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November market commentary

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November market commentary

Thursday, November 9th, 2023


All eyes have been on the Middle East following Hamas’ terror attack on Israel on October 7th, which led to the deaths of more than 1,400 people.

The resulting conflict has led to a humanitarian crisis in Gaza, fears of a possible escalation across the wider region, and a surge in oil prices.

We will be keeping a close eye on the unfolding situation in the Middle East and if it has an effect on the wider global economy.

As always, let’s take a closer look at what’s been happening in key markets across the world over the last month.


Economic growth in the UK remains sluggish, as official figures showed that GDP went up by just 0.2% in August 2023. According to the Office for National Statistics (ONS), this was driven largely by strong growth in services, but offset by falls in sectors such as manufacturing and construction. Data also showed that the fall in GDP in July was bigger than originally thought, with the figure being revised from 0.5% to 0.6%.

Meanwhile, ONS figures indicated that efforts to drive down inflation are still yielding limited results. The rate of inflation remained unchanged from the previous month in September at 6.7%, which is well above the Bank of England’s target of 2%. The ONS attributed the high rate partly to petrol and diesel costs, but noted that food and non-alcoholic drink prices have fallen.

This was backed up by the British Retail Consortium, which reported a 0.1% fall in food prices in September – the first monthly drop for more than two years. However, food prices are still 9.9% up on where they were a year earlier.

Ken Murphy, Chief Executive of supermarket chain Tesco, believes the pace of rising food prices will continue to slow this year. Speaking to BBC News, he insisted that Tesco is trying to “lower prices wherever we can”, and acknowledged “how challenging it is for many households across the country”.

There was another indication that cost of living pressures may finally be easing, as ONS data showed wages rose by 7.8% between June and August year-on-year. This means that average pay growth rose above inflation for the first time in nearly two years.

With a general election looming, you might expect the government to start talking about or dangling tax cuts in front of a hard-pressed electorate. But while recent figures may suggest we may be starting to turn a corner, the Institute of Fiscal Studies (IFS) believes there is no compelling case for net tax cuts “any time soon”.

“The UK economy remains stuck between weak growth on the one hand and the risk of persistently high inflation on the other,” the IFS said. “An ill-timed fiscal loosening – such as an unfunded package of pre-election tax cuts – might give a short-term economic sugar rush, but could prove unsustainable and ultimately mean a protracted recession as interest rates rise even further to bring inflation back under control.”

The IFS added that the “Chancellor is in a terrible bind, as will be whoever is Chancellor after the general election”.

There was more positive news from credit rating agency Moody’s, which has dropped its negative outlook on the UK, partly in response to Chancellor Jeremy Hunt’s decision to scrap most of the measures announced in last year’s Mini-Budget.

Meanwhile, the International Monetary Fund has been forced to defend itself against criticism from the Treasury that its UK economic assessment is too pessimistic. Chief Economist Pierre Olivier Gourinchas told the BBC that its growth forecasts exceed the Bank of England’s estimates, and that it is trying to be “honest interpreters of the data here”.

October also saw confirmation that the UK’s biggest infrastructure project would be dramatically scaled back, with Prime Minister Rishi Sunak announcing that the leg connecting the West Midlands and Manchester would not go ahead.

It has been a mixed few months for the banking sector, with Metro Bank recently being denied permission from the Bank of England to use its own internal models to assess its mortgage risks. However, a £925m deal was later struck that enables the business to raise extra funds from investors – an agreement that secures its financial position, but means it has to cut about £30m in costs every year from 2025. By contrast, Lloyds revealed a pre-tax profit of £1.9bn for the three months to September, up from £576m a year earlier.

October also saw the removal of the cap on bankers’ bonuses, a move first announced in last year’s controversial Mini-Budget, and one of the few measures announced by Kwasi Kwarteng to be retained by Jeremy Hunt. The government hopes that the move will help to make London a more attractive place to do business post-Brexit.

On the high street, fashion retailer Next has confirmed it is to buy clothing brand Fatface for £115m. This follows Next’s acquisition of Cath Kidston and Joules in recent months.

Meanwhile, a proposed merger of Vodafone and Three is still under close scrutiny, with bosses having to deny it would lead to price rises after concerns were raised by the Unite union. If the merger goes ahead, it would lead to the creation of the UK’s biggest mobile network and service around 27m customers.

The pound ended October unmoved against the dollar, and on the financial markets, the FTSE-100 Index ended the month at 7,321 points, up 3.76% on September.


The European Central Bank (ECB) left its interest rates unchanged for the first time in over a year, following ten consecutive rate hikes.

Policymakers had been rating hikes in order to tackle the rising cost of living, but thankfully, inflation across the eurozone has started to come down. The rate of inflation hit 4.3% in September, which is well down on the peak of 10.6% seen in October 2022.

The ECB believes that while inflation is likely to remain fairly high for some time yet, interest rates are now at a level where they could substantially contribute to it meeting its 2% target.

Christine Lagarde, President of the institution, added: “The economy is likely to remain weak for the remainder of this year. But as inflation falls further, household real incomes recover and the demand for euro area exports picks up, the economy should strengthen over the coming years.”

The eurozone economy contracted during the last quarter, according to new data from S&P Global, as rising borrowing costs and higher prices led to consumers limiting their spending. The report also showed that declining output in the services and manufacturing sectors also contributed to the downturn.

Speaking after the data was published, Franziska Palmas of Capital Economics said it still expects the eurozone economy to fall into recession in the second half of 2023.

Germany, in particular, is going through a tough period economically right now, with the European Commission predicting that the country will face a prolonged recession this year.

It is likely to be the only major economy in Europe to see its economy shrink during 2023, and according to the latest European Commission estimates, output will fall by 0.4% this year. The body has also downgraded its growth forecast for Germany in 2024 from 1.4% to 1.1%.

This comes after the International Monetary Fund predicted that Germany’s economy would contract by 0.3% in 2023.

It was a much more positive picture in Spain, where officials are hopeful it will outpace eurozone growth in the coming months. Pablo Hernández de Cos, Governor of the Bank of Spain, believes the country is performing relatively well because it relies less on sectors such as manufacturing than many other key European nations, and is less dependent on exports from China and Russia.

October also saw progress in the European Union’s efforts to bolster the banking system and make it more resilient. The European Banking Authority has published guidance for banking regulators in each member state, which includes a call for specific checks on the impact of higher interest rates on their business models, as well as their liquidity and funding risks.

The move is being taken in the wake of the recent collapse of Silicon Valley Bank and UBS’s forced takeover of Credit Suisse to ensure regulators in Europe learn lessons from what happened across the Atlantic.

Francesco Mauro of EBA said: “This is an exercise that has always looked at supervision, but the novelty is that, being more targeted, we can be more specific on what are the expectations that we are putting on supervisors. The spring events reminded us of the importance of proper management of liquidity risk.”

October also saw voters come out for the Polish general election. While the incumbent Law and Justice (PiS) party secured the biggest share of the vote, opposition parties secured enough votes to oust the government. Donald Tusk’s Civic Coalition, which attracted almost a third of the popular vote, looks to be in the strongest position to be able to form a coalition.

On the financial markets, Germany’s DAX index fell by 3.75% in October to end the month at 14,810 points. Meanwhile, the French CAC 40 index fell by 3.50% to end at 6,885 points.


October ended with better than expected economic figures, official data showing GDP rose by 4.9% between July and September, up from 2.1% in the previous quarter. This was the biggest increase in economic output since the final quarter of 2021, and was attributed partly to healthy levels of consumer spending.

This was welcome news, particularly as last month began with the US government narrowly avoiding a federal shutdown, after a short-term deal ensuring funding until November 17th was agreed.

However, the congressional budget deal did not include further military funding for Ukraine, which had been a key demand for the Democrats. Despite this setback, President Joe Biden has insisted the US will continue to support Ukraine, and said it cannot “under any circumstances allow US support to Ukraine to be interrupted”.

Meanwhile, economists are keeping a close eye on interest rates and wondering which way they will be heading over the coming months. In a poll by Reuters, 45% said they don’t expect to see any rate reduction until the second half of next year at the earliest.

Interest rate movements will also be of particular interest to anyone planning to take out a mortgage on a property in the coming months. According to Mortgage News Daily, the average interest rate on the typical 30-year fixed rate home loan rose to 8% for the first time in 23 years.

Consumers across the board were under financial pressure as a result of higher housing and petrol costs, which contributed to the inflation rate remaining static in September at 3.7%. Although inflation is significantly lower than it was this time last year, it is still well above the Fed’s target of 2%.

Nevertheless, the retail sector has continued to perform strongly, with figures showing that retail sales went up by 0.3% in September, when adjusted for inflation.

There was also positive news in the employment market, with figures from the Labour Department showing that employers added 336,000 jobs in September. This was almost double the amount that had been widely anticipated.

In the business sector, chip company Nvidia and iPhone maker Foxconn confirmed they are collaborating to create new data centres capable of powering various applications, including AI-powered electric vehicles and other AI-based services.

However, many sectors have been hit by ongoing industrial action. For example, more than 75,000 nurses, pharmacists and technicians at healthcare company Kaiser Permanente went on a three-day strike to call for improved wages and staffing levels. A tentative deal has since been struck, although the terms of the agreement have not been disclosed.

Industrial unrest also hit the car manufacturing sector, as the United Auto Workers union has been taking strike action against Ford, Stellantis and General Motors (GM) since September. GM believes the strikes could cost the company approximately £164m a week.

The ongoing actors’ strike in Hollywood also continued throughout October. Negotiations between actors’ union SAG-AFTRA and major Hollywood studios had been on hold for almost two weeks but have since resumed. Members of the union have been on strike since July over issues such as pay and the use of artificial intelligence.

In the tech industry, Microsoft is in dispute with the Internal Revenue Service over its allocation of profits across various countries and jurisdictions. The tax authority has asked for the tech giant to pay an additional £23.5bn in back taxes for the years 2004 to 2013. However, Microsoft is contesting the request, arguing that the issues raised by the body are “relevant to the past but not to our current practices”.

Meanwhile, Microsoft has announced that about 670 roles are set to go at professional networking site LinkedIn. This follows the loss of more than 700 jobs in May and accounts for approximately 3% of its current workforce.

On the financial markets, the Dow Jones fell by 1.36% to end the month at 33,052, while the more broadly-based S&P 500 index fell by 2.20% to end at 4,193.

Far East

Embattled Chinese real estate giant Evergrande saw its shares soar after it resumed trading in Hong Kong following a two-day suspension. The property company’s chairman Hui Ka Yan is currently under police surveillance “due to suspicion of illegal crimes”.

Evergrande also recently filed for bankruptcy protection in the US, after it defaulted on its debts two years ago. Real estate developer Country Garden has also defaulted on its US debts, Bloomberg reports, which could prove problematic for the wider Chinese economy, as the sector accounts for a significant share of its GDP.

According to the latest official figures, China’s economy grew by 4.9% between July and September, down from 6.3% in the previous quarter.

Ongoing tensions between the US and China have shown no signs of easing, following the US government’s decision to place restrictions on advanced chip exports. China’s foreign ministry argued the curbs, which affect major companies such as Nvidia, “violate the principles of the market economy and fair competition”.

Elsewhere in the tech industry, Apple Chief Executive made an unexpected visit to China, meeting with gamers in the city of Chengdu. Meanwhile, MG Motors, which is owned by China’s SAIC Motor Corp, believes it is in a “very strong position” to capitalise on growing demand for electric cars, after posting pre-tax profits of £54.2m in 2022.

While relations between China and the US remain frosty, the same cannot be said of China and Russia. Russian President Vladimir Putin recently attended a global summit in Beijing, hosted by Xi Jinping, where he was the guest of honour.

In Japan, business sentiment has continued to pick up, according to a survey by the country’s central bank.The headline big manufacturers’ confidence index rose to 9 in September from 5 in June, exceeding analysts’s expectations of 6. Meanwhile, the non-manufacturers index rose from 23 to 27, again beating forecasts. This bodes well for Japan’s economic output in the coming months, against the backdrop of sluggish growth worldwide.

Nevertheless, inflation remains a problem in Japan, as the central bank is expected to raise its core consumer inflation forecast for the year to March 2024 from 2.5% to 3%. How this affects interest rates remains to be seen, although a poll of economists by Reuters suggests that Bank of Japan will end its negative interest rate policy in 2024.

The export market looks set to be one ray of light for Japan’s economy, as exports from the country rose by 4.3% in September year-on-year. This upturn was driven by increased shipments of electronics, machinery and vehicles.

In South Korea, meanwhile, the central bank has opted to leave its policy rate on hold at 3.5%, partly in response to rising private sector debt and growing inflationary pressures.

The central bank believes inflation will average at 3.5% this year, down from 5.1% last year but still well above its 2% target. Furthermore, it is predicting that South Korea’s economy will grow by 1.4% in 2023, following an upturn of 2.6% in 2022.

On the financial markets, Hong Kong’s Hang Seng index fell by 3.91% to end October at 17,112. Meanwhile, Japan’s Nikkei index slumped by 3.14% to 30,858. China’s Shanghai Composite index fell by 2.95% to 3,018 and the Korea Composite Stock Price Index went down by 7.59% to 2,277.

