Month: September 2021

Equities in Europe accelerated as optimism about a continuing economic expansion balanced worries about a gradual withdrawal of central bank support. Lingering concerns about Chinese property developer Evergrande suppressed gains. In local currency terms, the pan-European STOXX Europe 600 Index ended 0.31% higher. Major indexes also rose. Germany’s Xetra DAX Index added 0.27%, France’s CAC 40 Index rose 1.04%, and Italy’s FTSE MIB Index gained 1.01%. The UK’s FTSE 100 Index climbed 1.26%.

The Bank of England (BoE) maintained its key rate unchanged at 0.10%, although two policymakers voted for a premature end to the quantitative easing program. The accompanying statement also indicated that some developments, including upside risks to the inflation outlook, had reinforced the case for tightening. In a letter to the Chancellor of the Exchequer explaining why inflation was above the 2% target, Governor Andrew Bailey said the BoE now expects “inflation could remain above 4% into the second quarter of 2022.”

Growth in the Eurozone economic activity stalled significantly in September from July’s 15-year high, while input prices jumped to a 21-year high. The early headline number for IHS Markit’s composite Purchasing Managers’ Index (PMI) came in at 56.1– down from the final readings of 59.0 in August and 60.2 in July. (PMI readings greater than 50 indicate an expansion in economic activity levels.).

The major US benchmarks rose above an early sell-off to end the week flat to modestly higher. On Monday, the S&P 500 Index recorded its biggest daily drop since May 12, and temporarily dipped below its 100-day moving average, a closely watched technical level. Longer-term bond yields climbed sharply over the week, assisting financial shares by holding the promise of improving banks’ lending margins. Energy stocks also outperformed within the S&P 500, while utilities shares lagged.

The coming wind-down of the central bank’s monthly asset purchases and mildly aggressive revisions to its interest rate forecasts helped push the yield on the benchmark 10-year U.S. Treasury note significantly higher later in the week. (Bond prices and yields move in opposite directions.) On Friday, the 10-year yield hit an intraday peak of around 1.47%, its highest level since the start of July, on the eve of the rebound in coronavirus cases.

Japanese stocks posted losses in a volatile, holiday-shortened trading week. Japan’s stock markets were closed on Monday for Respect for the Aged Day, and on Thursday for Autumnal Equinox Day. The Nikkei 225 Stock Average closed at 30,248.81, modestly lower for the week, just off its 31-year high recorded earlier in the month. The yen traded near JPY 110 versus the U.S. dollar, while the yield of the 10-year Japanese government bond finished the week at 0.055%.

Mainland Chinese stocks finished a holiday-shortened week broadly flat from the prior Friday’s close, after being closed Monday and Tuesday for the Mid-Autumn Festival. The market’s subdued performance was significant after Hong Kong’s Hang Seng Index fell more than 3.0% on Monday amid the mounting debt crisis surrounding China’s Evergrande Group. In the bond market, the yield on the 10-year Chinese government bond rose two basis points to 2.92% amid concerns about the potential costs to Beijing of an Evergrande rescue. In currency trading, the Renminbi was flat against the U.S. dollar, trading at 6.463 per dollar late Friday afternoon in Shanghai.

A second day of the relief rally for oil, as the predicament in the OPEC+ group between Saudi Arabia and the UAE continued to be unresolved. Friday saw oil prices increase for a second day, as the market focused on falling inventories (in the US), and signs of strong Asian demand from both China and India added support.

Brent crude oil futures were up $1.43 or 1.93%, at $75.55. US West Texas Intermediate futures were up $1.62, or 2.2%, at $74.56. Prices on both sides of the Atlantic ended the week little changed, despite significant daily fluctuations. Brent fell 0.7% for the week, while WTI was steady. Gold bulls see some upside from the rising tide on infections and doubts about the health of major economies. Gold gained 0.6% to $1,810.60 an ounce, silver rose 0.4% to $26.25 an ounce, and copper surged 1.9% to $4.34 a pound. That’s the first time in three weeks that gold has climbed over and ended above $US1,800 an ounce.

Lawsons Equity – Financial Planners Malta

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.

Market Update

Shares in Europe weakened, as concerns about the impact of the coronavirus’s delta variant on the global economy outweighed expectations of continuing central bank support. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.97% lower. Major indexes were mixed. Italy’s FTSE MIB Index ended modestly higher, but Germany’s Xetra DAX Index slipped 0.77%, and France’s CAC 40 Index lost 1.40%. The UK’s FTSE 100 Index slid 0.93%.

Core eurozone bond yields climbed in sympathy with U.S. Treasuries, with a Financial Times report saying the European Central Bank (ECB) anticipates to meet its 2% inflation target by 2025, and is on course to increase interest rates in about two years– significantly ahead of consensus expectations. Peripheral eurozone bonds tracked core yields. UK gilt yields advanced after data indicated inflation surged in August, stimulating concerns that this development could cue the Bank of England (BoE) to increase interest rates quicker than expected. The Office for National Statistics said inflation in the UK jumped to 3.2% in August, its highest level in more than nine years.

