Stock markets around the world have spent most of the week on the back foot: concerns over slowing growth and a sluggish post-pandemic recovery have been to the fore again and share prices have displayed higher levels of volatility in the last few days.
In recent weeks, subpar economic data has tended to push values higher because investors think a weak global recovery from the Covid-19 crisis will mean central banks have to keep stimulus measures in place for longer – and postpone interest rate hikes.
But that link is looking increasingly tenuous this week, with the Federal Reserve, the Bank of England and the European Central Bank all signalling a possible tapering of market support despite the mixed economic picture that has emerged as a result of the Delta coronavirus variant.
The US
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 1.4% down for the week so far, with the S&P 500 losing 0.9%. In a week shortened by Monday’s Labor Day break, investors appear worried that the Fed will start to withdraw support despite the labour market and supply chain difficulties currently facing many sectors of the United States economy.
The number of job vacancies in the US hit a record high in July, with employers struggling to fill positions in order to meet demand.
The number of job vacancies in the US hit a record high in July, with employers struggling to fill positions in order to meet demand.
The UK & Europe
In the UK, the FTSE 100 ended Thursday 1.6% down for the week, with a senior Bank of England official warning that interest rates may need to rise in 2022 to cope with persistent inflation. Boris Johnson unveiled new tax hikes to pay for Britain’s spiralling social care bill: as well as higher National Insurance rates for workers, they included a rise in tax on dividends for shareholders and company directors.
Halfords, meanwhile, became the latest retailer to warn of the impact of the global supply chain crisis on sales and profits. Its shares have fallen by nearly a quarter since hitting a high point in July.
In Frankfurt, the DAX index ended Thursday’s session down 1% for the week, while France’s CAC 40 lost 0.1%. The ECB this week voted to maintain current interest rates and but decided to scale back part of its bond-buying programme. New figures showed that investor confidence across the eurozone has taken a turn for the worse in September: it is now at its lowest level since April.
Asia
In Asia, the Hang Seng index in Hong Kong dipped 0.7% with early gains pared back by a 2.3% nosedive in Thursday’s session, prompted by reports that the Chinese government plans to continue its crackdown on online gaming addiction. The announcement that approval for new online video games would be temporarily suspended saw the shares in a number of technology businesses plummet: Tencent, one of the major players in the gaming sector, lost 8.5%. The mood among Chinese investors was not helped by the news that property giant Evergrande was reportedly on the brink of defaulting on some of its multi-billion-dollar debts.
Japan’s Nikkei 225 index of leading shares, on the other hand, was the week’s outlier, gaining 3% by close of trading on Thursday. Investors welcomed the news that Prime Minister Suga intends to resign before the beginning of October, and markets believe his successors could implement a looser fiscal policy. Prices in Tokyo were also boosted by exceptionally strong second-quarter growth figures in Japan.
September 3 | September 9 | Change (%) | |
|---|---|---|---|
FTSE 100 | 7138.4 | 7024.2 | -1.6 |
FTSE All-share | 4120.5 | 4055.8 | -1.6 |
S&P 500 | 4535.4 | 4493.3 | -0.9 |
Dow Jones | 35369.1 | 34879.4 | -1.4 |
DAX | 15781.2 | 15623.2 | -1.0 |
CAC 40 | 6690.0 | 6684.7 | -0.1 |
ACWI | 746.5 | 739.6 | -0.9 |
Hong Kong Hang Seng | 25902.0 | 25716.0 | -0.7 |
Nikkei 225 | 29128.1 | 30008.2 | 3.0 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 9/9/2021.
