Weekly Round Up
UK markets suffered a volatile week, ending in the red with the FTSE 100 Index falling by 1.08% to 7,039 points at the time of writing.
Growing worries that inflation may persist has raised expectations of sooner-than-expected tapering by the Bank of England and US Federal Reserve while investors fear global growth may have peaked.
On the economic data front, the UK economy grew by 5.5% during the second quarter of 2021, faster than a preliminary estimate of a 4.8% expansion, while the current account deficit unexpectedly shrank to £8.6 billion amid a strong recovery in exports of goods. Despite this, UK business leaders have warned ministers of an ‘autumn storm’ of rising taxes, escalating costs, labour shortages and supply disruption as the Government’s Covid-19 support schemes come to an end.
In the commodity markets, oil continued its rise with WTI crude futures trading around $75 a barrel on Friday, not far from a three-year high of $76.67 earlier in the week. After surging 9% in September, this is the biggest monthly gain since June.
Investors are considering the prospect of a surge in demand after reports that Beijing ordered Chinese state-owned energy companies to secure supplies for the incoming winter season while awaiting the OPEC+ decision on production.
US natural gas futures extended gains to $5.9 per million British thermal units to start the last quarter of the year, a seven-year high, as strong foreign demand more than offset prospects of lower domestic demand. A natural gas shortage in Europe has driven prices on the continent to record highs, while inventories in some European countries stood 20% below normal levels ahead of the winter season.
The Dow Jones Industrial average tumbled more than 500 points on the last trading day of Q3, the S&P 500 lost more than 1% and the Nasdaq declined 0.4%.
Wall Street was hit in September by inflation and supply chain issues as well as concerns over the rising cases of the Delta strain of Covid-19. The S&P 500 declined over 4% in September, the most since March 2020 and both the Dow Jones and the Nasdaq suffered their worst month so far this year. On the data front, initial jobless claims unexpectedly rose for the third week, with GDP revised slightly higher for Q2.
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