Emerging Markets

India’s status as one of the world’s leading emerging markets was reinforced recently by the International Monetary Fund (IMF), which predicted that India and China will jointly account for about half of all global growth in 2023 and 2024.

The IMF expects to see growth of 6.3% in 2024, thanks to strong domestic demand and a steady inflow of investment. This is higher than the 5% growth it is predicting in China. For the Asia Pacific region a whole, the IMF is forecasting growth of 4.6% in 2023, up from 3.9% in 2022. This will then slow to 4.2% in 2024.

In sanction-hit Russia, the government confirmed it would force many exporters to convert their foreign revenues into roubles, in order to help prop up the struggling currency as its invasion of Ukraine continues. Russia’s financial regulator will monitor and enforce the capital controls on 43 companies in industries such as metal and energy.

Andrei Belousov, First Deputy Prime Minister of Russia, commented: “The main purpose of these measures is to create long-term conditions for increasing the transparency and predictability of the currency market, [and] to reduce the opportunity for currency speculation.”

Meanwhile, President Vladimir Putin has confirmed Russia will continue increasing the production of military equipment “not by some per cent, but by several times”. This suggests that the prospect of Russia standing down and ending the war in Ukraine is remote and the country is preparing to continue with its invasion for some time.

In Brazil, economic growth has remained robust, with a survey of investors by the Central Bank showing their median GDP growth projection has risen from 2.56% to 2.92%.

This strong performance was reflected in the labour market in particular, as employers added nearly 221,000 jobs in August. This was well above the expectations of many economists, who had expected an upturn of between 180,000 and 200,000.

On the financial markets, India’s BSE Sensex index fell by 2.97% to end at 63,874 points. Russia’s MOEX index rose by 2.16% to close at 3,200 points, while Brazil’s Bovespa index ended the month down 2.94% at 113,143 points.

And Finally…

When you hear the words “on the run”, we’re betting that a tortoise doesn’t spring immediately to mind. But a runaway tortoise that went missing in 2020 has amazingly been found.

The tortoise was seen happily crossing a major road in Florida and was taken to a local animal refuge, which launched an appeal to find the owner.

Thankfully, a person came forward and they revealed that it had been missing for more than three years. We hope to find out what measures they put in place to prevent the pet from, er, running off again.



March market commentary

Thursday, March 2nd, 2023


Russia’s invasion of Ukraine in February 2022 had a huge impact on the global economy, pushing up commodity prices, inflation and living costs around the world.

Last month saw the first anniversary of the invasion, and amid the renewed displays of solidarity from leaders in the UK, the US and the European Union, was the uncomfortable reminder that this could be a prolonged conflict.

Policymakers are therefore having to balance their continued support for Ukraine with minimising the economic fallout, and the effects this will have on households and businesses.

As always, let’s take a look at the details to see what’s happening in key markets across the globe.


The month began with the Bank of England raising interest rates from 3.5% to 4%. This was the tenth rate hike in a row and means they are at their highest level in 14 years. However, there was some slightly better news as the Office for National Statistics (ONS) reported that although GDP fell by 0.5% in December, the economy saw zero growth over the final quarter of 2022 as a whole. This meant that the UK narrowly avoided slipping into recession last year, although it remains to be seen whether this has been merely postponed, rather than avoided.

Inflation, meanwhile, has continued to fall, dropping from 10.5% in December to 10.1% in January. Chancellor of the Exchequer Jeremy Hunt is to deliver his Spring Budget in March, and has already ruled out generous tax cuts, arguing that the “best tax cut right now is a cut in inflation”. However, there has been pressure on the Chancellor to announce tax cuts, given ongoing cost of living pressures, widespread industrial action, and notably, the Government seeing a surprise £5.4bn surplus in its finances in January.

The mixed economic picture led to key sectors seeing varying fortunes. For instance, while retail sales rose unexpectedly by 0.5% in January, figures from Nationwide showed house prices fell for the fifth month in a row, dropping by 0.6% to an average of £258,297.

Meanwhile, it was a good month for energy companies, with British Gas owner Centrica reporting profits of £3.3bn in 2022, and Shell revealing that its profits doubled last year to £32.2bn – the highest in its 115-year history. In addition, BP reported record annual profits of £23bn in 2022, while soaring energy prices helped EDF’s UK arm return to profit last year after seeing losses in 2021.

There were also several notable headlines in the UK employment market, with carmaker Ford announcing plans to cut 1,300 jobs around the country over the next two years. There was better news from Aldi, which confirmed it intends to create 6,000 new jobs in the UK this year.

As ever, Brexit continues to be a huge subject of debate, with many citing it as a key factor behind food shortages across the UK, although high energy prices and freak weather conditions have also contributed to supply issues nationwide.

On the financial markets, the FTSE-100 Index ended the month at 7,857 points, up 1.10% on January. The pound ended February up 0.42% against the dollar.


Last month saw the first anniversary of Russia’s invasion of Ukraine, and a renewed display of international resolve and solidarity from the UK, Europe and the US.

In early February, President Volodymyr Zelenskyy came to the UK to address MPs in Westminster Hall and meet King Charles at Buckingham Palace, before travelling to Brussels to address the European Parliament.

Later on in the month, as the anniversary approached, US President Joe Biden made a surprise visit to Kyiv, where he pledged to support Ukraine for “as long as it takes”.

Meanwhile, China has called for Russia and Ukraine to reach a political settlement to end the war, and President Zelenskyy has said he wants to meet China’s President Xi Jinping after Beijing published a 12-point peace plan.


February ended with the European Union reaching a new deal with the UK over post-Brexit trade arrangements for Northern Ireland, although whether this wins the approval of the Democratic Unionist Party in Northern Ireland remains to be seen.

Last month also saw the European Commission adopt tougher data protection measures by ordering its staff to remove the TikTok app from their phones and corporate devices, due to concerns that user data is being harvested and sent to the Chinese government.

In other news, Gas Infrastructure Europe confirmed that Europe was on course to end winter with the amount of gas in storage close to a record high – a significant development as it means the continent is becoming less reliant on energy from Russia. However, there was less positive news for French energy provider EDF, which saw record losses of £16bn, despite soaring energy prices in 2022.

Germany, meanwhile, saw industrial action during February, with a walkout by ground crew over pay bringing seven major airports to a standstill.

On the financial markets, Germany’s DAX index saw an increase of 1.59% in February to end the month at 15,369 points. Meanwhile, the French CAC 40 index rose by 2.75% in the month to end at 7,276 points.


The US Federal Reserve started the month by raising interest rates by 0.25%, which leaves the bank’s benchmark rate at 4.5%-4.75% – the highest level since 2007. Many experts, including economists polled by Reuters, believe the Fed will raise interest rates at least two more times in the next few months, as it continues working to stabilise prices.

This comes as inflation continues to cool, falling from 6.5% in the 12 months to December to 6.4% in the year to January. Although this means inflation has now eased for seven consecutive months, it remains well above the Fed’s 2% target, driven by increases in the cost of food, energy and housing.

The US economy performed strongly in the face of continuing pressures on the cost of living and rising interest rates. During the final quarter of 2022, the economy grew by 2.9% year-on-year. Although this was down on the 3.2% figure recorded in the previous quarter, it was slightly better than expected. Nevertheless, it has not eased fears among some analysts that a recession is inevitable.

It’s a mixed picture in the US, with official figures showing slumps in construction activity and home sales. However, data from the Labor Department showed that employers added 517,000 jobs in January, which helped push the unemployment rate down to 3.4% – its lowest level in more than half a century.

Meanwhile, retail sales rose by 3.0% last month, the largest increase since March 2021. This backed up the findings of a study by the Bank of America Institute, which attributed increased spending in January on consumers having “solid cash buffers and borrowing capacity”, even if they were on relatively low incomes.

The difficult global economic climate weighed heavily on the financial markets during February, with the Dow Jones falling by 4.21% to end at 32,656, and the more broadly-based S&P 500 index falling by 3.62% to end at 3,970.

Far East

This month saw China’s top foreign policy official Wang Yi visit Russian President Vladimir Putin in Moscow. But equally significantly, Beijing has called for peace talks between Russia and Ukraine, publishing a 12-point position paper on what needs to be done to end the war.

The Kremlin has confirmed it is paying “a great deal of attention” to China’s peace plan, and is analysing its proposal in detail.

Much has been made of the timing of this intervention, given worsening diplomatic relations between China and the US in recent months. Nevertheless, trade between the two nations hit a record high last year, with imports and exports totalling £572.6bn in 2022.

The recent easing of Covid restrictions in China looks set to trigger renewed growth in China, with the IMF predicting growth of 5.2% this year, compared with just 3% last year.

Meanwhile in Japan, official figures showed the economy is growing at a much slower pace than had been expected. Whereas many forecasts had predicted growth of 2% in the final quarter of 2022, the final figure was just 0.6% – and this slow growth coincides with inflation standing at a 42-year high.

On the financial markets, Hong Kong’s Hang Seng index fell by 9.41% to end February at 19,785, while Japan’s Nikkei Dow index rose by 3.46% to 27,445. China’s Shanghai Composite index rose by 0.74% to 3,279, while the market in South Korea fell by 0.50% to end at 2,412.

Emerging Markets

India looks set to become a much bigger player on the global stage, with the IMF predicting that emerging and developing markets will account for about 80% of global growth in 2023 and 2024. India will contribute more than 15% of this growth.

In what may be a reflection of its growing international status, Air India has ordered 470 new aircraft, which the company says will help it offer a “world-class proposition serving global travellers with an Indian heart”.

Brazil is also enjoying an economic surge, with figures from its central bank showing activity increased by 2.0% in 2022.

Meanwhile, Russia has announced that it will respond to a price cap on oil products imposed by other major economies by reducing production of crude oil by 500,000 barrels a day.

On the financial markets, India’s BSE Sensex index fell by 2.22% to end the month at 17,538, while Russia’s MOEX index saw an upturn of 1.23% to end at 2,252. Brazil’s Bovespa index, meanwhile, fell by 6.58% to end the month at 105,961.

And Finally…

Just weeks after a suspected Chinese spy balloon over the US triggered talk that aliens had finally landed, another mysterious object has led to some wondering if extraterrestrials are walking among us.

A giant sphere, referred to as “Godzilla egg” by a BBC reporter, washed ashore in the Japanese city of Hamamatsu. Police were alerted immediately, but intriguingly, they’ve not yet identified what the strange object is. Fascinating, as Mr Spock might say…

Back to more earthly matters, and the latest in our reports of iconic images being seen in food. Graham and Cathy Bloye were enjoying cauliflower wings at The Stanborough Beefeater in Welwyn Garden City when they noticed that one of the wings resembled the outline of the UK.

But after sharing images of their patriotic meal on social media, people viewing the post noticed that several key parts of the country were missing – notably the Isle of Wight and the Isle of Man. We’ve also taken a look at the image ourselves, and it’s not just British islands that are missing – East Anglia is clearly missing too.

September Market Commentary

Wednesday, September 7th, 2022

August started with US Speaker Nancy Pelosi visiting Taiwan. We comment on China’s reaction below and we also describe the environmental and economic challenges facing the country.

With domestic crises brewing at home, some commentators have noted the convenience of an external crisis for the CCP (Chinese Communist Party). “The position of the Chinese government and people on Taiwan is consistent,” President Xi Jinping said in a phone call to Joe Biden. “Those who play with fire will perish by it.” Taiwan claimed that China’s military exercises were simulating a ‘full attack’ on the island and China/US relations do not appear likely to improve any time soon. “Hope is not a strategy,” one commentator warned.

The headlines in August continued to be dominated by possible energy shortages and inflation. ‘Winter is coming’ as they frequently warned on Game of Thrones and there were certainly plenty of grim predictions. Fortunately the month ended with some light (possibly) at the end of the tunnel, with gas prices falling as Germany appeared to be on course to meet its storage targets.

In the UK August was the last full month of Boris Johnson’s Premiership, now replaced by Liz Truss who beat Rishi Sunak in the final ballot of members.

The month ended with a crisis of ‘unimaginable proportions’ as the monsoon rains and melting glaciers brought widespread flooding to Pakistan. At the time of writing a third of the country Pakistan which is bigger than both France and Spain was estimated to be under water.

As always, let’s look at all the news in more detail…


Boris Johnson entered 10 Downing Street in July 2019 and in December of that year secured an 80 seat Commons majority on a promise to ‘get Brexit done’. No-one then would have forecast a global pandemic or Johnson leaving Downing Street just over three years later and Liz Truss arrives in No10 to face a raft of problems.

At its meeting on August 3rd, the Bank of England’s Monetary Policy Committee voted by 8-1 to raise interest rates by 0.5% to 1.75%, the biggest increase for 27 years. Worryingly it warned that the UK was likely to fall into recession this year and that inflation was now “set to go above 13%”. Governor Andrew Bailey acknowledged the impact this would have but said that if the Bank didn’t raise rates inflation would be “even worse.” The inflation figure for July was 10.1%, up from 9.4% in June and the highest rate for some 40 years, driving what the BBC described as “the fastest fall in real pay on record”. Despite this, most analysts agreed that the Bank of England will raise rates again, with some forecasters expecting inflation to hit 18% next year. With sanctions on Russia pushing trade with the country to a new low, figures showed that the UK’s trade deficit for the second quarter was £27.9bn; a new record.

