Market Monitor - 1 October 2021

Market Monitor – 1 October 2021

Stock markets around the world have ended September with a whimper, and many bourses have recorded steep losses this week. The past few days have seen the intensification of a number of negative issues for investors, with global supply chain problems, rising inflation and the prospect of central banks withdrawing stimulus measures – while increasing interest rates – all to the fore.
While much of Europe has been affected by recent hikes in the price of gas, soaring oil prices this week have increased the inflation threat for the world economy as a whole. There are signs that OPEC member states could soon commit to increasing output, but whether – and when – they will take decisive action to ease supply problems remains to be seen.
At a conference held by the European Central Bank, policymakers from the United States and the UK warned of the damaging impact that supply-chain bottlenecks were having on their respective economies. Federal Reserve chair Jerome Powell said he expected inflation in the US to run well above target for several months, increasing the likelihood of an interest-rate hike.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 2.7% down for the week so far, with the S&P 500 slumping 3.3%. The S&P has suffered its worst month since the pandemic hit in March 2020, losing almost 5% over the course of September as technology stocks have given up large chunks of their recent gains over interest rate fears.
However, disappointing unemployment figures in the US on Thursday – as well as other indicators showing a weak post-pandemic recovery – may give the Fed pause for thought when it comes to tightening monetary policy.
Another concern for investors in America this week has been the political difficulties facing the Joe Biden administration: the government could face a shutdown later this month if lawmakers in Congress cannot agree to lift the national debt ceiling, while Democrats are currently struggling to pass a trillion-dollar infrastructure bill.

The UK & Europe

In the UK, the FTSE 100 closed on Thursday 0.5% up for the week, an outlier among its peers on either side of the Atlantic. The FTSE’s gains can, however, be attributed at least in part to a weaking of sterling, which has slumped as a result of Britain’s ongoing supply crisis: a drop in the pound is typically good news for the international companies that dominate the index, as their overseas revenues become more valuable in sterling terms.
The supply chain problems that have affected the UK economy in recent months have come to a head following warnings last week that deliveries to petrol stations could be disrupted. Motorists have responded by panic-buying fuel, leading to widespread shortages that are likely to hamper the economic recovery further.
In Frankfurt, the DAX index ended Thursday’s session down 1.7% for the week, while France’s CAC 40 lost 1.8%. Inflation in Germany hit 4.1% in September, up from 3.4% the previous month, while ECB president Christine Lagarde warned of accelerating supply chain bottlenecks across the eurozone.

Asia

In Asia, the Hang Seng index in Hong Kong rose 1.6%, clawing back some of its recent losses. An announcement by the Chinese government that it would support its property market following the recent Evergrande crisis provided a welcome boost for investors.
Japan’s Nikkei 225 index of leading shares, however, was unable to escape the global feelings of pessimism, closing Thursday down 2.6%.
September 24
September 30
Change (%)
FTSE 100
7051.5
7086.4
0.5
FTSE All-share
4063.2
4059.0
-0.1
S&P 500
4455.5
4307.5
-3.3
Dow Jones
34798.0
33843.0
-2.7
DAX
15531.8
15260.7
-1.7
CAC 40
6638.5
6520.0
-1.8
ACWI
730.5
709.5
-2.9
Hong Kong Hang Seng
24192.2
24575.6
1.6
Nikkei 225
30248.8
29452.7
-2.6

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 30/9/2021.

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1 October 2021
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