The small-cap Russell 2000 Index managed a small gain, but most of the major US equity indexes ended the week modestly lower, as investors weighed encouraging economic data against worries about supply chain challenges, elevated valuations, and concerns about how stocks would respond to an eventual tightening in monetary policy. Energy shares within the S&P 500 Index recorded solid gains on the back of rising oil prices, while strength in auto-related shares boosted consumer discretionary stocks.

On Sunday, Democratic Senator Joe Manchin said he would support an infrastructure spending package of around USD 1.5 trillion, far less than USD 3.5 trillion that the more progressive members of Congress have proposed. To help fund the new package, Democrats are seeking to raise the corporate tax rate to 26.5%, up from the current 21%, while also raising the top capital gains tax rate from 20% to 25%– smaller increases than previously sought.

Tuesday’s mild inflation data seemed to drive a rally in the bond market, helping push the yield on the benchmark 10-year U.S. Treasury note to its lowest intraday level since August 23, but the major equity benchmarks moved lower. (Bond prices and yields move in opposite directions.).

Japan’s stock markets increased over the week, with the Nikkei 225 Index up 0.39% and the broader TOPIX Index returning 0.41%. The government is aiming to ease the scope of coronavirus restrictions in November, once most of the population has been vaccinated. Against this backdrop, the yield on the 10-year Japanese government bond ticked up to 0.05%, while the Yen hovered around JPY 109.9 against the U.S. dollar, little changed from the prior week.

Chinese stocks dropped sharply for the week. Weak August economic data, a fresh coronavirus outbreak in Fujian province, the growing debt crisis at embattled property developer China Evergrande Group, and the threat of tighter gaming regulations in Macau dampened investor sentiment. The CSI 300 index of large-cap stocks fell 3.1%, and the Shanghai Composite Index retreated 2.4%. China’s stock markets are closed Monday and Tuesday for the Mid-Autumn Festival, and will reopen on Wednesday, September 22.

The yields on Chinese bonds were broadly flat for the week. In currency trading, the Renminbi (RMB) weakened by 0.2% against the U.S. dollar. The RMB has largely moved with the dollar in recent weeks, with the trade-weighted currency index close to a five-year high. Foreign investor inflows into Chinese bonds have slowed in recent months, but analysts anticipate demand will increase after Chinese government bonds are included in the FTSE World Government Bond Index starting in October.

In commodities, gold gained 0.6% to $1,810.60 an ounce, silver rose 0.4% to $26.25 an ounce, and copper surged 1.9% to $4.34 a pound. That’s the first time in three weeks that gold has climbed over and ended above $US1,800 an ounce, and left the metal up 1.8% for the week.

Lawsons Equity – Financial Planners Malta

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.

Equities in Europe decreased surrounded by uncertainty about the economic outlook, the continuing coronavirus pandemic, and central bank policy. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.19% lower. Major stock indexes also fell. Germany’s Xetra DAX Index eased 1.09%, Italy’s FTSE MIB Index slipped 1.45%, and France’s CAC 40 Index lost 0.39%. The UK’s FTSE 100 Index declined 1.53%.

Core eurozone bond yields ended a little higher, paring previous gains, after European Central Bank (ECB) President Christine Lagarde stated the central bank’s decision to cut its emergency bond purchases was not tapering. Peripheral eurozone bond yields broadly followed yields in core markets. UK gilt yields climbed amid growing expectations that the Bank of England (BoE) might start raising short-term interest rates.

The ECB raised its forecast for 2021 economic growth to 5.0% from 4.6%, and its inflation projection to 2.2% from 1.9%. The central bank’s projections showed inflation peaking at 3.1% in the fourth quarter, and then slowing to 1.7% in 2022 and 1.5% in 2023.

UK Prime Minister Boris Johnson secured parliamentary approval for GBP 12 billion in tax increases to fund changes to social care and the National Health Service. Under the plan, some investors will face higher levies on dividends, while the national insurance contributions taken out of pay-checks will also increase.

The major US indexes pulled back over the shortened trading week– markets were closed on Monday in observance of Labor Day. The small real estate sector led the declines in the S&P 500 Index, as longer-term interest rates increased, while consumer staples and utilities stocks held up best. The small-cap Russell 2000 Index fared worst after two consecutive weeks of outperforming the large-cap benchmarks, and value stocks trailed growth shares.

The Friday morning’s producer price data appeared to reverse a downward trend in the yield on the benchmark 10-year U.S. Treasury note, leaving it modestly higher for the week. (Bond prices and yields move in opposite directions.).