The Office for National Statistics confirmed that the economy had contracted by 0.1% in Q2. Unsurprisingly UK consumer confidence dropped to a new low, so there’ll be plenty of problems for the new PM to address. Not least of these will be those facing the UK’s small businesses, which are reported to be ‘scrapping hiring plans’ in the face of economic uncertainty. To compound the problem many companies, especially in the hospitality sector, are saying they are likely to go out of business if the planned rises in energy costs go ahead. The month ended with Ofgem announcing an 80% rise in the energy cap.

Was there any light in the gloom? UK car production grew for the third consecutive month. The heatwave boosted UK retail and helped it to recover some of the ground lost earlier in the year and store closures are now running at their lowest level for seven years.

In the circumstances the UK’s FTSE-100 index of leading shares didn’t fare too badly. Like most of the markets we cover in the Bulletin worries about inflation and energy pushed it lower, but it was only down by 2%, closing the month at 7,284. The pound was firmly in ‘good news for exporters, bad news for holidaymakers’ territory, falling 5% against the dollar to end August trading at $1.1610.


We reported last month on the deal struck with Russia to allow grain ships to leave port, and the month started with the first ship leaving the southern port of Odesa. A week later four more ships carrying grain and sunflower oil left Ukrainian ports through the UN-brokered safe maritime corridor. The departures  from Odesa and Chornomorsk gave rise to hopes of export stability, with millions in countries that are dependent on Ukraine’s exports now facing famine conditions. Whether the deal will hold is anybody’s guess.

August brought the long-expected fightback from Ukraine, with explosions hitting Sevastopol in the Crimea and Ukraine beginning its push to take the area around Kherson, one of the first cities to fall to Russia. President Zelensky warned that the war was now entering a “nastier” phase and, as heavy fighting continued around Kherson, defence analyst Michael Clarke commented that the current phase of the war was “make or break for Ukraine’s credibility as an ally worth military backing from the West. Ukraine has to show it can do better than just lose the war slowly. This [the attack on Kherson] is a NATO-style offensive, so it is a clash of military thinking, as well as a clash of arms”. Against this background Boris Johnson visited Ukraine again for the last time as Prime Minister and the UK and Ukraine announced the start of talks over a digital trade agreement.


August was another month in Europe when the headlines were made by energy supplies or the potential lack of them. It got off to a rather morbid start with Svend-Joerk Sobolewski, the Chairman of Germany’s Cremation Consortium talking of an unprecedented energy crunch in the sector and warning that, “You can’t switch off death”. You suspect that Vladimir Putin may simply have said, “Watch me” and there were similar grim warnings all around Europe. The Swiss police chief openly discussed social unrest from winter fuel shortages. In Poland homeowners were queuing for coal in the middle of August.

If the shortages are as bad as feared the damage to Europe’s economies will be significant. By the end of the 2nd quarter, Germany was only reliant on Russian imports for about a quarter of its gas needs but that quarter is what powers the industry of the EU’s largest economy.

There was some respite at the end of the month, with City AM reporting that gas prices had ‘fallen sharply’ amid reports that Germany was on course to meet its gas storage targets for October but Russia has since shutdown the flow through the Nord Stream 1 pipeline into northern Germany indefinitely. 

There were problems of a different kind in Norway, where the country’s sovereign wealth fund (the state-owned investment fund built up thanks to the country’s oil surpluses) made a record loss of £144bn in the first half of the year. The fund is valued at over a trillion pounds and managed a negative return of 14.4% from January to June, with its technology holdings falling by 28%.

It was a rather more successful period for the French taxman who, using artificial intelligence developed by Google, raised an extra €10m (£8.56m) in revenue by spotting swimming pools which the owners had ‘forgotten’ to declare, thereby avoiding higher property taxes. Having been tested in nine French regions, the AI is unsurprisingly going to be rolled out across the whole country.

So were Europe’s leading stock markets as happy as a French tax collector in August or as gloomy as a German undertaker? Sadly it was the latter. With Germany’s DAX index down 5% to end the month at 12,835. The French market was down by the same percentage, closing at 6,125.


We often start the US section of the Bulletin with a report on the previous month’s jobs figure – a longstanding bellwether of the US economy. In July the US added 528,000 jobs, with the unemployment rate falling from 3.6% to 3.5%.

The report from the Labor Department was far stronger than had been expected, with recent data showing the economy continuing to shrink. The consensus forecast had been 250,000 causing some right-wing commentators to question whether the The Biden Administration was ‘massaging’ the figures ahead of the mid-term elections.

There was certainly some gloomy news around. Electric vehicle start-up Rivian laid off 6% of its 14,000 strong workforce. Figures for June showed the US housing market suffering its biggest monthly decline since the 1970s, and the largest single-month increase in homes listed for sale for 12 years. One estimate suggests that 1 in 6 US households are in arrears with their energy bills.

The month had begun with US Speaker Nancy Pelosi’s visit to Taiwan much to the annoyance of the authorities in Beijing who described it as “malicious provocation”. Pelosi offered her “unwavering commitment” to Taiwan’s democracy and by the middle of the month the US and Taiwan had announced formal trade negotiations. One aspect of Pelosi’s trip which went largely unreported was her meeting with the chairman of the Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest chip maker and a company on which the US is heavily dependent. In a perfect world the US would like TSMC to establish a manufacturing base in the US – and stop making advanced chips for Chinese companies.

The month ended with reports that The Biden Administration was ready to ignore China’s live-fire exercises following Pelosi’s visit and ramp up arms sales to Taiwan. It will, apparently, ask Congress to approve an estimated $1.1bn (£940m) arms deal that will include 60 anti-ship missiles and 100 air-to-air missiles.

There was some good news for the US on inflation, which cooled more quickly than most experts had predicted thanks to the rise in interest rates. July’s figure was 8.5%, down from 9.1% in the previous month. That said, grocery inflation hit its highest level since 1979, while the ‘food at home’ index which covers cereals and bakery products was up 13.1% from July 2021.

We have commented below on the drought affecting China, and the US was similarly hit. Two-thirds of the country is now estimated to be affected by the drought, as water levels drop to unprecedented lows in the country’s lakes and reservoirs. California is one of the states affected, and its farmers have been forced to abandon tomato fields. The state accounts for 25% of the world’s ketchup production – meaning that the price of your tomato sauce could soon skyrocket.

Definitely not skyrocketing during August was Wall Street. Both the US indices we cover in the bulletin were down by 4%, with the Dow Jones ending August at 31,510 and the more broadly-based S&P 500 closing at 3,955.

Far East

As we have just mentioned, the month started with Nancy Pelosi’s visit to Taiwan and predictable anger from Chinese leaders but, in truth, the Chinese authorities had far more than just Nancy Pelosi to worry about in August.

We have detailed before the problems facing the Chinese property sector in general and Evergrande in particular and August had no sooner started than Evergrande was a billion dollars worse off. The company announced that one of its subsidiaries had been ordered to pay 7.3bn yuan ($1.08bn £930m) for failing to meet its debt obligations. This came two days after the company had outlined plans to restructure its debts; roundly criticised by many commentators for a lack of clarity.

Bloomberg reported that China’s top 100 developers saw new home sales fall almost 40% in July, so the outlook for the property sector is not going to improve any time soon. The malaise wasn’t, though, confined to the property sector. A string of new figures released in the middle of the month showed China’s economy continuing to struggle with the effects of Beijing’s ‘zero-Covid’ policy. Figures for factory output, business investment, consumer spending and youth employment were all disappointing, prompting China’s central bank to launch a 0.1% cut in interest rates to support the economy.

The problems look set to continue with China badly hit by drought in August. Combined with a heatwave, water levels have dropped significantly, forcing Toyota and Contemporary Amperex Technology, the world’s largest battery maker, to close their factories in Sichuan province. With a population of 80m Sichuan is a major manufacturing hub but is heavily reliant on hydropower.

To put some numbers on China’s water crisis, the country uses 10bn barrels of water a day which is roughly 700 times its daily oil consumption but decades of economic and population growth have pushed northern China’s water system to unsustainable levels. According to one report, at the end of 2020 per-capita water supply around the North China Plain was 50% below the UN’s definition of ‘acute water scarcity’. China has clearly acknowledged the problem for some time: in 2003 it launched a ‘South the North’ water transfer project, intended to use water from the Yangtze to replenish the north of the country. Officials in Sichuan have now deployed two giant ‘cloud-seeding’ drones in a bid to stimulate rainfall.

As you might expect with all the problems, China’s Shanghai Composite Index fell back in August, dropping 2% to end the month at 3,202. The Hong Kong index was down by 1% to 19,954 but the markets in Japan and South Korea went in the opposite direction. Both markets ended the month 1% higher, at 28,092 and 2,472 respectively.

Emerging Markets

As regular readers know, the Bulletin is written from the notes we compile through the relevant month. Since Russia invaded Ukraine we have far more notes in this section of the Bulletin, an indication, perhaps, of the increasing role on the world stage of countries like India.

Let’s start there, with news of a record trade deficit. India’s trade deficit for July was $31bn (£26.5bn) as high import prices – driven by global inflation – met falling demand for Indian exports as major economies in the West slowed. We have commented above on the impact of heatwaves and drought, and India could be particularly badly hit. The country is the world’s biggest exporter of rice and the prolonged drought has seen planting areas for the crop decrease by 13%.

Russia is clearly finding the money to continue the war in Ukraine but sanctions are hitting the country’s GDP, with one study quoted in City AM suggesting that the Russian economy was 4% smaller than a year ago. A new report from the Kyiv School of Economics predicted that the Russian economy will shrink by 9.5% for this year as a whole with up to 4m Russians set to lose their jobs. Ukrainian studies on the Russian economy should be taken with a pinch of salt and we should wait to see what the winter will bring.

With Belgium’s Energy Minister warning that Europe faces ‘five or ten awful winters’ without a cap on natural gas prices, Hungary decided to blink first with energy group MOL paying the necessary transit fees to re-start flows of Russian oil. Russia has, apparently, enjoyed a 38% boost to its energy earnings this year, with higher gas and oil prices pushing earnings to $337.5bn (£288bn).

Oil giant Saudi Aramco took one look at Russia’s earnings and simply said “hold my beer” as it reported profits of $48.4bn (£41.4bn) for the second quarter of 2022, a 90% year-on-year increase and, according to Bloomberg, the biggest quarterly profit for any company.

Despite the continuing war in Ukraine, droughts and inflation, August was a good month for the three emerging markets we cover in the Bulletin. the Indian stock market rose 3% to 59,537: Brazil’s market was up 6% to 109,523. And despite the comments about the Russian economy shrinking, the Moscow stock market was up 8% in August to close at 2,400.

And finally…

August, of course, was traditionally known as the ‘silly season.’ With politicians taking their summer break, journalists used to struggle to fill their column inches, hence the appearance of stories that normally wouldn’t come anywhere near the front pages.

For the ‘And finally…’ section of the Bulletin it is, of course, the silly season all year round. August 2022 wasn’t a vintage month, but it certainly held its own. In 2013, in the early stages of Bitcoin’s development, Newport IT engineer James Howells ‘mined’ 8,000 Bitcoins. They were stored on the hard drive of his computer. When Mr Howells upgraded his computer he forgot the Bitcoin and threw the old hard drive away. Fast forward nine years and the hard drive is resting in a Newport landfill and the Bitcoin are now worth £150m. Mr Howells is pleading with the local council to be allowed to dig up the landfill, saying he’ll give 10% of the proceeds to turn Newport into a cryptocurrency ‘hub.’ Sadly the council say excavating the landfill would pose an unacceptable ecological risk.

No such hi-tech nonsense for an Italian man who decided on a more traditional route to riches, digging a tunnel to burrow into a bank near the Vatican. Sadly the tunnel collapsed, and firefighters spent eight hours digging him out. The unnamed gentleman is now recovering in hospital with the local carabinieri waiting patiently…

Inevitably inflation has featured prominently in this month’s Bulletin and even this section can’t escape it. A store in the US beset by rising prices and even-faster-rising crime decided to lock up one product in plastic theft-prevention cases. Shoppers in New York said they had ‘never seen anything like it’ as they handed over their $3.99 (£3.40) in return for a tin of Spam.

Sadly, many people’s traditional method of consolation, chocolate, has also been hit by inflation. It is, of course, a sign of getting older that all chocolate bars seem to be half the size they were when you were a child. Now the Christmas tub of Quality Street has gone the same way, with Nestle reducing the size of the tubs from 650g to 600g. Cartons are also down in size from 240g to 220g meaning there’s even less chance of finding a green triangle…


August Market Commentary

Wednesday, August 3rd, 2022


As many readers know, this Bulletin is written from notes we compile throughout the month. One of the most interesting aspects of this is the occasional feeling of ‘was that really this month’ as we start to write the Bulletin. 

So it was this month. The race to replace Boris Johnson seems to have been going on forever. In fact it was only on Tuesday July 5th that Chancellor Rishi Sunak resigned, citing ‘fundamental differences’ with Johnson over the economy. With Sajid Javid resigning on the same day, Boris Johnson’s downfall became inevitable, and so the race to succeed him began. 

