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The week in review

We review the week starting 7 June, which saw global stocks hit fresh highs due to expectations that the economic recovery outweighed concerns that the Federal Reserve could start to roll back its market support.
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Published 15 June
2 mins

What’s happened in markets?

KEY MARKET MOVEMENTS (% change)
 1WK1MO3MOYTD1YR3YR5YR
FTSE All Share0.662.976.7912.4424.712.027.67
Euro Stoxx 500.914.928.9218.2935.128.9910.67
S&P 5000.432.468.2113.8343.7117.2817.38
Japan Topix-0.262.532.499.3525.655.4710.45
MSCI Asia Pac.0.163.730.366.4341.879.8915.05
MSCI Emerg. Mkts.0.084.232.387.8042.389.5613.92
Jo’burg All Shares-0.130.75-0.6615.6530.458.688.28
UK Gov’t Bonds0.911.510.42-5.73-6.773.492.73
US Gov’t Bonds0.481.030.90-2.61-3.194.882.35
Global Corp. Bonds0.661.451.83-1.174.076.804.80
Emerg. Mkt. Local Currency Bonds0.311.503.38-1.756.394.664.34

Figures in the respective local currencies as at the end of trading on 11/6/2021.

The G7 summit in Cornwall dominated news towards the end of the week, as world leaders sought to confirm that economic support would continue despite the mounting costs. Tensions remain between the EU and UK over Northern Ireland in what has been termed “sausage wars” by UK newspapers, given the restrictions mean chilled meat products cannot be transported from the mainland to Northern Ireland, with the EU threatening to impose sanctions on the UK should Boris Johnson choose to ignore parts of the Brexit agreement.
In other UK news, “Freedom Day” has been postponed to 19 July, with further delays not ruled out, as the delta variant (first detected in India) is showing to be at least 40% more infectious than the alpha strain (first detected in the UK). This pushback could threaten the pace of the recovery in the local economy, which posted an expansion of gross domestic product of 2.3% in April, its fastest pace since the coronavirus reopening last summer, on the back of strong consumer spending, while the resumption of full schooling boosted output.

In the US, the consumer price index rose by 5% in May, higher than the 4.7% expected and the 4.2% recorded in April. The increase marked the biggest jump in the index since August 2008. However, markets did not react as had been expected. Although there was a slight increase in yields, these then fell. This has been attributed to the Federal Reserve (Fed) managing fears of inflation, although some investors have yet to be convinced that inflation will only be transitory in nature.

In the Eurozone, the European Central Bank kept rate increases on hold and pledged to continue to maintain the pandemic emergency purchase programme, despite the central bank raising its growth and inflation forecasts. The bloc will also have to manage its members with regard to the pledge agreed at the G7 of a minimum global corporation tax of 15%, with Hungary and Poland having already stated they are against the introduction.
In Asia, the spread of Taiwan’s COVID-19 outbreak to electronic factories threatens to put even more pressure on the struggling semiconductor industry, with delays expected to continue for at least another year. Over the Strait, China’s producer price index increased 9% in May, which was an increase on the 6.8% gain in April.
In markets, emerging markets (+5%) performed in line with developed markets (+5%) over the past 30 days. Style-wise, growth stocks (+7%) re-established a lead over value (+3%) versus the same period 30 days prior, with real estate (+9%), information technology (+8%), communication services (+5%) and consumer discretionary (+5%) leading the charge. Small capitalisation stocks posted +7% returns for the past 30 days versus the +5% for large capitalisation stocks.
ECONOMICS  
 Latest

Consensus

Forecast

UK GDP (QoQ)-1.5 –
UK PMI62.9 –
UK CPI (YoY)1.51.8
EU GDP (QoQ)-0.3 –
EU PMI57 –
EU CPI (YoY)2.02.0
US GDP (QoQ)6.46.4
US PMI64.0 –
US CPI (YoY)5.0 –

What’s happened in portfolios?

Our property positions continued to benefit from the increasing retail activity and, again in the UK, despite the delays to lockdowns easing, growth in confidence, which should be confirmed in the next set of retail sales numbers.

On the fixed income front, despite the recent market movements, we continue to believe that the focus for bond portfolios should be on short-term debt. The recent shift in portfolios to further tilt to these positions allows us to mitigate duration risk for very little reduction in yield.

What's happening this week?

16 Jun • Fed Interest Rate Decision | 17 Jun • EU Consumer Price Index | 18 Jun • UK Retail Sales

Clients of Nedbank Private Wealth can get in touch with their private banker directly to understand how their portfolios are responding to market events, or call +44 (0)1624 645000 to speak to our client services team.

 

If you would like to find out more about how we manage clients’ investments, please contact us on the same number as above. Or you can get in touch using the links to the forms towards the end of this page.

Sources: Nedbank Private Wealth and (1) Bloomberg; and (2) Reuters.

The value of investments can fall, as well as rise, and you might not get back the original amount invested. Exchange rate changes affect the value of investments. Past performance is not necessarily a guide to future returns. Any individual investment or security mentioned may be included in clients’ portfolios and is referenced for illustrative purposes only, not as a recommendation, not least as it may not be suitable. You should always seek professional advice before making any investment decisions.

Access more of our insights

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We review the week starting 12 July, which saw markets slip back from recent highs amid continued concerns over the spread of the COVID-19 Delta variant. Meanwhile, the debate carries on about how transitory inflation might be.

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As the semiconductor industry saw a global shortage the relationship between China and the US got tenser, particularly with regard to Taiwan. Karen Bennett and Rebecca Cretney highlight what’s going on and what investors should be aware of.

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