Market round-up: 8-12 March

Thomas Watts


This week

With the past week seeing children go back to school for the first time this year, many of those following the markets were given a break from simple arithmetic and learning the alphabet with their loved ones to focus on a busy domestic results season, as the full A-Z of UK companies reported their yearly earnings. 

It has been somewhat of a mixed bag for UK corporates this year, largely depending on how they have coped with the COVID-19 pandemic, with different sectors varying wildly. However, it was footwear retailer, Shoe Zone’s results that really caught the eye. Acting as a bellwether for a beleaguered high street, the company reported a 24.3% slump in revenues as its shops remained closed, not being able to re-open until 12 April at the earliest. Perhaps what was the most impressive part of their results however, was the seriousness in which they take their name, announcing that Terry Boot will be Shoe Zone’s next finance boss, replacing the outgoing Peter Foot. 

Taking a more global outlook, it was the US benchmarks that flip-flopped around during the week, with the tech-heavy NASDAQ falling into correction territory before the more general S&P 500 hit an all-time high. Falling 10.6% from its mid-February peak, prospects of further government spending and a recovering global economy have stoked fears of inflation, sending the benchmark 10-year Treasury yield to near one-year highs and weighing on technology shares. 

The shoe was on the other foot by the middle of the week however, as the S&P 500 hit record highs after poor US CPI data gave short term inflation worries the boot, whilst the US government gave final approval to one of the largest economic stimulus measures in history. Americans also ran with data that showed the amount of new job openings over the month has beaten predictions as the market rally continued into Thursday. 

The party continued into Europe as continental bourses hit 13-year highs, led by the mining and retail sectors. Investors were also buoyed by The European Central Bank’s comments that it would not walk away from its  prolonged money-printing program, designed to keep a lid on Eurozone borrowing costs, signaling that the bank is determined to lay the foundation for a solid economic recovery.

Next week

The tone for the coming week could be set as early as Monday as a raft of economic data is released from the world’s second largest economy, China. Having been a beacon of growth in an otherwise stagnant global economy since the Global Financial Crisis, China has been slowing of late as it transitions from a manufacturing economy to a services-led one. 

To this end, the nation’s industrial production numbers should make for fascinating reading, having beaten economists’ expectations for the past five months. The data itself details the change in the total inflation-adjusted value of output produced by manufacturers, from mines and utilities etc. Having a large impact on the nations surrounding it as well as commodity prices, the data has a wide-reaching effect on many markets, including the mining-heavy FTSE 100.

Staying with the theme of commodities, the US Energy Information Administration releases its oil inventory figures. The figures detail the change in the number of barrels of crude oil held in inventory by commercial firms during the past week and acts as primary gauge of supply and demand imbalance within the market. If inventories are being drained quicker than expected, this should indicate a higher demand and vice versa, usually having a heightened impact on oil prices, which can in turn have a knock-on impact on inflation.   

Rising oil prices can indirectly be a key contributor to inflation expectations, which have been growing throughout 2021, with 10-year Treasury yields rising to reflect a growing belief that a recovery from COVID could result in a spike in global inflation. Such fears could well be alleyed on Wednesday as the US Federal Reserve holds its latest press conference, giving its views on the economy and hinting at future rate policy. Not only will minutes of the Fed’s last meeting be published for investors to scrutinise, there will also be a Q&A session in order for journalists to dig a little deeper into the Fed’s current thinking. 

The following day, the Bank of England holds its equivalent address, “Super Thursday”. In an attempt to release a month’s worth of economic data in one afternoon, Andrew Bailey, Governor of the BoE, will give his thoughts about the state of the domestic economy, alongside published minutes of the Monetary Policy Committee’s last meeting as well as the outcome of their latest vote on rates.

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 March 2021.