Sunak was the early favourite – and he appears to have been well-prepared, with the ReadyforRishi domain registered in December last year – but while the race will continue for the next few weeks, he is widely expected to lose out to Liz Truss, the current Foreign Secretary and the MP for South West Norfolk.

Away from Westminster, the war in Ukraine continued, inflation maintained its upward path and – if you like your glass half-empty – there were plenty of gloomy forecasts. 

Goldman suggested that the world was ‘on the brink of a rather severe recession’. The International Monetary Fund echoed this, saying that ‘the world may soon be teetering on the edge of a recession’, with growth stalling in the UK, US, China and Europe. The IMF cut its 2023 forecast for UK growth to just 0.5%, down from the 1.2% it had predicted in April. Small wonder that the CBI is calling on whoever is our next PM to prioritise tax cuts and business growth. 

July also brought us the sad death of former Japanese Prime Minister Shinzo Abe, shot while out campaigning. The month ended with the war of words between China and the US escalating further, with US House Speaker Nancy Pelosi seemingly determined to visit Taiwan. 

Despite the gloom, July was an excellent month for world stock markets. Only two of the markets we cover in the Bulletin were down in the month, with some showing significant gains. As always, let’s look at both the news and the numbers in more detail. 


July didn’t get off to the best of starts in the UK. Business bosses were reported to be at their most pessimistic since the start of the pandemic: entrepreneur James Dyson cast doubt on the UK’s stated ambition to be a ‘science superpower’ and as the cost of living continued to rise, consumer confidence was ‘back down to lockdown levels’. 

Meanwhile, a report on the BBC said that more than 7,000 pubs had closed in the last ten years – and having battled their way through the pandemic, those still open were struggling to cope with ‘rising energy costs and soaring prices’. 

As we report elsewhere in the Bulletin, inflation continued to do its worst. The UK was no exception, with price rises for fuel, eggs and milk pushing inflation to 9.4% in June, up from the 9.1% recorded in May. These increases are pushing Government borrowing costs to new levels: interest paid by the Government in June was £19.4bn – a new record. Total borrowing in the month was £22.9bn, up £4.1bn from a year earlier, according to figures from the Office for National Statistics. 

The Bank of England duly ‘vowed’ to bring inflation under control, but right now, its target rate of 2% looks like a very small dot on the horizon. We report below on a larger-than-expected rate rise in the US, and few people would bet against the next rise in the UK being 0.5% rather than the ‘traditional’ 0.25%. 

Rising inflation and interest rates will obviously continue to pour fuel onto the cost-of-living fire, with ‘Brits facing a painful spike in energy bills’, according to a report in City AM. They suggested that up to £25bn of discretionary spending could be lost in the ‘cut-back economy’. Inevitably, the subscription economy – which previously delivered everything to your door in exchange for a monthly subscription – will come under real pressure. 

Let us find some good news – which wasn’t quite the needle-in-the-haystack you might think. The ONS reported that after shrinking in March and April, the UK economy rebounded in May, growing by 0.5%. Amazon – which was confident of record sales on Prime Day – announced that it was creating 4,000 new jobs in the UK and lithium battery maker AMTE Power announced an investment of £190m to build a new factory in Scotland. The firm cited the UK’s ‘strong heritage of innovation’ as the reason for its choice. 

And despite all the tales of queues and delays at the nation’s airports, IAG, the owner of British Airways, posted its first profit since the pandemic. The company made £245m in the second quarter – compared to a loss of £809m in the same period last year – and said it had seen a significant increase in the number of flights and passengers. 

As we reported in the introduction, July was generally a good month for world stock markets and the FTSE-100 index of leading shares didn’t disappoint. The FTSE was up 4% to close the month at 7,423. The pound ended July more or less unchanged against the dollar, trading at $1.2176. 


The resignation of Boris Johnson – an event apparently mourned in Kyiv and celebrated in Moscow – and the subsequent election for our next Prime Minister took up much of July’s column inches. News about the continuing war in Ukraine was therefore less freely available than in previous months, so let us try and fill in some of the blanks. 

The month started with Ukraine claiming that it was accurately targeting Russian command posts in the east of the country, although that didn’t stop the Russian war machine grinding on, with suggestions that Russia may be moving towards a more general mobilisation and ‘expanded’ aims for the war. 

In Ukraine, President Zelensky fired his chief prosecutor and security chief, and followed that by ‘firing dozens of officials’ in the security services for ‘treason and collaboration’.

There was some light in the darkness when it was reported that Russia and Ukraine had agreed a deal to allow exports of grain to re-commence – but this was thrown into doubt the very next day following a Russian missile attack on Odessa, which reportedly destroyed a Ukrainian military vessel and a number of US-supplied Harpoon anti-ship missiles.  

We have commented previously on Russian looting of grain in Ukraine. July brought reports that it was also looting steel destined for the UK and Europe, with one suggestion that Russia could have stolen steel worth up to £500m that was destined for the UK. 


Ever since the Russian tanks rumbled across the Ukraine border on February 24th people have wondered if Vladimir Putin would use gas supplies as a weapon against Europe. 

July was the month when the answer appeared to be ‘yes’, with the BBC reporting that ‘Europe prepares for Russia to turn off the gas’. The month ended with Gazprom stopping supplies to Latvia, having earlier reduced its gas supply to Germany. Gas prices jumped, with many German states and cities taking immediate steps to cut consumption. Hanover was one example, turning off the hot water and heating in public buildings, as mayor Belit Onay said the ‘imminent gas shortage’ meant he needed to cut energy consumption by 15%. 

Bank UBS suggested that power rationing was ‘inevitable’ in Germany this winter: quite what impact that will have on the German economy – traditionally the economy which drives the rest of Europe – is anybody’s guess. Figures for May showed that Germany had recorded its first trade deficit since 1991: imports climbed 2.7% to over €125bn (£105bn) in the month, giving Germany a trade deficit of €1bn (£840m). 

German gas and utility provider Uniper, the largest importer of Russian gas in the country, was reported to be in talks with the government over a €9bn (£7.56bn) bailout.

In financial news, the euro dipped below the dollar for the first time in 20 years, with the European Central Bank’s hesitation in raising interest rates taking much of the blame. The ECB duly raised rates by 0.5% – the first rise for 11 years – as it sought to tackle Eurozone inflation which reached 8.9% in July, up from 8.6% in June. 

Unsurprisingly, Brussels cut its forecast for EU growth. While expectations for this year remained unchanged at 2.7%, the European Commission cut its forecast for next year by a full percentage point to 1.5%. 

In politics, Italian Premier Mario Draghi offered his resignation, which was rejected by the President. But after a week of turmoil, Mr Draghi finally succeeded in resigning after 18 months in office. Elections will take place this autumn with far-right leader Giorgia Meloni currently being tipped to win. 

Despite the worries about inflation, gas supplies, a cold winter – and even colder showers in Hanover – July was a good month for Europe’s two leading stock markets. Germany’s DAX index was up 5% to 13,484: the French market performed even better, gaining 9% to close the month at 6,448. 


July was a month when good news was hard to find in the US. The S&P 500 index had closed June at 3,785 – down 20.6% in the first six months of the year, the worst performance in that period since 1970. As we will see below, it did recover a significant amount of the lost ground in July. 

The experts were generally anticipating the US adding 268,000 jobs in June, with their fingers firmly crossed that the numbers would be not too strong (stoking up inflation even further), nor too weak, thereby hinting at a recession. In the event, the numbers were on the ‘strong’ side, with the US economy adding 372,000 jobs in June. 

The inflation figures arrived a week later, with US inflation at 9.1% in June, the highest figure since November 1981. Rent, new and used cars, motor insurance and medical care led the way, with the inflation figure higher than most economists had expected. 

This meant that an interest rate rise was almost inevitable. The dollar duly rose against other countries – as we have mentioned above, taking it above the euro. The interest rate rise arrived at the end of the month with the Federal Reserve lifting rates by 0.75% to a target range of 2.25% to 2.5%. 

In company news, Elon Musk was much to the fore. Tesla sales were reported to be ‘booming’ in China, but the world’s richest man pulled out of a deal to buy social media platform Twitter – which must have the lawyers on both sides rubbing their hands. 

Netflix said it had lost a million subscribers, Walmart issued a profits warning and AT&T admitted that many customers were struggling to pay their phone bills – all a consequence of the cost of living crisis. Despite this, both Amazon and Apple posted better-than-expected sales figures. 

The month ended with the US economy technically going into recession. It shrank by 0.9% in the three months to June, the second successive quarter in which the economy had contracted – the technical definition of a recession. 

Wall Street, though, was having none of it. The Dow Jones index gained 7% in July to close at 32,845. The more broadly-based S&P 500 index did even better: it was up by 9% to close the month at 4,130. 

Far East 

July brought a heatwave to the UK: it also brought one in the Far East – and perhaps gave an indication of the problems countries like Japan and China will face in the future. 

The month began with reports that Japan was facing a looming energy crisis, as an economy which is dependent on imports for 90% of its oil and gas battled against a weak local currency, the fallout from the invasion of Ukraine and a heatwave. As Japanese people rushed for the air conditioning, the Washington-based think tank the Centre for Strategic and International Studies said the combination of factors was ‘putting a significant pressure on Japan’s energy security, making this one of the most serious energy crises Japan has had’.

By the end of the month, the same problems were evident in China as a persistent heatwave pushed power demand to record levels in some areas, leading to rolling blackouts. Bloomberg quoted He Yang, director of China’s National Energy Administration, who said increased power consumption would continue into August (traditionally the peak period), with demand already breaking records in July. 

The main news in the Far East, though, was the assassination of former Japanese Prime Minister Shinzo Abe, someone we have featured many times in the Bulletin. On the back of Mr Abe’s death, his centre-right party gained a ‘supermajority’ in elections to Japan’s upper house. 

In economic news, China’s economy contracted by 2.6% in the 2nd quarter thanks to its zero-Covid policy and the long lockdown in Shanghai. However, at the end of the month, President Xi Jinping – speaking at a meeting of the CCP Politburo – confirmed the policy would remain in place. Wuhan subsequently locked down over 1m people over four cases of Covid. 

One of the more interesting developments in China was the ‘homeowners’ revolt’. We have written previously about the problems of the property companies such as Evergrande (which saw its CEO and Head of Finance resign in July) and it was reported that some property companies’ bonds are now trading as low as 35 cents on the dollar. 

That is perhaps unsurprising, with Chinese homeowners increasingly refusing to pay their mortgages on properties which remain unfinished long after the due date. In some cases, these protests have turned violent, and there are obvious problems looming for both the banks and the property companies if the trend continues. 

Another problem which seems to be brewing is youth unemployment. Previously thought to be the preserve of countries like Greece and Spain, unemployment among 16 to 24-year-olds in Chinese cities has now reached 19.3% – more than twice the comparable rate in the US. 

July was a mixed month on the region’s stock markets. Both Japan’s Nikkei Dow index and the market in South Korea were up by 5% to 27,802 and 2,451 respectively. China’s Shanghai Composite index fell 4% to 3,253 while the market in Hong Kong tumbled 8%, to close the month at 20,157.  

Emerging Markets 

We have detailed Russia’s threats to turn off Europe’s gas supplies above. What July unquestionably brought us was signs of much closer ties between Russia, India and China, with both the latter countries increasing their spending on Russian oil in the March to May period, and India explicitly rejecting a call from the EU and US to boycott Russian oil. 

The month also brought a three way meeting in Iran, with Vladimir Putin making his first foray outside Russia since the conflict in Ukraine started. He met the Presidents of Iran and Turkey and, according to reports, there were three items on the agenda: oil and gas; wheat and grain – and missiles and drones. 

It was reported that Iran’s oil revenues had increased by 580% in the first four months of its year (which begins on March 21st), thanks to Russia’s invasion and the sanctions on Russia. Despite the sanctions, you suspect that whatever oil and gas Russia doesn’t sell to Europe will find a home in India or China – with Putin continuing to benefit from the increased prices.  

As regular readers will know, we have written previously about Russia and China – backed by Brazil, India and South Africa – launching a global reserve currency to challenge the dollar. As Russia and China continued to strengthen their economic ties, Vladimir Putin announced: “The issue of creating an international reserve currency based on a basket of our [the BRICS countries] currencies is being worked out.” 

On the stock markets, July was a very good month for India, with the market there rising 9% to close the month at 57,570. The Brazilian market regained some of the recently-lost ground with a 5% rise to 103,165. The Russian market, in contrast, barely moved, gaining just nine points to end the month at 2,214. 

And finally…

Those of you that know your Shakespeare will remember the lines from Hamlet: ‘There are more things in Heaven and Earth, Horatio/Than are dreamt of in your philosophy.’ 

So it is that the ‘And finally…’ section ignites the boosters this month and heads off into deep space, and the apparently ‘colossal, untapped’ wealth waiting for us in the asteroids. 

The asteroid ‘Davida’, which has a diameter of 326km, has apparently been identified as the most valuable asteroid in the belt between Mars and Jupiter, with a resource value estimated at very nearly 27 quintillion dollars. In simple numbers, the value of Davida is $26,990,000,000,000,000,000 – with the asteroid containing nickel, iron, cobalt, nitrogen, ammonia and hydrogen. 

