Market Round-up: 1-5 March

Thomas Watts


This week

The first week of March often heralds the beginning of spring and is widely regarded not only as a signal that hibernation will be coming to an end soon, but also when the property market wakes from its slumber.  

For all the talk of moving house, there was one address this week that had the attention of economists and homebuyers alike, and it came from No. 11 Downing Street, a nice central London location in itself. Rishi Sunak’s second Budget as Chancellor of the Exchequer looked to be a real fixer-upper, ushering in one last splurge in order to get the UK’s economy through the final vestiges of its COVID-19 induced slump. Resisting direct tax hikes on individuals, it seems the burden will fall on corporations to fill the government’s coffers as it was predicted that the UK economy would return to its pre-pandemic level by mid-2022, six months earlier than previously forecast.

Britain will see its first rise in corporation tax since 1974, seeing profitable companies pay 25% from 2023 compared to the 19% they currently pay, with the overall rate of taxation in the economy increase to its highest since 1969. However, it was declared that firms can use a two-year “super-deduction” tax break that the chancellor hopes will spur on investment and provide a short-term boost to growth. 

In other measures, it was announced that the government’s furlough scheme would be extended by a further five months, ensuring that the labour market should survive comfortably until lockdown is ended. The existing stamp duty freeze for home buyers was also extended by another three months in an attempt to maintain the property market’s buoyancy. 

Indeed, figures released by Halifax on Friday showed that this is still largely the case. Measuring the change in house prices financed by the former building society, the data acts as a leading indicator of the sector’s health, which can have a sizable ripple effect. Halifax commented: “Having enjoyed an extremely strong period of activity in the second half of last year, the housing market continued its softer start to 2021, with average prices down very slightly (-0.1%) compared to January. However, with annual house price inflation currently at +5.2%, property values remain comfortably higher than 12 months ago.” 

The foundations of any economy however is the employment market, as the week drew to a close with US Non-Farm Payroll figures, data showed that the world’s largest economy is nearing a good place. The US economy added 379,000 jobs versus predictions of 197,000 and although hourly earnings remained static, it shows at least that economies are beginning to recover from the COVID pandemic.

Next week 

Following a week which saw the Treasury lay its cards on the table about how they will tackle the economic destruction the outbreak of COVID-19 has wreaked on the economy, the coming days see the turn of those at the Bank of England to evaluate the situation. 

The tone for the coming week could be set as early as Monday as the Governor of the central bank, Andrew Bailey, is due to speak about the economic outlook at a webinar hosted by the Resolution Foundation. Giving his views on the outlook for the domestic economy and how it could emerge successfully from the measures placed upon it by COVID, his words will be scrutinised by market commentors for any clues of rate policy as central banks across the world examine the possibility of normalisation. 

With 10-year US Treasury notes starting to yield more than the S&P 500 index, it seems that inflation expectations are really starting to gather momentum. The final piece of the puzzle could come in the shape of US inflation figures, released on Wednesday. Measuring the change in the price of goods and services, CPI numbers should give us a broad gauge as to whether prices are ticking higher as saving rates and spending also show signs of rising.

The last stop of the coming five days sees us finish the week on the continent as the bloc’s central bank is due to speak on Thursday. The press conference is about an hour long and will have two parts; first a prepared statement is read, then the conference is open to questions from the press. ECB officials will not have been briefed on these questions which can often lead to unscripted answers, creating amplified volatility, especially in the currency markets.

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.