Market Monitor - 9 July 2021

Market Monitor – 9 July 2021

Renewed concerns about the global economic recovery and a crackdown on technology companies by Chinese authorities have driven down share prices around the world this week.
There are increasing signs that the expected post-pandemic boom is likely to be much more uneven than was hoped earlier this year as Covid-19 vaccines were being rolled out: the damage and distortions that the crisis has caused in supply chains and labour markets, for example, could take several months to resolve. At the moment, many businesses are facing severe cost pressures and limits on their ability to operate at full capacity.
While the present economic climate is likely to result in higher inflation, investors currently think the possibility of rising interest rates has become more remote: if growth is lumpy, central banks are less likely to need to use monetary policy to keep prices in check. However, notes from the most recent the Federal Reserve policy meeting suggest that policymakers in the United States are planning to scale back their stimulus measures in the months ahead – a move that will not be welcomed by stock markets.
In China, news that government regulators are planning tighter data controls on internationally listed tech businesses – most notably ride-hailing service Didi – has caused significant disquiet among investors. Didi made its stock market debut in New York at the start of the month, but lost 20% of its value this week after the crackdown was announced.

The US

Elsewhere on Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1% down for the week so far, with the S&P 500 falling 0.7%. Growth fears have been stoked by rising unemployment numbers in the US as well as a dip in services and manufacturing output.
Yields on government bonds continue to decline, reflecting lower interest-rate expectations for the years ahead. Despite the gloomier economic picture, a fall in yields is better news for technology businesses as it makes the value of their future revenues more attractive in present terms.

The UK & Europe

In the UK, the FTSE 100 ended Thursday 1.3% down for the week with concerns about the spread of the Delta variant – and the government’s intention to press ahead with the reopening the economy later this month regardless – to the fore. Shares in travel firms such as airlines and tour operators received a small boost after ministers announced plans to relax quarantine requirements for holidaymakers who have been fully vaccinated by the NHS.
A fall in the oil price from recent highs has hit energy firms in London this week, but the supermarket sector has performed well on the hopes of a bidding war for Morrison’s.
In Frankfurt, the DAX index ended Thursday’s down 1.5% for the week, while France’s CAC 40 lost 2.4%. An unexpected fall in German factory orders in June has added to the gloom across the eurozone, with businesses confidence in the region’s biggest economy dipping to a six-month low as fears of the spread of the Delta variant increase and supply chain issues begin to bite.
July 2
July 8
Change (%)
FTSE 100
FTSE All-share
S&P 500
Dow Jones
CAC 40

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 1/7/2021.

9 July 2021
Mark King
Mark King
Head of Investment Content
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Market Monitor – 9 July 2021

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