Before we all rush off to the asteroid belt to beat the current cost of living crisis there is, of course, a warning. Astronomers have detected a ‘strange and persistent’ radio signal from a galaxy far, far away that appears to be flashing in a pattern similar to a heartbeat. The signal lasts for up to three seconds – which researchers say is around 1,000 times longer than the average radio signal from space. Maybe we’re not the only ones with designs on Davida.

Coming down to earth with a bump were the franchisees of Vkusno i Tochka (Tasty and that’s it) which has taken over the Russian restaurants formerly known as McDonald’s. 

They’ve run out of fries: a shortage of the right type of potatoes means that there will be no fries until the autumn. So if you’d like a burger, it may be tasty, but that’s very much it as far as the fries are concerned…

Definitely not coming down to earth (for a long time, you suspect) were the England women’s football team. As most readers will know, they beat Germany 2-1 to win the Euros. They also emphatically gave us the best headline of the month. 

Retailers reported that they were fast running out of Lionesses’ football shirts as the final approached, with thousands of fans left disappointed. Or as City AM put it, ‘the kit hits the fan…’ 

November Market Commentary

Wednesday, November 3rd, 2021


October was the month which brought us Chancellor Rishi Sunak’s second Budget of the year. Normally that would make the headlines, but October was also a month when the world gave us plenty to worry about. 

With factors such as rising energy prices and supply chain issues impacting economies worldwide, the UK’s economic outlook may well be heavily dependent on events beyond the Chancellor’s control.

Rishi Sunak had described his Budget as one for a “new age of optimism”: one that would deliver “a stronger economy for the British people”. But in China, the price of coal was rocketing, factory gate prices reached their highest level for 26 years and the country missed all its key economic targets for the third quarter. 

Growth for the July to September period slumped to 2% in the US, and the German government sharply cut its growth forecast for the year, citing “supply bottlenecks and high energy prices”.

There was also plenty of political unrest in the month. Tension between China and Taiwan was described as ‘the worst in 40 years,’ with Chinese leader Xi Jinping issuing a thinly-veiled ‘keep off’ message as he described plans for re-unification as an “entirely internal” matter. 

China fired a hypersonic missile round the world in a move which appears to have taken the US completely by surprise. North Korea sent a ballistic missile into the sea off Japan in a move which surprised no-one at all. And US President Joe Biden told new Japanese Prime Minister Fumio Kishida that the US would defend the disputed Senkaku Islands in the event of an attack by China. The islands – which are uninhabited – are currently controlled by Japan but claimed by both China and Taiwan. 

The month did end with some semblance of global harmony, as world leaders at the G20 summit in Rome endorsed a deal on a global minimum corporation tax rate of 15%, which will be enforced from 2023. 

So another month when there was plenty of news to digest. As always, let’s look at all the details…


As noted above, Rishi Sunak delivered his second Budget speech of the year on Wednesday October 27th. It was, in some ways, a strange speech. As you will know by now, he committed himself to an extra £150bn of spending, with the inevitable higher taxation to pay for it. Then he suddenly changed tack at the end of the speech, talking about a ‘moral challenge’ facing the country, his own dislike of higher taxes and making a pledge to reduce taxation in the future. 

He sat down with Conservative backbenchers enthusiastically waving their order papers, but the Budget split opinion on all sides of the political spectrum. The left described it as a ‘bankers’ benefit’, while the right criticised what it saw as excessive spending and taxation. The Institute of Fiscal Studies made it very clear that the tax burden would continue to increase, stating that there was “clear blue water between now and any time in the past”. Looking further ahead, they saw little increase in household disposable income, which would be “almost stagnant” over the next five years, growing by just 0.8% each year. 

Many business groups also criticised the Budget, with Tony Danker of the CBI saying that the Budget “did not go far enough to deliver the high investment, high productivity economy the Government wants”.

The month opened with the news that business confidence had ‘fallen off a cliff’ in September, as supply chain problems, rising energy costs and the shortage of fuel all combined to drive up prices.

However, there was some good news around in October. Figures for August showed that the economy had grown by 0.4% in the month as more people ate out, went on holiday and – wellingtons at the ready – attended music festivals. 

Government borrowing fell in September: at £21.8bn it was the second-highest September figure on record, but was £7bn less than in September 2020. Inflation in September dipped slightly to 3.1% from the 3.2% recorded in August, although the relief may only be temporary. 

Huw Pill, the Bank of England’s new chief economist, warned that inflation is likely to hit, or surpass, 5% early next year – and said that the Bank had a “live decision” to make on interest rates at its rate-setting meeting on November 4th. The food and drink industry added weight to the argument, with Federation boss Ian Wright telling MPs that inflation is between 14% and 18% for hospitality firms – and that it will inevitably lead to price rises for consumers. 

What of jobs? There were plenty of stories of companies taking on new staff in the month, with Addison Lee, London’s leading private hire firm, looking to take on 1,000 new drivers, which hopefully says something about the economic recovery in the capital. More generally, the Recruitment and Employment Confederation reported in the middle of the month that there were now 2.29m job vacancies, with more than 600,000 being added since the last week of August. The growth has been spread across the country, said the REC, making competition for staff ever more fierce. 

The month ended with two pieces of good news on the jobs front, both centred on the north-east. Envision, the Chinese firm behind Sunderland’s ‘gigafactory’ announced a huge expansion – with the factory’s capacity increasing sixfold – as it looks to bolster its electric battery division. Not to be outdone, Saudi chemicals giant Sabic announced that it was to invest nearly £1bn at its Teesside plant in a move that will create and protect 1,000 jobs. 

The FTSE-100 index of leading shares had a good month, rising 2% to end October at 7,238. The pound was up by a similar amount against the dollar, closing the month trading at $1.3689. 


We mentioned the twin threats of power shortages and inflation in the introduction, and they were certainly in evidence in Europe. 

October started with the news that inflation in the Eurozone had soared to a 13-year high, with figures from September showing inflation had risen to 3.4% from 2% in the previous month, the highest figure since September 2008. 

There was perhaps even worse news to end the month, as the German government cut its growth forecast for the year from 3.5% to 2.6%. Economy Minister Peter Altmaier cited energy costs and problems in the supply chain – especially for semiconductors – as the reason. “In view of the current supply bottlenecks and high energy prices worldwide, the hoped-for final spurt will not happen this year,” he said, before adding that in 2022 “the economy will gain momentum significantly”.

In between these gloomy bookends, there was more bad news for the car industry, which is now threatened by a shortage of magnesium. Europe imports 95% of its magnesium (which is used to strengthen aluminium) from China and, according to Bloomberg, could run out by the end of November, threatening millions of jobs in sectors from the car industry to aerospace and defence. 

There was some consolation for the beleaguered car industry when Volvo (now owned by China’s Zhejiang Geely Holding Group) saw its shares jump from £4.50 to £5.10 on its £13bn debut on the Stockholm stock exchange. The company had hoped to raise £1.7bn from the listing as it gears up to become fully electric by 2030. 

On the political stage, disagreements between the EU and Poland over whose law takes precedence continued. Social Democrat Olaf Scholz remains the favourite to succeed Angela Merkel as German Chancellor, and a new name was whispered for next year’s French Presidential election. Right-wing commentator and essayist Éric Zemmour has not yet officially entered the race, but a recent poll put him ahead of Marine Le Pen as the likely challenger to President Macron. 

Europe’s politicians – and economists – would have ended the month mulling over the latest growth figures for the Eurozone. Figures for the third quarter showed growth of 2.2% in the 19 countries that make up the Eurozone. This was ahead of expectations but inevitably gave rise to worries about further inflation, which was expected to hit 4% for October. 

The region’s major stock markets were, however, in an optimistic mood. Germany’s DAX index shrugged off any worries with a 3% rise to 15,689 while the French stock market did even better, gaining 5% in the month to close at 6,830. 


As we reported last month, September was a poor month for US stock markets, with the Dow Jones index falling 4% and the S&P 500 down 5%, in what was the markets’ worst month since March 2020. 

October saw them regain the lost ground – and more – in a month which brought us the third quarter figures from the major tech companies. While they reported some very large numbers, however, third quarter growth for the wider US economy was down to just 2% (from 6.7% in the previous quarter) in the face of supply chain problems, rising inflation and further Covid restrictions in some states. 

The month started with the news that the US had added a disappointing 194,000 jobs in September, although the unemployment rate fell from 5.2% in August to 4.8%. There are currently 7.7m people out of work – a significantly higher number than before the pandemic. 

Electric car maker Tesla was much in the news. It revealed record quarterly sales and profits for the third quarter: revenues rose to $13.76bn (£10.05bn) as it sold more than 240,000 cars, with profits rising to $1.6bn (£1.18bn). A deal to sell 100,000 to Hertz saw the share price leap and made Tesla the fifth company to reach a $1tn (£730bn) valuation. 

Google, of course, has already reached that landmark and announced a third straight quarter of record profits. Revenues for the July to September period were ahead of Wall Street expectations at $65.5bn (£47.8bn) with the company reporting a net profit of $18.9bn (£13.8bn). 

Facebook posted profits of $9bn (£6.6bn) for the period, although the row over leaked documents and unethical behaviour from the company rumbled on. Facebook also announced that henceforth its holding company would be known as Meta – reflecting Mark Zuckerberg’s commitment to developing the Metaverse, the virtual reality future he seems intent on steering us all towards. 

The name ‘Meta’ apparently comes from the Greek word for ‘beyond.’ It’s also the Hebrew word for ‘dead.’ Let’s hope it is the former Mr Zuckerberg is steering us towards…

The only one of the tech giants to disappoint the market was Apple, whose shares fell 5% after its third quarter earnings – despite being a record and 29% up on last year – were around a billion dollars short of expectations. Unsurprisingly, boss Tim Cook blamed supply chain issues and the continuing shortage of semiconductor chips. 

The fall in Apple’s share price was good news for fans of Microsoft, which duly reclaimed the title of ‘world’s most valuable company.’ 

…And Wall Street was much more Microsoft, Tesla and Google than Apple, as US stock markets more than made up the ground lost in September. The Dow Jones index climbed 6% to close October at 35,820, while the more broadly-based S&P 500 index was up 7% to 4,605. 

Far East 

Let’s start off where we ended last month – with the problems at Chinese property giant Evergrande. As you may remember, the company has hundreds of billions of dollars of debt and reportedly owes money to 171 domestic banks and 121 other financial firms. September ended with the company missing a £35m interest payment to foreign bondholders – the second missed payment in a week – and throughout the month, the company’s share price lurched up and down, depending on whether a payment had been made or missed. 

By the end of the month, the company chairman was apparently putting his own house up as collateral and – as we reported in October – bankers UBS estimate there are ten property developers in China with combined debt nearly three times the size of Evergrande. 

To property add panic. We have reported elsewhere in this Bulletin on rising prices for both raw materials and energy. Nowhere was that more keenly felt than in China. 

By the middle of the month, the price of coal had reached a record high, increasing by 10% in one day as flooding hit one of the country’s key mining areas. The impressively-named National Development and Reform Commission said that in view of the shortages the price of electricity generated by coal would be allowed to rise and fall by 20% (compared to a previous upside limit of 10% and a lower limit of 15%). 

Quite what that does for planning and cash flow in Chinese industry is anybody’s guess, and it was no surprise to see another surge in factory-gate prices. In September, they grew at their fastest rate for 26 years, adding to worries about both local and global inflation. 

Unsurprisingly, Goldman Sachs – which a month ago said that China would have zero growth in the third quarter – cut its growth forecast for the year from an already low 5.8% to just 5.4%. 

Goldman Sachs was wrong – but not by much. Official figures confirmed that the economy grew by 0.2% in the third quarter compared to the previous three months. Year-on-year, it was up by 4.9% compared to the third quarter in 2020, against a generally expected figure of 5%. Perhaps more worryingly, industrial output in the third quarter was up by just 3.1% against a forecast of 3.8%. 

There were no such worries for HSBC, which smashed expectations for profits in the third quarter, boosted by the release of reserves that had been set aside to cope with expected pandemic-related defaults. Analysts had forecast profits to come in at $3.78bn (£2.76bn): HSBC sailed past that, posting pre-tax profits for the three months of $5.4bn (£3.94bn). 

The region’s stock markets, however, largely took their cue from worries about inflation and energy prices, with the exception of Hong Kong’s Hang Seng index, which rose 3% to 25,377. China’s Shanghai Composite index fell 1% to 3,547, while the Japanese stock market was down 2% at 28,893. South Korea was the worst performer, with the market there down 3% in the month to 2,971. 

Emerging Markets 

We have mentioned power shortages already and they will almost certainly be mentioned again in the coming months. The Emerging Markets section of the Bulletin is no exception – but let us start with a story that sounds like something a James Bond villain would envy. 

El Salvador, as regular readers know, became the first country in the world to accept Bitcoin as legal tender. The country’s President took to Twitter in October to announce that the country had begun ‘mining’ Bitcoin using power harnessed from a volcano. President Nayeb Bukele said: “We are still testing and installing, but this is officially the first Bitcoin mining from a volcano.” He confirmed that the project had started by generating 0.00599179 of a Bitcoin, worth approximately £208. So there may be some way to go…

Rather more seriously, India is on the brink of an unprecedented power crisis, with more than half the country’s 135 coal-fired plants ‘running on fumes’ as coal stocks run critically low. 70% of India’s electricity is generated using coal, with the shortage threatening to derail the country’s economic recovery from the pandemic. 

