Weekly round up
Despite a pullback on Friday, UK markets continued their rise this week with the FTSE 100 Index gaining 1.11% to trade at 7,625 points at the time of writing. London equities now remain close to a 2 year-high, this was after Thursday’s GDP data showed the economy was not so severely hit by Omicron as was previously thought.
The UK economy shrank by a less than expected 0.2% in December and expanded 1% in Q4 2021, despite the emergence of the Omicron variant. The largest contributors were human health and social work activities driven by an increase in GP visits at the start of the quarter. Followed by a large increase in coronavirus test and trace activities and the extension of the vaccination programme.
Household consumption increased 1.2%, government spending 1.9%, gross fixed capital formation 2.2% and exports jumped to 4.9%, while imports dropped 1.5%. The UK economy advanced 7.5% in 2021, compared to a 9.4% fall in 2020, with GDP now just 0.4% below its pre-pandemic level.
Business investment in the UK increased 0.9% in the last three months of 2021, beating estimates of a 0.8% rise and is now 10.4% below pre-coronavirus levels.
In the commodity markets, Gold weakened below $1,830 an ounce on Friday after hitting a two-week high of $1,842 in the previous session, as investors grappled with hot US inflation data and hawkish comments from a Federal Reserve official, which fuelled bets for a more aggressive tightening.
Brent crude futures hovered near $91 a barrel on Friday and were heading for their first weekly loss since mid-December, as diplomatic efforts raised the chance of reviving the Iran nuclear deal. This would pave the way for a resumption in official flows from the nation. Analysts suggest that Iran could add as many as 1.5 million barrels a day if an agreement is reached that allows sanctions to be lifted.
Meanwhile, OPEC said in a monthly report on Thursday that the recovery in global consumption could surpass its forecasts this year as the rebound in economic activity and travel gathers pace.
US equity futures extended their declines on Friday after Wall Street sold off in the previous session, spurred by concerns over more aggressive Federal Reserve tightening amid a four-decade high inflation rate.
US inflation hit 7.5% in January, accelerating at its fastest pace since February 1982, coming in higher than previously forecast. Americans paid higher prices for a wide range of goods, including food, electricity, and shelter.
US Treasury yields spiked in reaction to the data, with the benchmark 10-year yield breaking above 2% for the first time since 2019. Some economists said the Federal Reserve may have to take a more forceful approach to cool down the economy this year, with larger and more frequent interest rate increases rather than doing so gradually.
The Dow Jones Industrial Average fell by 1.47% on Thursday, while the S&P 500 and the Nasdaq Composite indices lost 1.81% and 2.1% respectively.
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