Market Monitor - 5 November 2021

Market Monitor – 5 November 2021

Global stock markets have surged this week after central banks in Europe and the United States decided to take a more cautious approach to tightening monetary policy. The Federal Reserve in Washington announced on Wednesday that it would start reducing the size of stimulus measures by $15bn a month – a slower pace than many investors had forecast. Interest rates in the US, meanwhile, will be maintained at the current level for the time being.
On Thursday, the Bank of England’s Monetary Policy Committee (MPC) surprised markets by leaving interest rates and stimulus measures unchanged. Analysts had expected a small rise in the base rate – which has stood at 0.1% since the start of the pandemic – in response to rising prices in the UK. But while the Bank expects inflation in Britain to hit 5% over the winter, the consensus view on the MPC seems to be that hiking rates too soon could put the brakes on a post-pandemic recovery that has already been impeded by shortages and global supply-chain problems.
The ongoing disruption to international trade caused by Covid-19 has continued to affect manufacturers in Europe, North America and Asia, and shipping giant Maersk warned on Tuesday that there was no end to the current crisis in sight.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.9% up for the week so far, having breached the 36,000-point level for the first time on Monday. The S&P 500 meanwhile gained 1.6%, with many of its constituent technology companies benefiting from the Fed’s decision to wind down its stimulus programme in a more measured fashion. Car rental business Avis was one of the week’s surprise success stories: its shares doubled in value following news that the firm was planning to increase take-up of electric vehicles.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 0.6% up for the week, with investors reacting positively to the MPC’s lack of action. But its failure to raise interest rates – a move that had effectively been priced in by the markets – hit shares in Britain’s banks.
The UK energy crisis has claimed yet more victims, with business supplier CNG Energy this week becoming the sixth firm to collapse as a result of surging gas prices. However, higher energy prices helped BP to exceed expectations and record an 18% increase in underlying profits for the previous quarter.
AI-based Cybersecurity company Darktrace was one of the biggest losers this week after analysts downgraded its stock. Shares in the firm have now fallen more than a third from last month’s highs.
European shares had an excellent week: in Frankfurt, the DAX index ended Thursday’s session up 2.2%, while France’s CAC 40 gained 2.3%. Positive news from central banks in the UK and US outweighed ongoing concerns about a slowdown in the eurozone’s manufacturing sector – new data showed factory output has declined to its lowest rate since the early weeks of the pandemic. There was also good news for Europe’s airlines, with the removal of travel restrictions boosting profits at Germany’s Lufthansa.


In China, Hong Kong’s Hang Seng index lost 0.6% as fears of a crisis in the country’s property sector persisted. Japan’s Nikkei 225 index, meanwhile, enjoyed a stellar week, gaining more than 3% following a surprisingly strong election performance for the pro-market Liberal Democrat party.
October 29
November 4
Change (%)
FTSE 100
FTSE All-share
S&P 500
Dow Jones
CAC 40
Hong Kong Hang Seng
Nikkei 225

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 4/11/2021.

5 November 2021
Mark King
Mark King
Head of Investment Content
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