Like many countries, demand for power has picked up sharply in India as the country has come out of the pandemic, with consumption in the last two months up 17% on the same period in 2019. India is the world’s second largest importer of coal, so will be badly hit by global price increases. 

For now this wasn’t reflected on the Indian stock market, which had a relatively quiet month, closing October unchanged in percentage terms at 59,307. The Russian market gained 1% to end at 4,150 but it was a poor month in Brazil, where the stock market fell 7% to finish at 103,501. 

And finally…

The ‘And finally…’ section of the Bulletin has brought you many heroes over the years and this month we must induct another into our Hall of Fame. Step forward Danish artist Jens Haaning, who was given $84,000 (£61,000) by the Kunsten Museum of Modern Art in Aalborg to create a work of art for a forthcoming exhibition. 

After receiving the money, Haaning e-mailed the exhibition’s curator saying that he had changed his mind. He duly delivered a blank canvas to the Museum, which he had titled ‘Take the Money and Run.’ He then kept the money. Many of our readers might see it as a suitable comment on modern art…

Doing rather less well in the monetary stakes was California man Mauro Restrepo. Mr Restrepo’s marriage was in trouble, apparently due to a curse placed on it by a witch hired by his ex-girlfriend. Seeking a solution, Mr Restrepo Googled ‘psychics’ and contacted Sophia Adams, a ‘psychic love coach’. Suitably convinced, Mr Restrepo handed over $5,100 (£3,700) to save his marriage. You won’t be surprised to hear that the matter is now with the lawyers…

Finally this month, we make the short trip to Ireland, where new rules to combat the spread of Covid have come into force. These now mandate the wearing of masks in nightclubs, but not when you are drinking or dancing. We can’t help but wonder exactly what else people are meant to be doing in a nightclub, if it’s not drinking or dancing!

Perhaps Mr Restrepo should have taken his wife to one. It would certainly have been cheaper than finding a psychic love coach on Google…

October Market Commentary

Wednesday, October 6th, 2021

You will no doubt be aware that September was a month when shortages dominated the headlines. As we will see below, it was by no means a problem confined to the UK: sadly it does not look like a problem that will quickly disappear. We have, for example, written previously about the shortage of semiconductor chips which has hit car production around the world. In September the boss of Daimler suggested that this could last through 2022 and “into 2023.” 

September was also a month when global diplomacy, and its possible implications for trade, reared its head. Chinese jets flew into Taiwan’s air defence zone and North Korea launched a test cruise missile into the Sea of Japan. Most significantly, the US, UK and Australia signed the AUKUS deal, allowing Australia to receive nuclear powered submarines. 

Predictably China criticised the deal as a “threat to stability” in South East Asia, and France was said to be outraged after losing the contract to build the submarines. Any Australia/EU trade deal will now not happen until next year at the earliest.  Despite talks between Boris Johnson and Joe Biden, a UK/US trade deal also looks unlikely at the moment, with the US President saying, “We’re going to have to work that through…” 

September saw the oil price rise above $80 for the first time in three years and, perhaps unsurprisingly, it wasn’t a good month for world stock markets, with the majority of those we cover in the Bulletin falling in the month. 

As Joe Biden might say, let’s “work through” all the details…


When he was Chancellor of the Exchequer, George Osborne seemed to preface every Budget speech by reminding us that the UK was only a small part of the world economy. Whatever action he took, events elsewhere could easily render it irrelevant. September, and perhaps the months running up to Christmas, may well be a period when Osborne’s Law holds true. Supply-chain problems have caused shortages, whether that is on the supermarket shelves or at the petrol stations. As City AM reported, the shortages also “clamped down on UK manufacturing growth.”

Where you put the blame for the shortages may well depend on your political point of view but, as we report below, supply-chain issues are not a problem confined to the UK, and the power shortages in China may make the position worse, and push up prices, around the world. 

Away from the headlines about shortages there was the usual mixture of good and bad news. In the middle of the month it was reported that the UK economy grew at the fastest rate of any of the G20 countries in the second quarter, with growth of 4.8% between April and June. By the end of the month this figure had been revised upwards to 5.5%. The ratings agency Fitch has predicted that the UK economy will grow at 6.6% this year which is well ahead of the forecast from the Office for Budget Responsibility. 

The UK has applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and September brought the formal start of the talks. The CPTPP is a $9tn (£6.7tn), 11 country trading bloc. Donald Trump famously withdrew the US from the agreement but, as we report below, China has now applied to join it. 

Much of the work on the UK’s application to join the CPTPP was done by Liz Truss when she was International Trade Secretary. In September’s re-shuffle she became Foreign Secretary, with Anne-Marie Trevelyan taking over her previous role. 

The Government was in the news for much more than a reshuffle in September, as it broke two manifesto commitments, increasing national insurance to pay for social care and temporarily suspending the triple lock on pensions. 

The end of September brought the end of the furlough scheme, the Coronavirus Job Retention Scheme to use its full title, which will unquestionably see some workers lose their jobs. The BBC reported that approximately 1m workers were still on the scheme as it ended. 

That said, job vacancies went past the 1m mark in September, and there are plenty of stories of companies, including Amazon, offering inducements as they look to recruit temporary staff for the Christmas period. 

Let us end the UK section where we began it, with the Chancellor of the Exchequer. Rishi Sunak will present his second Budget of the year on October 27th. What was a difficult task in March looks even tougher eight months on, as he tries to keep the recovery going and start to pay the Coronavirus bill. He will also need to keep a lid on inflation, which reached 3.2% in August as food prices rose, and has been forecast to reach 4% by the end of the year. 

For now the Bank of England is saying it does not expect any interest rate rises, to counter inflation, this year. Any rate rises would, of course, push up the cost of servicing the Government’s debt. Borrowing in August was higher than expected at £20.5bn, down on the same month last year but still the second-highest August figure on record. 

The FT-SE100 index of leading shares had a relatively quiet month. Having started September at 7,120 it ended the month down just 34 points at 7,086. The pound was down by 2% against the dollar, closing at $1.3458. 


September got off to a positive start in Europe, with Ryanair predicting a rapid rebound in air travel and revealing that it had beaten its forecast numbers for August. 

Wizz Air announced similar figures, with passenger numbers up more than 50% in August to around 3.5m. However, passenger numbers were down 44% for the twelve months to August, illustrating the long shadow the pandemic still casts over the travel industry. 

The main story in Europe, though, was the German General Election, held on September 26th. Having stepped down as leader of the Christian Democrats (CDU) in March 2018 Angela Merkel had made it known that she would not be seeking a fifth term as Chancellor, leaving new leader Armin Laschet as the party’s candidate. 

Opinion polls throughout the campaign did not make good reading for the CDU. The Social Democrats (SPD) topped the poll with 25.7% of the vote and a provisional 206 seats in the Reichstag, with the CDU on 24.1% and 196 seats. With 368 seats needed to form a government there could, in theory, be a CDU/SPD coalition. However, at the time of writing both Laschet and SPD leader Olaf Scholz are claiming that they will be able to form a government and a three way coalition made up of one of the main parties, the Greens (who came third with 14.8% of the vote) and the pro-business Free Democrats (who came fourth) looks much more likely. 

Like other major economies around the world Germany is suffering supply-chain problems and shortages in the wake of the pandemic. What it emphatically does not need is a prolonged period of paralysis while a new Government is formed. 

Germany is also facing worries about inflation and demand for gold coins and gold bars in the country has reached its highest level since 2009. According to the World Gold Council demand for coins and bars in Germany was up by 35% in the first half of the year, compared to a rise of 20% for the rest of the world. 

While Germany was preparing to go to the polls Europe as a whole was reacting to the AUKUS submarine deal, with France predictably outraged. It now looks as though any trade deal between the EU and Australia won’t happen until after the next French elections, due to be held in April next year. 

The EU also unveiled a new strategy for boosting economic, political and defence ties in the Indo-Pacific region in the immediate aftermath of the AUKUS deal. The aim of the strategy is to “strengthen and expand economic relations, help partners fight and adapt to climate change and boost co-operation on healthcare.” Make of those grand ambitions what you will!

There was definitely no grand ambition on Europe’s major stock markets in September. The German DAX index was down 4% to close at 15,261: the French stock market fell back 2% to end the month at 6,520. 


The US, like every major economy, has had its share of good and bad news as it recovers from the pandemic. But is the bad news starting to outweigh the good? 

The month began with disappointing news on employment, with the US economy adding just 235,000 jobs in August, well down on the 1.05m created in July. The unemployment rate did fall, from 5.4% to 5.2% but the jobs figures, combined with a decline in consumer confidence, prompted several banks to cut their forecasts for US GDP growth in the third quarter. Morgan Stanley did not so much cut their forecast as slash it, reducing it to 2.9% from a previous 6.5%. Goldman Sachs cut its forecast from 5.5% to 3.5%. 

The other worry, which it shares with every major economy at the moment, is inflation. Prices rose again in August to take consumer price inflation on a year-on-year basis up to 5.3%. 

There was, though, some good news. The US manufacturing sector strengthened, largely driven by an increase in new orders. The Purchasing Managers’ Index rose from 59.5 in July to 59.9 in August. The housing sector remained strong, with one index measuring US house prices showing a 19.1% annual increase in June 2021. 

The US Federal Reserve was certainly in the glass half full camp, saying in a statement that the US economy was continuing to strengthen, that the jobs market was improving and that “currently high levels of inflation remain transitory.” In the accompanying press conference Jerome Powell, Chairman of the Fed, gave a clear indication that the central bank would start to reduce its economic stimulus measures later this year. 

None of the above, of course, mattered to the good ship Amazon, which continued to sail merrily along. September brought the news that it would need to recruit another 55,000 people, to add to the 1.3m it already employs worldwide. That’s roughly equivalent to the population of Estonia. 

This was in stark contrast to the “old economy,” with GM announcing that it would halt production at most of its US plants in September, as the shortage of semiconductor chips continued to hit carmakers. Ford and Toyota also reduced production during the month. 

The Federal Reserve may have had its glass half full in September, but for Wall Street it was very much half-empty. The Dow Jones index fell 4% to end the month at 33,844 while the more broadly-based S&P 500 index fared slightly worse, dropping 5% to 4,308. 

Far East 

There has been so much news in the Far Eastern section of the Bulletin this month, especially with regard to China, that it is difficult to know where to start. 

Perhaps the most appropriate place is at the end of the month, when Goldman Sachs became the latest bank to cut its growth forecast for China, as the country continues to struggle with energy shortages. Having previously forecast that the Chinese economy would grow by 8.2% this year, the bank is now forecasting growth of 7.8% following estimates that up to 44% of China’s industrial activity has been adversely affected. 

Perhaps even more significantly, the bank is forecasting zero growth for the third quarter, citing a ‘perfect storm’ of increased regulation, tight global energy supply, surging coal prices and a crackdown on carbon. China’s “factory gate inflation” is the highest it has been for 13 years, due to a shortage of raw materials. 

The other major story was Evergrande, the Chinese property company which was ranked the most valuable real estate company in the world in 2018. It now has hundreds of billions of dollars of debt and, according to one source, owes money to 171 domestic banks and 121 other financial firms. 

There are real worries as to whether Evergrande will be able to meet its debt repayments. Will the company be bailed out by the Chinese government? Is it “too big to fail?” We may not have to wait long to find out, by the end of the month Evergrande was selling assets to meet debt repayments and reportedly missing a payment of £35m to foreign bondholders due on the 29th. Angry investors in the company have apparently moved on from simply protesting outside the company’s headquarters to taking senior management hostage. One executive in the south eastern province of Jiangxi was blockaded in his office by 300 protesting investors. They were described by one publication as having gone “full pitchfork.” 

More worryingly, perhaps, bankers UBS estimate that there are ten property developers in China with combined debt nearly three times the size of Evergrande. 

In previous Bulletins this year the words “Chinese authorities” and “crackdown” have frequently appeared in the same sentence. September was no exception as the country’s National Radio and Television Administration trained its sights on “vulgar influencers” as they pursued Xi Jinping’s stated goal of common prosperity. The general clampdown on online games, and the time spent playing them, also continued. 

At the end of the month China’s central bank made the move it seemed to have been edging towards for some time, when it announced that all transactions of crypto-currencies, such as Bitcoin, would be illegal. Such transactions, it said, “seriously endanger the safety of the people’s assets.”

We have commented above on the UK’s continuing application to join the CPTPP. The day after the UK, the US and Australia announced the AUKUS pact China duly applied to join the CPTPP, a move which many analysts saw as a bid to leave the US increasingly isolated on the world stage.  

September proved to be a very mixed month for the region’s stock markets. The Japanese Nikkei Dow index was up 5% to end the month at 29,453. China’s Shanghai Composite index managed a gain of just 1% to 3,568 while the South Korean market went in the opposite direction, falling 4% to 3,069. Hong Kong’s Hang Seng index seemed to bear the brunt of the worries about Evergrande and the possible slowdown in China, falling 5% in the month to close at 24,576. 

Emerging Markets 

September was an unusually busy month for news in the Emerging Markets section of the Bulletin. El Salvador, not a country we have previously covered, became the first country in the world to accept the cryptocurrency Bitcoin as legal tender. 

