Market Monitor - 27 August 2021
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Market Monitor – 27 August 2021

Global stock markets have made steady gains this week with investors happy to wait for direction from America’s Federal Reserve bank at its forthcoming annual symposium in Jackson Hole, Wyoming.
Expectations of central bank policy have been among the most important factors driving market sentiment in recent months: investors are keen that monetary policy in the world’s major economies is not tightened too quickly as the post-pandemic recovery gathers pace.
Last week, fears of an early end to stimulus measures in the United States – a move seen by many policymakers as a necessary step to curb rising inflation – sent share prices crashing. But with the Delta coronavirus variant causing yet more economic disruption in the US, Europe and Asia, investors have taken a more relaxed view in the past few days, allowing markets – especially those in the Far East – to recover.
The consensus at the close of trade on Thursday was that Fed chair Jerome Powell’s long-awaited speech the following day would simply extend the “wait and see” approach he has advocated for much of 2021 – with no clear timeline as yet for a tapering of stimulus measures or an increase in interest rates.
Powell appears to have little choice but to keep the stimulus taps turned on given the latest economic data from the US. Industrial production has declined in August thanks to ongoing material shortages and supply chain issues, while the updated American GDP figures for the second quarter of this year were weaker than expected.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.3% up for the week so far, with the S&P 500 gaining 0.6%. The tech-focused Nasdaq index, meanwhile, hit new highs this week thanks to widespread gains among technology stocks: these shares have the most to gain from an extension of stimulus measures, not least because lower interest rates mean future revenue streams generated by tech businesses are more valuable.

The UK & Europe

In the UK, the FTSE 100 ended Thursday 0.5% ahead for the week despite more gloomy economic data in Britain. Inventory levels at UK retailers are rapidly dwindling thanks to materials shortages as well as logistical issues – most notably a nationwide shortage of lorry drivers. Supermarket chains Tesco and Iceland have both warned that problems could drag on into the busy Christmas period unless the government acts to cut red tape in the haulage industry. On Monday, shares in fellow retailer Sainsbury’s soared 14% following reports of a possible takeover bid from private equity firm Apollo – the latest in a string of acquisition rumours in the sector this year.
In Frankfurt, the DAX index ended Thursday’s session down 0.1% for the week following a pessimistic report from the Bundesbank: it said that economic growth could be severely curtailed by the spread of the Delta variant over the course of the autumn. German manufacturer Bosch warned also that global supply chains may have been permanently damaged by the pandemic, with the long-term supply of semiconductors of particular concern.
In France, the CAC 40 gained 0.6% following last week’s slump, despite the fact that private-sector growth has slowed to its lowest rate in four months.

Asia

In Asia, the Hang Seng index in Hong Kong surged 2.3% after entering bear-market territory last week, while Japan’s Nikkei 225 index of leading shares had posted even more impressive growth by Thursday’s close, gaining 2.7%. This was despite reports that Japanese manufacturing and service sector growth had fallen at its fastest rate in more than a year as a result of a rise in coronavirus infection levels
Aug 20
Aug 26
Change (%)
FTSE 100
7087.9
7125.0
0.5
FTSE All-share
4082.5
4106.7
0.6
S&P 500
4441.7
4470.0
0.6
Dow Jones
35120.1
35213.1
0.3
DAX
15808.0
15793.6
-0.1
CAC 40
6626.1
6666.0
0.6
ACWI
722.6
731.9
1.3
Hong Kong Hang Seng
24849.7
25415.7
2.3
Nikkei 225
27013.3
27742.3
2.7

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 26/8/2021.

27 August 2021
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Market Monitor – 27 August 2021

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