Equity Markets Rally Despite Persistent Supply Chain Issues

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21/10/2021
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Equity Markets Rally Despite Persistent Supply Chain Issues

Global equity markets posted strong weekly gains last week despite supply chain bottlenecks continuing to cause problems around the world. Data from the Eurozone showed industrial production falling by -1.6% [3] whilst in the US, inflation continued to push higher last month[1] with supply shortages of key components such as semiconductors keeping pressure on prices. On a positive note, monthly UK GDP returned to growth during August with the economy benefitting from the first full month of reopening[2].

In Europe, the German DAX and French CAC rose by +2.5% and +2.6% respectively, buoyed by optimism regarding the outlook for earnings. US equities added +1.8% with the S&P500 closing the week on strong footing as the latest wave of the pandemic continued to show signs of easing. UK equities also enjoyed a strong week with both the FTSE100 and FTSE250 gaining by +2.0% whilst in Japan, the Nikkei 225 rallied by +3.6% ahead of next week’s General Election.

Sovereign bond yields retreated on both sides of the Atlantic, the 10-year US treasury yield falling by 3 basis points (bps) to 1.58% and the UK gilt equivalent by 6bps to 1.11%. Growing concerns regarding the economic outlook being amongst the main contributors behind the falls. In Japan the 10-year was largely unchanged at 0.07% whilst on the Continent, the equivalent duration benchmark index fell by 3bps to -0.19% in what was another volatile week of trading.

Moving to commodities, copper prices spiked sharply amid the ongoing global energy supply crisis with the metal jumping by more than +12.0% to $10,538 a tonne. That was despite growing concerns relating to Chinese growth, in particular within its heavily indebted property sector. Oil also continued its march higher with Brent Crude closing the week at $84.13 a barrel, a weekly rise of +2.0% as it reached a three year high on significantly higher demand.

 

Week Ahead

CPI inflation is the standout data from the UK this week with the headline index expected to be unchanged at 3.2%. On Friday, retail sales are also published alongside the flash PMI readings for the Manufacturing and Services sectors, covering the first three weeks of October. In the US, the Federal Reserve publishes its bi-monthly Beige Book which consists of various economic data from the Bank’s 12 districts. Other US data to keep an eye on include building permits and housing starts from the construction sector as well as weekly jobless claims on Thursday afternoon.

Flash PMI data is also published in the Eurozone this week with the pace of growth expected to have moderated slightly from September’s levels. Away from PMI’s it’s a somewhat quiet week for European data for Final CPI figures for September the only other figure of note. In Asia, a raft of Chinese data was released in the early hours of Monday morning with Q3’21 GDP missing expectations; retail sales, industrial production and fixed asset investment figures were also announced. There are no major macro numbers due from Japan on this occasion. [3]

 

Read last week's market update

Gas Price Surge Adds To Eurozone Inflation Fears

 

 

[1] Trading Economics - United States Inflation Rate - 2021

[2] Office for National Statistics - GDP Monthly Estimate - August 2021

[3] Forex Factory - 17.10.21

 

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