Equity markets rose this week across the world. Inflation in the US appears to be peaking, whilst Japan’s new Prime Minister reassures the market. China sees a muted week in markets, whilst shares in Europe and UK rally, despite the continued concerns about inflation.
Last week’s performance – major stock markets
| S&P 500 | +1.82% |
| Nikkei 225 | +3.64% |
| CSI 300 | +0.04% |
| Euro Stoxx 50 | +2.69% |
| FTSE 100 | +1.95% |
Commentary
US: Evidence that inflation is peaking helps markets
Stocks had another week of gains, helped by strong economic signals and positive earnings surprises. Stocks fell at the start of the week due to higher energy prices and continued pressures from supply chain disruptions, but evidence that supply pressures and inflation might be peaking seemed to be a major factor in stocks turning around. Investors also seemed comforted by evidence that the drag on the economy from the delta variant of the coronavirus was easing.
Japan: Reassurances from new PM comforts markets
Japan’s stock market returns were positive during a week that saw Japan’s powerful lower house of parliament dissolved, setting the stage for an October 31stgeneral election. Investors gained reassurance that new Prime Minister Fumio Kishida is not planning to veer too far away from the policies of his predecessors and does not intend to raise the country’s capital gains tax, a subject that previously spooked markets.
China: Muted markets ahead of GDP report
Chinese markets ended nearly unchanged ahead of this week’s quarterly GDP report, which will likely show a slowdown in the country’s expansion. Investors have been spooked by a deepening energy crisis as cold weather swept into much of the country and power plants scrambled to stock up on coal, sending prices of the fuel to record highs. Oil and natural gas prices have also sent jitters across China. Economic data released during the weak was mixed but largely muted.
Europe: Shares rally on economic recovery optimism
Shares in Europe rallied on optimism about the continuing economic recovery and strong corporate earnings. Inflation however remained a concern for investors. Industrial production in the eurozone fell in August due to supply chain bottlenecks and slowing global trade.
UK: GDP, Labour Market and inflation in the spotlight, but markets rise
GDP in August grew 0.4% as the hospitality industry benefited from the first full month of reopening. Britain’s labor market is now at its tightest in more than four decades, with fewer unemployed people for each job vacancy than before the pandemic. Inflation remains a concern in the UK. Investors are expecting an increase to interest rates in December. On Sunday, the governor of the Bank of England further warned that it “will have to act” to curb inflationary pressure.