As we reported above, China has now made cryptocurrency transactions illegal as it trials a digital yuan. However it may well be that smaller currencies opt to go down the Bitcoin route, with Ukraine expected to make it legal tender by 2023. 

Despite a second wave of the pandemic the Indian economy rebounded sharply, with figures for the three months to June showing growth of 20.1%, compared to a drop of 24% in the same period last year. 

Elections were held in Russia, with United Russia, the party that supports Vladimir Putin, winning 315 out of 450 seats in the Duma. No surprise there, but what was striking was the very low turnout in the election, with many constituencies having turnout well below 40%. 

The month ended with the BBC reporting that Afghanistan’s banking system was close to collapse, with international aid to the country having dried up since the Taliban took power. 

On the stock markets, September was a good month for both the Russian and Indian markets. Russia’s stock exchange rose 5% to close at 4,104 while the market in India was up 3% to 59,126. The Brazilian stock market went sharply in the opposite direction, ending the month down 7% at 110,979. 

And finally…

You may well remember the Ever Given, the giant container ship which blocked the Suez Canal for six days earlier this year and was subsequently blamed for all manner of shortages including garden gnomes. 

Now comes news of a fully autonomous ship, based in Japan, which is about to face its first real test as it sets out on a 236 mile journey. Ultimately, Japan hopes that half of its ships will be piloting themselves. Clients may remember the fully autonomous security guard robot which drowned itself in a fountain. The hotel which replaced those irritating, unreliable staff with robot waiters, and had to hastily backtrack. Fully autonomous ships roaming the world’s oceans, what could possibly go wrong? 

September was unquestionably robot month. Amazon launched Astro, the home robot. Or, as it has already been dubbed, “Alexa with wheels. Staying on the subject, there is good news for any reader whose football team may not have made the best start to the current season. Founded by a group of robotics scientists, the Robot Soccer World Cup AKA the RoboCup, has set itself an ambitious target. The aim is that by the middle of the century a team of robot footballers will beat the most recent winners of the real World Cup. 

The robots use artificial intelligence to make decisions such as whether to pass or shoot. There you are, the term “midfield dynamo” could take on a whole new meaning…

Lockdown last year brought us any number of tales of people doing what can only politely be described as unusual activities. An Italian gentleman ran a full marathon round his dining room table, a chap in Cardiff was stopped by the police as he wandered round a local beauty spot in medieval armour and carrying a toy sword. Now comes news from Indonesia, where Agus Widanarko is apparently bringing joy to those isolating in Central Java province by dressing as “Super-isoman”. Donning a Spider-Man costume, with an extra mask for safety, Agus has been providing entertainment to children who have been in self-isolation. Truly an effort to marvel at. 

4 Key takeaways from the Spring Statement

Wednesday, March 20th, 2019

The Spring Statement is an opportunity to hear the latest updates on the state of the UK economy and what to expect of its growth over the coming months and years. With most people setting their focus firmly on the amorphous hokey-cokey of Brexit negotiations, it’s something of a breath of fresh air to take a moment to look at concrete upcoming strategies and measurable realities.

With that in mind, here are 4 key points you can hang your hat on while what’s on or off the table continues to be debated in the background.

1) Taxes, Taxes, Taxes

Employment is up and that means more tax receipts for the Government’s coffers. 2018 ended with 440,000 more people in work than 12 months prior, with 60,000 fewer people relying solely on zero-hours contracts. Government borrowing fell in January to the lowest we’ve seen since 2001 and £21bn of income and corporation tax was raised, leaving a healthy monthly surplus of £14.9bn.

2) Even more taxes

The Making Tax Digital scheme is set to come into effect on April 1st 2019. Looking at it broadly, it’s an effort to modernise the tax system. The first step comes in the form of mandatory digital record keeping for VAT, for those businesses which find themselves above the VAT threshold. It’s undoubtedly a strong example of intent for the future.

3) You guessed it… taxes

No Safe Havens is an initiative that was introduced in 2013 to crack down on those who seek to evade their tax through hiding their income and assets overseas, and those who advise them on how to do so. The Spring Statement brought with it a declaration of further commitment to this cause by investing in the latest technology and enforcing tough new penalties while, at the same time, making sure it’s easy for law abiding taxpayers to handle their tax correctly.

4) Growth is good

Okay, it’s not all about taxes. The Office for National Statistics’ January figures demonstrate the UK Economy has grown to the tune of 0.5%, blowing the economists’ predictions of 0.2% out of the water with the biggest monthly increase we’ve seen since 2016. Construction saw notable growth of 2.8%, with the service sector up 0.3% and manufacturing up 0.8%. We saw inflation fall to 1.8% in January and the general consensus is that we can expect to see UK growth of between 1.3% and 1.4% this year.

That’s your breath of fresh air over. You can get back to talking about Brexit now. If you have any questions surrounding any of these topics or the Spring Statement in general, please feel free to get in touch with us directly.

IR35, the biggest Budget revenue raiser

Thursday, November 8th, 2018

Extra money for Brexit and the NHS, changes to growth and debt forecasts, changes to tax thresholds and a new ‘digital services tax’. These have been the points which have received the most media attention from the autumn Budget. Another important announcement, however, has predominantly slipped under the media radar and failed to become a major ‘talking point’ from the new budget. Hammond announced an IR35 tax clampdown that will have a huge affect on contractors and freelancers who operate in the private sector. Rules which already apply to the public sector will be extended to the private sector in 2020, with the exception of small businesses.

The reforms mean that self employed people could end up paying more tax.

Private sector companies with over 250 employees will now have an obligation to check whether they are using any contractors who should be paying tax. The aim of these changes is to clamp down on self employed workers who should really be treated as employees, but work through a third party.

In reality, these changes don’t mean that IR35 is being applied to the private sector for the first time. Rather, it just means that the burden of responsibility to pay the right amount tax shifts from the subcontractor to the company.

In the private sector, relationships with freelancers are generally more complex than in the public sector where the rules already apply. There are fears that the changes will have a negative impact on genuinely independent contractors.

The new IR35 rules could reduce a subcontractor’s annual income by as much as 25% when extra income and National Insurance contributions are taken into account.

What’s more, some subcontractors are worried that the changes will deter public sector firms from employing them. They think that the risk of facing a large tax bill at a later date will prevent firms employing freelancers, even if it is just for genuine sub-contractual work. The fact remains that employers could face serious consequences if they misidentify a worker as an employee or self employed.

The Treasury estimates that the change in rules will earn the taxpayer an extra £1.2 billion by 2023. An extra £410 million has already been raised since rules were introduced in the public sector in April 2017. This is a similar figure to the amount that the new ‘digital services tax’ is expected to raise.

July market commentary

Wednesday, July 18th, 2018

Let us invite you to travel back in time to June 2016, to the day after the Brexit referendum. Meanwhile, across the Atlantic, campaigning in the US Presidential election is in full swing.

You are offered two glimpses into the future. The first is that two years on, the UK has apparently made no real progress in the Brexit negotiations. The second is that Donald Trump has been elected President and has had a successful meeting with Kim Jong-un. You would have dismissed both of them as ridiculous and yet that is exactly what June brought us, as Theresa May called yet another Brexit crisis meeting and President Trump met the leader of North Korea in Singapore.

…And then the President went on to announce a raft of tariffs on imported goods – from both China and Europe – which may well see the threatened global trade war develop. Both China and the EU were swift to announce retaliatory tariffs, and (unsurprisingly) June was a month in which none of the major stock markets we cover managed to gain any ground.

June was also another bad month for the virtual currency Bitcoin. The price has been in steady decline over the last two months and, over the weekend, stood at $6,369 (£4,822). There were two main reasons for the fall as the South Korean cryptocurrency exchange Bithumb revealed that it had lost 35bn won (£24m) in a cyber-attack, and governments and regulators around the world – the US Securities and Exchange Commission is the latest – made ominous noises about cutting down on Bitcoin fraud.

In what is surely a sign of things to come, the Canadian province of Quebec halted approvals for Bitcoin mining as it worried about being able to supply electricity to the province.

Sadly, the big story in the UK in June is one which has been written about often in recent times – the continuing decline of retail and the national high street. On the morning of Monday July 2nd, both the Mirror and the Daily Mail led with ‘the battle to save Britain’s high streets’.

Can anything be done? June brought us almost uninterrupted sunshine, and it may well be that the retail figures – like those for May – will show a rebound from the depressing figures disclosed in the Spring. The Mail is reporting that 50,000 retail jobs were lost over the last six months and is calling for an urgent review of ‘crippling business rates’.

Even that may not be enough: the simple fact is that it is easier, quicker, more convenient and cheaper to shop online. Even Costa is starting to struggle, reporting a 2% fall in like-for-like sales in the first three months of the year, which it blamed squarely on a lack of shoppers.

The long term trend was neatly captured by the problems of House of Fraser. On June 4th, it ‘rejected talk of a collapse’: three days later it was announcing that 31 of its stores would close. With M&S also planning a programme of store closures, Debenhams issuing constant profit warnings and 60 bank branches closing every month, the UK high street increasingly looks like it could be an idea whose time has passed.

But let us try and find some good news…

June was a good month for the economic numbers in the UK. Unemployment was down, falling by 38,000 between February and April, and the number of people in work rose to a record 32.4m – up 440,000 on the previous 12 months. That said, wage growth slowed again, so it is to be hoped that inflation does not also start to rise, otherwise we will be back in the realm of falling real wages.

The UK also earned the unofficial title of tech ‘unicorn’ capital of Europe. For those of you that don’t know the term, a ‘unicorn’ is a tech start-up valued at more than $1bn (£757m). The UK is home to 37% of the continent’s ‘unicorns’ and, according to a report for London Tech Week, is the number 1 destination for Europe’s top tech talent.

Rather more mundanely, the Bank of England voted to hold interest rates at their current level, but it is looking increasingly likely that base rates will rise to 0.75%, possibly as early as August.

The month ended with MPs voting overwhelmingly for the expansion of Heathrow airport – but do not expect the diggers to move in for a few years. The move will be widely challenged in the courts by local and environmental campaigners.

Finally, what of the UK stock market? The FTSE 100 index of leading shares had a quiet month. It started June at 7,678 and fell by just 41 points to end the month at 7,637. And it is down just 51 points for the year as a whole, having started 2018 at 7,688.

The pound was also down slightly against the dollar, falling from $1.3299 to $1.3211.

As noted in the introduction, June brought us the second anniversary of the vote to leave the EU but we remain no closer to knowing what the final shape of Brexit will be. Airbus and BMW made veiled warnings about the consequences of ‘no deal’ but with Theresa May’s cabinet still squabbling about the shape of the eventual customs partnership, that exact outcome appears to be looking ever more possible.

At the time of writing, the newspaper headlines are telling us that this month’s meetings will be ‘make or break for May’, although it would not be a surprise to see that, once again, a last minute compromise will be cobbled together and that this time next month we will still be no further forward.

The Italian coalition government has survived its first month in office, even giving an impression of normality as new finance minister Giovanni Tria said that the government was “clear and unanimous” in its decision to remain in the Eurozone.

The main news in Europe was the decision of the ECB to end its huge programme of bond-buying which was introduced in a bid to stimulate the economy of the Eurozone. In a statement, the ECB said that it would halve the current scheme – worth €30bn (£26.6bn) a month – after September “as long as the data remained favourable” and end it completely in December. ECB President, Mario Draghi, acknowledged that Eurozone growth had stuttered recently, but was adamant that the underlying growth “remained strong”.

There was big news for jobs in the steel industry as German industrial group Thyssenkrupp signed a deal with Tata Steel to combine the two companies’ European businesses. The new company will be headquartered in Amsterdam and will have a total workforce of 48,000 – but there are fears of up to 4,000 redundancies.

There could be one more redundancy as well… It is hard to escape the feeling that we are approaching the end of Angela Merkel’s time as German Chancellor as key ally Horst Seehofer, the interior minister, threatened to resign over her immigration policy. In Turkey, Recep Erdogan won a new five year term as president, with some commentators arguing that it effectively spelled the end of the country as a democracy.

On the stock markets, the German DAX index ended June down 2% at 12,306, while the French index was down just 1% at 5,324. At the halfway point in 2018, the German index is down by 5% for the year as a whole, while the French index has risen by just 11 points.

Threatened trade war or not, the US announced better than expected data on jobs as unemployment fell to an 18 year low. Forecasters had been expecting 190,000 jobs to be added in May, but that figure was comprehensively beaten as the economy added 223,000 jobs in the month.

As had been expected, the US Federal Reserve announced a rise in interest rates, moving the target rate up from 1.75% to 2%, and going so far as to forecast a further two rate rises this year, reflecting the strength of the US economy. It is the seventh time that rates have been increased since 2015 and takes them to their highest level since 2008.

In company news, there was more gloom for Facebook as it wrestled with yet another ‘privacy bug’ – this time affecting the data of 14m people. And there was bad news for Google as the EU announced that it would fine the company up to $11bn (£8.33bn) over the dominance of its Android system.

Tesla, Elon Musk’s car making company, announced that it would cut 9% of its workforce – mostly ‘salaried employees’ – as it bids to finally make a profit. The company employs 37,000 people and has never made a profit in the 15 years it has existed.

