Weekly Round Up
UK markets ended the week in negative territory, with the FTSE 100 Index falling by 1.84% to 7,038.42 at the time of writing.
The sharp fall on Thursday came after the US Federal Reserve’s meeting minutes showed that policymakers agreed they could start reducing bond purchases this year. This coincided with signs that the global economic recovery is stalling due to coronavirus outbreaks, reversing last week’s positive sentiment in the markets.
Figures from the Office for National Statistics showed that retail sales unexpectedly fell by 2.5% versus expectations of a 0.4% increase in July as people spent less money on groceries and more on going out. However, retail sales were still up 5.8% compared to pre-pandemic levels in February 2020.
Commodity markets suffered a violent sell-off as mounting anxiety about slower economic growth sent oil and metal prices tumbling and iron ore plunged on weaker steel demand. The iron ore price fell nearly 15% to US$130.2 a tonne and is now down 45% from the record high of US$237.57 it reached just three months ago.
China has stepped up efforts to cut pollution from its vast steelmaking industry as it targets peak emissions in 2030. The country is now aiming to cut steel output growth this year to 2020 levels, meaning it must reduce steel output by 12.2% from August to December. Brent crude, the global oil benchmark, extended losses for the sixth straight session in a row to the lowest level since March to trade below $64 a barrel.
In the US, the S&P Index and the Dow Jones Industrial Average both traded in the red as investors continued to digest the latest Federal Reserve minutes and the likelihood of economic stimulus reducing this year.
Commodities were hit hard by falling prices, however Nvidia’s shares managed to weather the storm better after the chip giant’s quarterly earnings beat estimates amid strong graphic cards sales. The surge of the delta variant in the US prompted economists at Goldman Sachs to almost halve their US growth forecast in the third quarter. They now predict a 5.5% expansion in GDP between July and September, a sharp downgrade from their previous estimate of 9%.
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