Market round-up: 14-18 June

Thomas Watts


This week

With the English Football team wrapping up their first win within 90 minutes in the European Championships on Sunday, it was left to those in Westminster to try and achieve a victory in extra time, with the Prime Minister  forced to extend social distancing precautions by a month.

Under the final stage of a plan outlined by Boris Johnson in February, the government had hoped to lift most social restrictions on 21 June, meaning pubs, restaurants, nightclubs and other hospitality venues could fully reopen, however this has now been pushed back to 19 July. Despite Britain having one of the quickest, most efficient vaccine rollouts in the world, with more than 41 million having had their first shot and 30 million enjoying both doses, the government noted that the new delta variant is increasing cases by 64% a week since its arrival on these shores.  Reacting to the news it was unsurprisingly, those stocks that had the most to lose from not opening up fully that lost ground throughout the week, including listed pub chains and restaurants.

However, although the delay to a full opening up is not ideal, estimates from Deutsche Bank show that a four-week delay would temporarily reduce gross domestic product by around 0.25%, a fraction of the historic 9.8% slump recorded in 2020 during the nadir of the pandemic.

It’s a game of two halves as they say, with strong domestic employment data released on Tuesday overshadowing what could only be a temporary setback. Figures showed those finding new work surged by a record amount (197,000) during May as COVID restrictions eased, though it is worth mentioning that the level reached still remains more than half a million below its pre-pandemic peak.

Tuesday's figures also showed the fastest headline wage growth since 2007 in the year to April. Although again the figures are worth taking with a pinch of salt due to the distortions caused by the comparisons with depressed wages a year ago and greater job losses among low-paid staff.

Wednesday signaled a definite half time for markets as a much more hawkish  Federal Reserve surprised by forecasting an earlier and faster adjustment to interest rates over coming years than many expected. With investors fearing that the Fed’s tone could be an own goal, triggering mass sell offs, especially in growth sectors such as Technology, Thursday proved something of a surprise.

The Tech heavy NASDAQ rose significantly, at one point approaching a record intraday high set in April, as U.S. technology stocks gained on optimism surrounding a speedy economic recovery. Leading the way was Chipmaker Nvidia, toping its group with a rise of 5.4%.

On the defensive right from the kickoff this week was furniture retailer , which tumbled 4% on its market debut as investors worried about consumer appetite to rejuvenate their dwellings just as lockdown was coming to an end.

Next week

With the outbreak of COVID-19 having had a potentially fundamental impact on the domestic property market, the coming week will give us the opportunity to see just how the “race for space”  has affected prices in both rural and urban environments.

Monday will see online estate agent Rightmove release its House Price Index (HPI) data, detailing the change in the asking price of homes for sale on its website. Although this acts as the UK's earliest report on housing inflation, the data actually tends to produce a relatively mild impact due to asking prices and selling prices not always being correlated. However the housing industry's health should not be overlooked due to the wider industry activity it can spur. The property market has a wide reaching impact on banks, mortgage providers, estate agents and even greatly impacts DIY and furniture companies who should benefit from increased activity in the sector.

From moving address to a very different type of meaning, Tuesday sees another potentially market moving address, this time from US Federal Reserve chairman, Jay Powell. Testifying on the Fed’s emergency lending programs and current policies before the House Select Subcommittee on the Coronavirus Crisis, investors will be listening very carefully to what he has to say, especially as bets increase that the Fed will start to taper its asset purchase programme in the foreseeable future.

The week will be rounded off back on domestic shores as our very own Bank of England ushers in another “super Thursday”, a positive jamboree of economic data that the central bank uses to communicate its views of the domestic economy with a wider audience.  Thursday will see not only the minutes published from the Monetary Policy Committee’s last meeting but also the way in which they voted on future rate policy. The data will also be accompanied by a question and answer session, which will be partly unscripted, potentially adding to the heightened market volatility that such crucial data can bring.

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 June 2021.