Market Monitor - 23 July 2021
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Market Monitor – 23 July 2021

In another highly volatile week, stock markets around the world have managed to claw back some of their early losses – but concerns about the impact of the Delta coronavirus variant are very much to the fore.

Monday saw a heavy sell-off on both sides of the Atlantic, with a number of indices recording their biggest declines in several months. Underlying these falls were new fears that the rapid spread of the more infectious Delta variant – which is already almost totally dominant in the UK – could undermine the post-pandemic recovery and may require a fresh round of lockdown restrictions, even in countries where vaccinations rates are high.

Britain is being viewed as an international test case, with ministers pressing ahead with the removal of practically all Covid-19 restrictions despite surging infection levels. Although the number of hospitalisations and deaths is relatively low at present thanks to the vaccination programme, the number of UK workers required to isolate due to contact with a positive Covid case is putting a number of sectors, such as manufacturing, retail and hospitality, under intense strain. Investors are worried that this scenario could soon be repeated in Europe and the United States, severely hampering the global recovery.

Markets did however manage to stage a comeback over the course of the rest of the week: the silver lining for investors of the growth fears outlined above is that they make interest rate rises less likely in the near term, while central banks will be under more pressure to maintain current stimulus measures – both of which can be expected to keep share prices high.

Indeed, on Thursday the European Central Bank reiterated its ongoing commitment to looser monetary policy while the Bank of England’s deputy governor Ben Broadbent said he expected the current spike in inflation to be temporary – and that a tightening of policy would not therefore be immediately necessary.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.4% up for the week so far, despite having recorded its biggest fall in nine months on Monday, while the S&P 500 closed 0.9% ahead. The fall in yields on Treasury bonds – which reflects lower interest-rate expectations – has helped share prices in the US recover since the start of the week, although the latest unemployment figures show that new claims are rising as the Delta variant spreads across America.

The UK & Europe

In the UK, the FTSE 100 ended Thursday 0.5% down for the week, with business leaders calling on the government to revise its policy on requiring individuals who come into close contact with a positive coronavirus case to self-isolate for up to 10 days. New manufacturing figures show that factory orders are surging – but bosses say that staff shortages are hampering their ability to raise production levels.

Consumer goods maker Unilever warned that rising costs were hitting its bottom line, with its share price falling sharply on the news. Retailer Next was among this week’s biggest risers, gaining almost 8% on Wednesday alone after revising its profit forecasts upward.

In Frankfurt, the DAX index ended Thursday’s session down 0.2% for the week, while France’s CAC 40 gained 0.4%. ECB boss Christine Lagarde warned that the spread of the Delta variant was putting the eurozone recovery at risk.

July 16
July 22
Change (%)
FTSE 100
7004.5
6968.3
-0.5
FTSE All-share
4001.4
3991.5
-0.2
S&P 500
4327.2
4367.5
0.9
Dow Jones
34687.9
34823.4
0.4
DAX
15540.3
15514.5
-0.2
CAC 40
6452.9
6481.6
0.4
ACWI
719.2
719.8
0.1

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 22/7/2021.

23 July 2021
Mark King
Mark King
Head of Investment Content
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Market Monitor – 23 July 2021

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