“Profit is not what motivates us,” Musk posted on Twitter. Wall Street does occasionally like to see companies making a profit, but it was a quiet month for the Dow Jones index, which drifted down 1% to close the month at 24,271. Looking at the year as a whole, it is down 2% from its opening level of 24,719.

Far East
China seems well on course to become the world’s most influential economy as the One Belt, One Road infrastructure project continues to extend its influence through Africa and towards Europe, with Chinese leader Xi Jinping committed to creating ‘a paradigm of globalisation that favours China’. The country is now the world’s second largest consumer of crude oil, with 25% of the imports coming from Sudan and the Gulf of Guinea.

For this month though, it was a disappointing performance from China’s Shanghai Composite Index which fell 8% to close at 2,847. Hong Kong followed Shanghai’s example, falling 5% to 28,955 and the South Korean market was down by 4% to 2,326. The Japanese market was more or less unchanged in the month, moving up very slightly to 22,304.

Unsurprisingly, given the threat of a trade war, all four markets are down over the first six months of the year. The Chinese market leads the way with a fall of 14%: South Korea is down 6% and the Hong Kong and Japanese stock markets are down by 3% and 2% respectively.

Emerging Markets
Could North Korea one day feature in this section of our report? It seems that these days the only way to predict the future is to think the previously unthinkable. Kim Jong-un is 34 (or 36, depending on which ‘official’ source you believe) and it is not hard to see him one day taking North Korea down a similar road to China while maintaining rigid state control of the economy.

For now, though, we will look at only the usual suspects – India, Russia and Brazil. The first two saw their stock markets largely unchanged in June, closing at 35,423 and 2,296 respectively. The Brazilian market was down 5% at 72,763. For the first six months of the year, Russia – with future tourism surely buoyed by a successful World Cup – has seen its market rise by 9%, the Indian stock market is up 4% but the Brazilian index is down by the 5% it fell in June.

And finally…
Sadly, the high street seems to be taking a further thumping from consumers as newspapers report that supermarket groups are ‘losing millions’ as ‘cunning shoppers’ buy expensive items such as avocados and put them through the self-service tills as cheaper items like carrots.

It sounds like there is a gap in the market for an app which tells you how many 60p per kg. carrots weigh the same as a £1.50 ready-to-eat avocado…

New shopping techniques aside, a shortage of CO2 (carbon dioxide) was also making the news. It turns out that CO2 is not just something you vaguely remember from school, but a vital component in the food and drink industry.

It is used to add the ‘fizz’ in beer and fizzy drinks, and to extend the shelf life of meat and other food products. Scotland’s biggest abattoir has closed and Asda rationed the supply of fizzy drinks to online customers.

There are also real fears that there could be a beer shortage this summer as Europe continues to struggle with the CO2 shortage and “beer crazy football fans” threaten to drink Russia dry during the World Cup.

But things can always get worse – and back in the UK we could now be facing a shortage of… lettuce. The heatwave has apparently boosted demand for lettuce but – according to the brilliantly-named British Leafy Salad Growers Association – the soaring temperatures have stopped the crop growing. Broccoli and cauliflower crops have also been affected and the shortage could hit the supermarket shelves as early as this week.

Expect the Iceberg Lettuce to replace Bitcoin as the new default currency of the internet. Maybe it’s time to get out there and plant lettuce in the back garden… or perhaps instead you should be considering a crop of avocados…

May market commentary

Thursday, May 3rd, 2018

It looked for a long time that the main headline for this commentary would be the opening salvos in a trade war between China and the USA. The International Monetary Fund published a bullish report on world trade, saying that global growth will hit a 7 year high of 3.9% this year – giving a stark warning at the same time that trade risked being ‘torn apart’ by a protracted trade war.

But then came the news of North Korean leader Kim Jong-un’s, historic visit to South Korea and his meeting with President Moon Jae-in. There followed a bromance which would have been impossible just a few months ago, and a commitment to rid the Korean peninsula of nuclear weapons. The meeting would have been unthinkable at the beginning of the year when North Korea was boasting of being able to reach the US mainland with its rockets: now Pyongyang says it will invite US observers to witness the shutdown of its nuclear site in May.

By the end of the month even the China/US threats and counter-threats seemed to have receded a little and most of the major stock markets which we cover made up losses suffered early in the month on fears of a trade war. There was, however, one significant fly in the ointment as the price of oil continued to climb: Brent crude went past $72 a barrel in light of the continuing troubles in Syria and the instability in the region.

Let’s start the UK section with some really good news: 2017 was a record year for the UK wine industry, as figures showed 64% more bottles of UK-made wine reached the market than in 2016. The Wine and Spirit Association said the industry was reaping the benefits of ‘huge’ investment over the last decade.

…But if April brought good news for wine, it brought yet more bad news for retail as the wet Easter proved a washout for the UK high street, following the bad weather which kept shoppers at home in March. Carpetright announced the closure of 92 stores – and you have to think that the merger of Asda and Sainsbury’s, announced at the end of the month, will ultimately lead to store closures and job losses. There have been plenty of warm words from both sides but it is hard to see that the merger can be good for jobs or, in the long term, for consumers as the number of big supermarket groups in the UK reduces from four to three.

We have commented above on the IMF forecast for world trade: that same forecast included a prediction that UK growth this year would be 0.1% higher than originally thought at 1.6%. HSBC also predicted that UK exports would rise this year by their fastest rate since 2011.

Other numbers for the UK made mixed reading: a slowdown in construction and the effects of the ‘Beast from the East’ meant that UK growth in the first quarter of the year was just 0.1% – the lowest figure since 2012. Mortgage lending was also down, as figures for March showed it falling 2.3% to £20.5bn.

There were some positive figures: wages finally climbed above inflation as the year long squeeze on pay showed signs of ending earlier than expected, and unemployment fell to 4.2% – its lowest level since 1975. And London was voted the world’s top financial centre, finally climbing above New York for the first time in five years.

The vote was presumably taken without reference to TSB: April ended with TSB taking the phrase ‘banking chaos’ to a whole new level. The bank upgraded its systems – inevitably in order ‘to improve customer service’ – and ended up seemingly giving customers access to anyone’s account except their own.

Fortunately, there was no such chaos for the FT-SE 100 index of leading shares. After some lacklustre months, it rose 6% in April to end the month at 7,509. As so often happens, the pound went in the opposite direction, falling 2% to end the month trading at $1.3754.

Throughout April, the debate raged about whether the UK should stay in some sort of customs union with the EU after March next year. Doing so would avoid a ‘hard border’ between Northern Ireland and Eire – but would severely limit the UK’s ability to do trade deals with countries outside the EU.

It would, sadly, be possible to write an entire 2,500-word commentary on the various models of customs union – or partnerships – that are currently being discussed: we will attempt to do it in less than 200.

The first option – favoured by the Brexit supporters and known in Whitehall as ‘Max Fac’ (short for Maximum Facilitation) would see the UK and EU agree to minimise all checks, using smart technology and building on best practice from around the world (for example, the USA and Canada do not have a customs union). This means that there would be a border between the UK and the EU, but it would be as light touch as possible.

The second option is a hybrid model – the Customs Partnership – which rests on the EU recognising UK customs checks as equivalent to their own, so that goods entering the EU at say, Rotterdam, could in theory travel on to the EU without further checks.

This appears to be Theresa May’s favoured option, but has been described by hard right Tory Jacob Rees-Mogg, as ‘cretinous’ while the International Trade Secretary Liam Fox, has come out firmly against any form of customs union. With eleven months to go until March 2019, the debate will undoubtedly rumble on: but we have reached the 200 word limit, we promised. Don’t worry, the politicians will undoubtedly still be discussing it next month…

April was a busy month for French President Emmanuel Macron, who made a high-profile visit to Washington and, earlier in the month, made a speech in Strasbourg calling for ever-closer union between the EU’s member states and, as the EU faced up to the loss of the UK’s contribution, more tax and revenue raising powers for the EU.

Many commentators perceived this as Macron’s bid for the de facto leadership of the EU, with German Chancellor Angela Merkel widely seen to be in a weaker position following her eventual coalition agreement with the Social Democrats. German dominance no longer a safe bet, ran a headline in City AM.

Away from the corridors of power and in the banking halls, the European Central Bank announced it would leave interest rates unchanged, despite the pace of growth in the Eurozone starting to slow. There was bad news from Deutsche Bank, which announced ‘significant’ job cuts as it scaled back its corporate and investment banking operations. Christian Sewing, the new CEO of Germany’s biggest lender, said that the cuts were ‘painful but unavoidable’ as the bank reported a sharp drop in first quarter corporate and investment banking revenues.

Fortunately, there was no pain on the German stock market, as the DAX climbed 4% in the month to end April at 12,612. The French stock market had an even better month as it rose 7% to 5,520 – and there was even good news from Greece, with the Athens stock market up 10% to 858.

All the attention at the beginning of the month focused on the war of words – and potential trade war – between the US and China. It ended with the historic meeting in Korea and South Korean President Moon Jae-in suggesting that Donald Trump be awarded the Nobel Peace Prize.

Away from that potential plaudit, the US President had some troubling numbers to contend with. The US trade deficit widened in February to $57.6bn (£42bn) and there are suggestions that the US could have a trade deficit of a trillion dollars a year by 2020.

Jobs growth slowed in March, with just 103,000 jobs created in the month, and there were disappointing figures for the first quarter, as annualised growth slowed to 2.3%. Those figures are unlikely to be helped by suggestions that the US could get as many as four interest rate rises this year, as the Federal Reserve pursues a more aggressive line in a bid to keep inflation under control.

April was, however, a good month for both Alphabet (the parent company of Google) and Amazon as their sales and profits surged ahead. But it was a lot less fun for Facebook’s Mark Zuckerberg: he endured an uncomfortable month as he apologised for his company’s massive data breach at a Congressional hearing. Not a good month for Wells Fargo either, as the bank was fined a record $1bn (£730m) for failing to resolve investigations into car insurance and mortgage lending breaches.

What did the Dow Jones index make of it all? Virtually nothing. Having opened the month at 24,103, the Dow closed April up just 60 points at 24,163.

Far East
The news from the Korean border rather overshadowed China’s news in the month – specifically that the country had seen its economy grow at 6.8% in the first quarter, ahead of the government’s growth target for the year of ‘around 6.5%’ – although obviously, this figure would be under pressure from a prolonged trade war with the US.

In Chinese company news, Didi Chuxing, China’s equivalent of Uber, the world’s largest ride-hailing app and currently reckoned to be worth nearly £40bn, announced modest plans for world-wide expansion.

The Economist Intelligence Unit published an interesting article, listing the countries which were most ready for the robotics revolution: South Korea headed the list, with Japan and Singapore joining it in the top four. (The UK was in 8th place, just ahead of the USA.)

Obviously, the news of the détente between North and South Korea had a positive influence on the region’s stock markets. Only China – perhaps still worrying about a possible trade war – saw its stock market fall during the month, with the Shanghai Composite down 3% at 3,082. Hong Kong went in the opposite direction, up 2% to 30,808 and the South Korean market rose 3% to 2,515. Japan, free of the worry of North Korean missiles flying over its islands, saw the Nikkei Dow rise 5% to close April at 22,468.

Emerging Markets
US sanctions hit Russian shares said a BBC headline in the middle of the month, reporting that sanctions imposed by the US had hit the shares of companies controlled by Russian oligarchs, ‘as the Russian stock market tumbled in the wake of the sanctions.’ This followed the diplomatic crisis sparked by the poisoning of former spy Sergei Skripal and his daughter, and President Trump’s threats of tariffs on aluminium and steel.

Well, sanctions or no sanctions the Russian stock market had recovered by the end of month, closing April up 2% at 2,307. There was an even better performance from the Indian stock market, up 7% in April to end the month at 35,160 – and Brazil completed our Emerging Markets hat-trick as the market there rose 1% to close at 86,115.

And finally…
April was a good month for the ‘And finally’ section of the commentary – but we start with something that is probably best not read while you are eating breakfast.

NASA, America’s space agency has been looking for a material that can be transported into space and used for the spare parts that are inevitably needed on a long space mission. The idea is that the parts would be made using a 3D printer: but what material to use? The rocket scientists at NASA have decided that, well… human waste would be ideal. Transported into space and put to use: that’s an idea that Major Tom never discussed with ground control…

There had been widespread rumours of an exodus of London’s leading bankers after Brexit. Apparently, that is not now going to happen. A report in Politico said that the bankers’ wives – and one husband – had been to inspect Frankfurt, the rumoured new banking capital of Europe, and found it to be ‘dark, grey and dull’. So there you are: David Davis and Michel Barnier can huff and puff all they like – in the end it looks like bankers’ wives will decide the shape of Brexit.

Sadly, one wife who had rather less influence was the wife of Tanzanian gambler, Amani Stanley. So sure was Amani that his beloved Manchester City would clinch the Premier League title by beating Manchester United at home that he bet his wife on the result. All was looking good when City were leading 2-0 at half-time. Unfortunately, United stormed back in the second half to win 3-2 and Amani lost his wife for a week to his United supporting friend Shilla Tony. As yet there is no news on her husband’s gambling from Mrs Stanley…