobless figures appear to suggest the economy is proving resilient in the face of growing inflation and the war in Ukraine. Weekly jobless claims fell much more than expected to 166,000 - the lowest number since 1968. Continuing claims rose unexpectedly, however.

In China, Shanghai has been under a citywide, two-stage lockdown that began on March 28 in an effort to stop the virus’s spread. With 23 Chinese cities currently under total or partial lockdown, Nomura has estimated that 193 million people are affected in areas that account for 13.5% of China’s economy.

April 4, 2022

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.

Christian Sewing, the Chief Executive Officer of Deutsche Bank, has warned that a recession in Germany is highly likely if the country’s supplies of Russian gas should be cut off.

Speaking to a press briefing, Mr Sewing added his name to a growing list of German executives and politicians to offer stark warnings. He claimed there would be “a further deterioration of the situation if there’s a stop to imports or deliveries of Russian oil and natural gas.”

Germany imports 55% of its gas supply from Russia, through the Nord Stream gas pipeline. It has publicly said it intends to reduce its reliance on Russian gas but predicts it will not be able to achieve this until mid-2024.

The country is already battling a surge in inflation but Mr Sewing predicts the figure could climb into double digits should an import embargo on Russian gas be enacted. It comes after Russian President Vladimir Putin ordered that foreign buyers must pay for energy supplies in rubles.

The United Kingdom is battling its own crisis as energy prices for consumers soared on 1st April last week - with an unprecedented £700 per year price hike for a household on average usage.

Elsewhere in Europe, initial estimates showed that the eurozone’s annual inflation rate soared to a record 7.5% in March, compared with 5.9% in February. The increase was driven mainly by the upsurge in energy prices. However, the rate of unemployment dropped to a record low of 6.8% in February as the economy continued to recover from the lifting of coronavirus lockdowns.

In the United States, stock prices fluctuated over the week in an apparent response to the evolving situation in the war in Ukraine. The week started off on a strong note, which traders attributed to positive negotiations between Russia and Ukraine. The S&P 500’s four-day winning streak was broken on Wednesday after a Russian official said that talks with Ukraine yielded no breakthroughs and that Russia was regrouping forces in a push to complete the takeover of the eastern Donbas region. 

Finally, in China, the country’s PMIs for manufacturing and services fell into contraction in March as outbreaks of the omicron variant of Covid-19 across the country led to lockdowns and disrupted industrial production. Many economists have reduced their economic growth forecasts for China due to the virus’s resurgence and the government’s zero-tolerance approach to outbreaks.

March 28, 2022

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.

The European Union has signed a new deal with the United States that will see the EU receive an extra 15 billion cubic metres of liquefied natural gas by the end of the year, as it aims to reduce its reliance on Russian energy.

Following Russia’s invasion of Ukraine, the EU has been quick to reduce its ties with the country. Alongside a raft of sanctions on Russian businesses and individuals, the alliance has also been looking at ways it can reduce its dealings with Russia.

The extra 15 billion cubic metres is in addition to the 22 billion the EU already receives from the US, and equates to about 10% of the total supply received from Russia. 

Approximately 40% of the EU’s total gas needs are supplied by Russia. The combined 37 billion cubic metres from the US will equate to around 24% of this total.

UK Chancellor Rishi Sunak unveiled his Spring Budget last week amid the growing cost of living crisis. It featured modest cuts in fuel duty tax and national insurance contributions alongside Mr Sunak pre-announcing a reduction in the basic income tax rate in 2024.

In the United States, new data showed that some aspects of the economy remained resilient in the face of the turbulence experienced as a result of the Russian invasion. Durable goods orders fell 2.2% in February, the first decline in five months and much more than the expected fall of around 0.5%, but IHS Markit’s gauge of manufacturing activity rose much more than expected in March and hit its highest level since September 2020 - whilst its services gauge indicated the most activity since July 2021. Weekly jobless claims fell much more than expected and hit levels last seen in September 1969.

Amid growing pressure on Japanese Prime Minister Fumio Kishida to act to cushion the impact of rising fuel and commodity prices on households and firms, the Japanese government is set to announce an additional package of measures to boost the economy. Tokyo’s core consumer price index, a leading indicator of the national average, rose 0.8% in March from a year earlier.

March 21, 2022

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.

Businesses in the UK have pleaded with Chancellor Rishi Sunak to help with the growing cost of living crisis by scrapping the planned national insurance rise due to come into effect in April. 

Ahead of Mr Sunak’s Spring Statement to the House of Commons on Wednesday, economists have warned that the increase could wipe £24bn in economic growth over the next decade.

A Randstad survey of 730 businesses employing about 9,000 people found that nine out of ten employers want the government to scrap its 1.25 percentage point rise in national insurance, which is planned for next month.


The calls come amid a backdrop of increasing economic uncertainty, exacerbated by the conflict in Ukraine - with estimates forecasting that inflation will reach 8% later in the Spring.

In other news, the Bank of England has tried to stem the rise in costs by raising interest rates by a further 0.25 percentage points to 0.75%. It marks the third time in four months that the Bank has raised the rate and its highest since March 2020 - just as the first national coronavirus lockdown began.

In the United States, new data showed that February retail sales were disappointing. However, continuing claims for unemployment insurance fell to a 52-year low - showing continued strength in the labour market. Meanwhile, mortgage rates in the country soared as they surpassed 4% for the first time in almost three years.

The Moscow stock exchange has partially reopened after a nearly month-long suspension following Russia’s invasion of Ukraine. As it stands, only bonds issued by the Russian government can be traded but officials hoped that trading in stocks could resume soon.

March 14, 2022

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.


Government ministers are expected to scrap all remaining international travel rules currently in place in England.


Under current law, all passengers arriving in England are required to complete a passenger locator form before they reach the country. 


Those who aren’t fully vaccinated are also required to take a Covid test before departure and pay for a full PCR test upon arrival.


Members of the travel industry have long campaigned for a relaxation of the rules, as the sector aims to bounce back from the devastating impact of the pandemic. The restrictions are set to end this coming Friday but it is not yet known if the United Kingdom’s devolved nations will follow suit.


Elsewhere, petrol prices are expected to drop again later in the month as global oil prices start to fall. After hitting record highs last week, surging past 160p per litre in the UK, prices are expected to stabilise in line with the global market as fears that the European Union would follow the US and Canada in banning Russian oil have eased.


In the United States, stocks moved lower over another week of extreme volatility provoked by the Russian invasion of Ukraine. At its intraday low for the week last Tuesday, the Nasdaq Composite fell to a level that was nearly 22% below its recent peak - more than the 20% threshold that technically defines a bear market. At its low point, the S&P 500 Index was roughly 14% off its high. Consumer staples stocks underperformed as Coca-Cola, PepsiCo and other food and consumer manufacturers announced that they were suspending business in Russia.


Assets in Poland have been pressured by the country’s proximity to the conflict between Russia and Ukraine, with the National Bank of Poland deciding to raise its reference rate by 75 basis points, from 2.75% to 3.50%. Poland shares its southeastern border with western Ukraine and it has received more than 1.4 million Ukrainian refugees, according to data from the United Nations, in what has become the worst humanitarian crisis in Europe since World War II.


Japan’s economic growth in the fourth quarter of 2021 was downgraded to an annualised 4.6%, from 5.4% on a smaller rise in private demand. Nevertheless, it marked a return to growth for the economy following a contraction in the previous three-month period.