Japanese equities extended their gains over the week, buoyed by political optimism and expectations of further fiscal stimulus under a new prime minister, following the decision of current Prime Minister Yoshihide Suga to step down. The Nikkei 225 Index returned 4.30%, while the broader TOPIX Index rose 3.78%. While the government again extended its coronavirus state of emergency measures, plans boosted sentiment to relax restrictions once most of the population has been vaccinated, with relaxation expected to commence around November. Against this backdrop, the yield on the 10-year Japanese government bond remained broadly unchanged from the end of the previous week at 0.04%, while the yen weakened to JPY 109.97 against the U.S. dollar (from 109.72 the prior week). 

Chinese stocks rose for the third straight week. The Shanghai Composite Index gained 3.4%, and the CSI 300 Index of large-cap stocks rallied 3.5%, according to Reuters. Strong trade data and an unexpected yet reportedly candid phone conversation between the U.S. and Chinese presidents lifted investor sentiment. The yield on China’s 10-year government bond increased and ended the week at 2.89%, while the Renminbi currency edged up 0.2% versus the U.S. dollar to 6.4423 per dollar, its strongest level since mid-June, according to Bloomberg.

Gold traded through a high of around $1,806 and a low of $1,788, and settled at $1,792.60. That was down around half a per cent and 2.2% for the week. Silver fell 3.6% over the week to end at $23.85.

China’s latest attempt to influence oil markets failed in a big way on Friday. After a drop caused by the Chinese announcement of a drawdown on its strategic reserves to supply the market, the price rose 2.3% on Friday to settle at $69.72. That left WTI up 0.6% for the week, and Friday’s rise turned a small loss for the week into a gain, with that help from China. Brent crude settled higher at $72.92.

Market Update

Shares in Europe were little changed, as investors evaluated signs of slowing economic growth. In local currency terms, the pan-European STOXX Europe 600 Index ended the week roughly flat. Major indexes were mixed. Germany’s Xetra DAX Index fell 0.45%, while Italy’s FTSE MIB Index gained 0.22%. France’s CAC 40 Index and the UK’s FTSE 100 Index were almost flat.

Core eurozone government bond yields rose on higher-than-expected eurozone inflation and aggressive commentary from some ECB policymakers, who called for a reduction in the purchase pace of the Pandemic Emergency Purchase Program. Peripheral eurozone and UK government bond markets mostly tracked core markets.

Eurozone inflation accelerated more than forecast to 3% in August, up from 2.2% in July, and well above the ECB’s 2% target. Higher energy, food, and industrial goods prices drove the rise, according to the EU’s statistics agency.

The major US indexes ended the week mixed after the S&P MidCap 400 Index joined the S&P 500 and Nasdaq Composite indexes to reach new intraday highs on Thursday. The small real estate sector outperformed within the S&P 500, while financials lagged. Trading volumes were generally subdued during what is widely considered the last week of the summer vacation season. Markets were scheduled to be closed the following Monday in observance of Labor Day.

The jump in hourly earnings appeared to spur inflation fears and an increase in the benchmark 10-year U.S. Treasury note yield on Friday morning, leaving it modestly higher for the week. (Bond prices and yields move in opposite directions.) The broad municipal bond market was little changed throughout the week and underperformed Treasuries.

News of Prime Minister Yoshihide Suga’s resignation resulted in a strong rally in Japanese equities, removing political uncertainty and elevating expectations of increased economic stimulus. Japan’s accelerating COVID-19 vaccination drive underpinned gains. The Nikkei 225 Index soared 5.38%, while the broader TOPIX Index rose 4.49%, reaching a 30-year-high.

The yield on the 10-year Japanese government bond rose to 0.04% (from 0.02% at the end of the previous week), while the yen weakened slightly to JPY 109.98 against the U.S. dollar (from 109.83 the prior week).

Chinese stocks climbed for a second consecutive week. The Shanghai Composite Index gained 1.7% and outperformed the large-cap CSI 300 Index, which rose 0.3%, according to Reuters. On Thursday, President Xi Jinping announced the launch of a new stock exchange in Beijing.

The new exchange focuses on providing equity financing for small and mid-size enterprises, and reflects China’s strong commitment to its capital markets. News of the new stock market comes as many foreign investors have grown more wary of investing in Chinese assets following a regulatory clampdown on many industries.

The yield on the 10-year Chinese government bond fell four basis points to 2.85%. The Renminbi currency appreciated 0.5% against the U.S. dollar to 6.451.

Friday’s weak US jobs report for August naturally showed renewed interest in gold, helped weaken the US dollar, and sparked delight among many investors that the free money from the Fed and other central banks will continue for a while longer.

Gold for September delivery rose $14.30 an ounce, or 0.8% to $1830.90. Oil fell on Friday, as it became clear that Ida had not badly damaged the Gulf of Mexico production and processing facilities.

Lawsons Equity – Financial Advisors Malta

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.