Last Week in the City: Powell fails to reassure

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook this week ending 5 March 2021.

This content is more than 6 months old now, please visit the news area of this site for more recent content

  1. Garry White

Comments by US Federal Reserve chair Jerome Powell hit markets at the end of the week – as he failed to reassure the market on inflation and a recent surge in borrowing costs. Some had hoped Mr Powell would react to the recent broad sell-off in government bonds with a stronger message or hints of fresh intervention.

Mr Powell said the rise in yields was “notable”, but he did not consider it a “disorderly” move – or one that pushed long-term rates so high the Fed might have to intervene in markets more forcefully to bring them down. The comments resulted in a fall in the S&P 500, which briefly erased its gains for the year, with Nasdaq closing below its 1 January level.   

The FTSE 100 was flat over the week, with the FTSE 250 up 0.5% by the middle of Friday’s trading session.

*****************************************

February market round-up: Jon Cunliffe, Charles Stanley’s Chief Investment Officer, reviews market action in February.

******************************************

Covid-19

Italy and the European Commission blocked a shipment of AstraZeneca's Covid-19 vaccine to Australia. The pharma group failed to meet its EU contract commitments, so the Italian government refused its request to export 250,000 doses from it plant in the country. Italy made the request and it was signed off by the European Commission under a new export control system that came into law on 30 January. This is the first time it has been used.

A number of countries extended lockdown restrictions this week, but the US state of Texas opened up its economy.

Germany looks set to extend its coronavirus lockdown until 28 March, although it will start easing some restrictions from next week.

The Japanese government plans to extend a state of emergency to combat Covid-19 for Tokyo and three neighbouring prefectures until March 21, two weeks longer than originally scheduled.

Greece has extended its coronavirus lockdown to 16 March as it reported the highest number of new cases recorded so far in 2021.

In Brazil, Sao Paulo state introduced lockdown measures after Brazil set a daily record for Covid-19 deaths.

Estonia imposed new restrictions on restaurants and non-essential shops as part of efforts to curb rising infections.

The governor of Texas, Greg Abbott, lifted most of the state's pandemic restrictions, allowing businesses to reopen at full capacity as of next week and telling residents that masks were no longer required. "It is now time to open Texas 100%," Mr Abbott said.

India has experienced a less widespread attack of Covid-19 than the advanced countries of the West. India remains an interesting growth prospect within Asia, a continent we favour. Read more in this week's article, India looks forward to a better year

Economics

Jerome Powell spooked markets with comments on inflation. The Federal Reserve chairman said the economic reopening could “create some upward pressure on prices,” but reiterated that the central bank would be “patient” before changing its interest-rate policy. Bond prices have been sliding in the opening weeks of this year, in a move that has accelerated in the past two weeks. This market concern about future interest rates means the March Fed policy meeting will be the most important for some time.

For once, the central banks might be right about price rises. Inflation may not rise so rapidly and sharply that they will need to increase interest rates any time soon. We look at good and bad inflation.

Fed chair Jerome Powell tried words to soothe market worries about inflation, but they did not reassure enough. We look at concerns the US will run “too hot” in this week's article, Running hot – but not too hot?

China is aiming for an economic growth rate above 6% in 2021, after scrapping its target last year. China's Premier Li Keqiang announced the target on Friday at the opening of this year's National People's Congress.

Budget

Chancellor Rishi Sunak extended furlough until September in Wednesday's Budget and set out measures to protect business as the UK emerges from lockdown. But he also announced major changes to tax – including a freeze on personal allowances and a rise in corporation tax from 2023.

Budget 2021: The impact on personal finances and investments: Rob Morgan rounds up the main developments from Rishi Sunak’s Budget and next tax year’s key allowances.

Tax Year End: How tax-efficient are you? In this podcast, two of our Financial Planners discuss how to make the most of your tax allowances.

Geopolitics

The US agreed to a four-month suspension of retaliatory tariffs imposed on British goods such as Scotch whisky over a long-running aircraft subsidy row. The two sides will attempt to resolve the dispute during this time. The Trump administration previously imposed tariffs on EU goods because of a row over state subsidies for aircraft makers Airbus and Boeing. Britain is party to the dispute as a former member of the EU and maker of key Airbus components.

Democracy in Hong Kong was struck a further blow. China’s top law-making body has formally unveiled plans to ensure only “patriots” can govern Hong Kong, with other electoral changes including a vetting process for all parliamentary candidates.

IPOs

UK food delivery group Deliveroo announced plans to list in London later this year. The company went from near failure in 2020 amid a competition review into Amazon’s minority investment, to operating profitability toward the end of the year thanks to the lockdown-driven surge in demand for delivered meals.

Environment

Health and environmental concerns are driving the move to alternative protein. Garry White looks at edible insects in this week's article, Grub’s up: The case for edible insects.

Technology

The UK's Competition and Markets Authority has launched an investigation into whether Apple's terms for app developers are anti-competitive. It follows a series of complaints, one from Epic Games, the developer of Fortnite. Some developers are unhappy that they are forced to distribute apps to iPhones and iPads via the App Store, and the commission Apple takes. Apple said its terms were "fair and equal".

Mining and commodities

Tesla will become a technical partner in a nickel mine – a metal needed for lithium-ion batteries that power electric cars. Elon Musk's group will also buy nickel from the Goro mine on the small Pacific island of New Caledonia to secure its long-term supply. The move comes amid growing concerns about future supplies of nickel and other commodities used in green technology.

Energy

Oil prices rose to a 15-month high after Opec and its allies agreed not to increase supply in April as they await a more substantial recovery in demand amid the coronavirus pandemic. Brent crude futures rose 3.2% over the week to trade at about $68.25 a barrel by mid-session on Friday.

Retail

Amazon officially opened the doors to its first physical store in the UK offering shoppers its flagship “just walk out shopping” system. Amazon Fresh, the online giant’s first physical grocery store outside of the US, is in Ealing, London, and utilises the same AI-powered technology as its Go stores. The store uses “computer vision, deep learning algorithms and sensor fusion” to automatically detect any items a customer puts in their shopping basket or returns to the shelf.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

More from author

  1. Garry White

    Last Week in the City: Another new high for global equities

    Date: 9th Apr 2021 12:17pm

    Garry White, Chief Investment Commentator, provides a round-up of the market movement...

  2. Garry White

    Will copper derail the climate agenda?

    Date: 8th Apr 2021 08:16am

    China has been stockpiling metals ahead of a global infrastructure push that will see...

  3. Garry White

    Last Week in the City: America’s jobs plan unveiled

    Date: 1st Apr 2021 11:44am

    Garry White, Chief Investment Commentator, provides a round-up of the market movement...

Most read articles

  1. Last Week in the City: Powell fails to reassure

    Last Week in the City: Another new high for global equities

    Date: 9th Apr 2021 12:17pm

    Garry White, Chief Investment Commentator, provides a round-up of the market movement...

  2. Last Week in the City: Powell fails to reassure

    Last Week in the City: America’s jobs plan unveiled

    Date: 1st Apr 2021 11:44am

    Garry White, Chief Investment Commentator, provides a round-up of the market movement...

  3. Last Week in the City: Powell fails to reassure

    Last Week in the City: Politics can’t derail market optimism

    Date: 26th Mar 2021 11:45am

    Garry White, Chief Investment Commentator, provides a round-up of the market movement...

Investment involves risk. You may get back less than invested.