Market round-up: 05-09 July

Thomas Watts


This week

It was back in 2018 that the song streaming service, Spotify, pioneered the method of selling their director’s shares directly to the market to float, rather than list the traditional way of an initial public offering, later proving to music to investors’ ears…

The week that was saw a continuation of the theme, as the FTSE 100’s welcomed fintech firm, Wise, making its stock market  debut on Wednesday. Opening with a market cap to the tune of £8 billion and at £8 a share, the stock rose 10% on its first day of trading, followed by another 10% on its second, ending at £9.62. Taking on added significance, London's largest ever tech listing could pave the way for other firms looking to go public without the help of underwriters.

The government has been keen to attract technology groups to list in the UK for a while, with the financial watchdog earlier this week outlining proposals to make it easier for such companies to list in London, helping it to compete with New York and the EU post-Brexit.

The rise of Wise throughout the second half of the week was in sharp contrast to the rest of the market as Thursday saw global markets suffer their biggest  1 day loss in 3 weeks.  Dragged lower over concerns about China’s recovery and tighter regulation on technology companies, the FTSE 100 stuttered to a 2% loss. The strength of China’s recovery is key for Europe’s miners and oil majors who are acutely sensitive to the world’s largest consumer of natural resources.

With markets falling across the continent, Europe’s central bank announced its new inflation target of “2% over the medium term”. The widely expected change replaces the previous “below, but close to, 2%” formulation. The change is clearly dovish, raising the target from something in the 1.6%-1.9% range, up to 2%. That said, the ECB have effectively been operating with a 2% target in mind, so it may not make a material difference to the path of policy over the next few years.

Coming back home, the week was wrapped up with a slew of disappointing economic data, giving investors plenty to ponder heading into the weekend. Although industrial and construction output came in below consensus forecasts, perhaps the most underwhelming was month on month GDP figures.  Coming in at almost half of what was expected, data showed the economy grew at 0.8%, signaling a fourth consecutive month of growth but still way below the 3.1% mark last seen in February 2020. Breaking the data down further, the services sector grew by 0.9% during May with accommodation and food service activity growing by 37.1% as restaurants and pubs welcomed customers back indoors following the easing of coronavirus restrictions.

Next week

After what could well be a late night for some football fans on Sunday, the beginning of the week could prove to be a mercifully quiet one amongst all the potential holiday and sick days taken.

It is just as well then, from an economics point of view, the week doesn’t really kick off until Tuesday, ironically in London, as events move from Wembley Way to Threadneedle Street.  Tuesday will see our very own Bank of England (BoE) release its Financial Stability Report, an assessment of conditions in the domestic  financial system and potential risks to the economy.  The evidence on strains and imbalances can often provide insight into the future of monetary policy, and will especially pique the interest of those following the currency markets.

The following day should provide a good accompaniment to the BoE’s report, in the form of the nation’s inflation data. Measuring the change in the price of goods and services purchased by consumers, the numbers should take on added significance as the previous reading showed prices creeping above the central bank’s 2% target. As the BoE have made it clear that they believe this recent spike is merely transitory and should pass after the initial euphoria of lockdown restrictions easing fades, many will be looking to see if a slowdown in consumerism is starting to take hold.

The week will end with investor focus switching across the pond to the US, where their retail sales figures will be made public on Friday. Retail sales figures are inextricably linked with consumer spending, resulting in the data giving us a strong gauge as to how inflation may be manifesting in the world’s largest economy.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in July 2021.