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

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook for the week ending 1 April 2021.

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook for the week ending 1 April 2021.
Garry white employee

by
Garry White

in Features

01.04.2021

The UK took another step towards freedom this week, after a number of pandemic-related restrictions were lifted. The next milestone in Prime Minister Boris Johnson’s roadmap out of lockdown is 12 April, depending on data. The easing in the UK came as Europe’s Covid-19 crisis accelerated, with new restrictions announced in France. However, the general tone in global markets was one of optimism in the recovery.

US President Joe Biden unveiled his ambitious $2 trillion jobs-and-infrastructure package, which is even more expensive than his $1.9 trillion Covid-19 relief package approved earlier this month.

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

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Central Banks: How do they get us out of the pandemic? In this Charles Stanley Radio podcast we discuss the role and support of global central banks, as well as the ongoing battle between the Federal Reserve and the markets at large. Listen here.

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Covid-19

Prime Minister Boris Johnson said that the UK’s roadmap out of lockdown was still on track, despite a third wave of the virus hitting European countries. Mr Johnson said there was nothing in the data to dissuade him from "continuing along our roadmap to freedom." Under stage two which came into effect on Monday 29 March, the stay at home order was lifted, outdoor gatherings are allowed with the return of the “rule of six”. Further restrictions are due to be relaxed on 12 April, 17 May and 21 June — when the country is expected to go back to "normal life" depending on health data and vaccine rollout success.

France introduced its third lockdown. French schools will close for at least three weeks as part of new national restrictions to fight rising Covid-19 cases. Lockdown measures, introduced in some areas of the country earlier this month, are also being extended to other districts.

Regional leaders of two German states badly hit by a third wave of Covid-19 infections urged the rest of the country to reimpose tough lockdown measures to flatten infection rates. In a joint letter reported on by Süddeutsche Zeitung newspaper, Bavaria’s conservative premier, Markus Söder, and the Green head of Baden-Württemberg, Winfried Kretschmann, said the situation was “more serious than many believe”.

Hungarian journalists accused Viktor Orban’s government of putting lives at risk by barring the media from covering the full extent of what is now the world’s deadliest Covid-19 outbreak. In an open letter published by most of the country’s independent news outlets, reporters said they had been blocked from hospitals and barred from speaking to medics, making it impossible to inform the public of the full extent of the crisis.

The Brazilian real lost around 10% in the first three months of 2021, briefly revisiting its record closing low of 5.88 per U.S. dollar set last year. Analysts think the low could be easily breached soon. Thousands of Brazilians continue to die daily of Covid-19, the economy is struggling and opposition to President Jair Bolsonaro has increased. The president has reacted by appointing loyalists in key positions.

The chief executive of Heathrow Airport, John Holland-Kaye, said Britain should scrap its quarantine requirements for passengers arriving from countries with low levels of concern about Covid-19.

Economics

Britain’s recovery during the second half of last year was stronger than first estimated, the Office for National Statistics said. This meant UK GDP fell 9.8% last year, slightly better than its first reading of 9.9%.

The European Union faces several challenges that will lead to a delay in its recovery from the pandemic. It is also facing a US forcefully trying to reset relations with China. We look at the challenges facing the bloc here.

Geopolitics

China warned the US against crossing its “red line” after an American ambassador visited Taiwan, the first such official visit in the last 42 years. John Hennessey-Niland, the US ambassador to the pacific island nation of Palau, was part of the delegation that came with Palauan president Surangel Whipps for a five-day trip.

The BBC moved its China correspondent, John Sudworth, to Taiwan from Beijing following “pressure and threats from the Chinese authorities”. Mr Sudworth, who has won awards for his reporting on the treatment of the Uyghur people in Xinjiang, left Beijing with his family. The BBC said it is proud of his reporting and he remains its China correspondent and that "John's work has exposed the truths the Chinese authorities did not want the world to know”.

Trade

Traffic resumed through Egypt's Suez Canal after a stranded container ship blocking it for nearly a week – the Ever Given – was finally freed. However, the knock-on effect on global shipping could take weeks or even months to resolve.

The US warned it could put tariffs of up to 25% on a host of UK exports in retaliation for the UK’s Digital Services Tax on technology companies. Ceramics, make-up, overcoats, games consoles and furniture could all be subject to trade barriers, according to a list published by the Biden administration. Washington is pressing ahead with the action, arguing that the DST is “unreasonable, discriminatory, and burdensome".

Infrastructure

President Joe Biden plans significant investment in electric vehicles, renewable power and the electric grid as part of a broad blueprint to bolster the US economy and combat climate change. This is part of a $2.25 trillion infrastructure and stimulus blueprint. Biden’s initiative would give a 10-year extension to tax credits to help the wind, solar and other renewable energy projects. It also proposes doubling federal funding for mass transit and spending $80bn to expand and modernize passenger rail services.

Buoyed by the popularity of his $1.9 trillion Covid-19 stimulus package, President Biden is now planning a large infrastructure package. Will the markets like it? We take a look at its potential impact on investments here.

IPOs

Amazon-backed Deliveroo shares plummeted on its stock market debut as investors cited its gig-economy worker model as a cause for concern. The shares recovered from lows, but the flotation was London's largest for a decade and the slump may be a blow to the UK's ambitions to persuade more big tech companies to list in the UK. A review released alongside Rishi Sunak’s recent Budget suggests the UK aims to become Europe’s leading destination for special acquisition vehicles (Spacs) in an aim to encourage more technology companies to list in London. Garry White looks at Spacs here.

Financials

US hedge fund Archegos was hit with margin calls after a plunge in ViacomCBS shares, leading to chaotic trading as some banks tried to limit their losses across a range of equities. Nomura, Japan’s largest investment bank, said its losses could hit $2bn, while reports suggested Credit Suisse could lose up to $4bn. Executives within at least two banks are being quizzed by risk managers over why they offered a business as small as Archegos tens of billions of dollars of leverage on trades in volatile equities through swaps contracts, according to the Financial Times. There are also inquiries into whether Bill Hwang, the former hedge fund manager who ran the family office business, concealed any other positions from the banks.

Technology

Facebook and Amazon have become the US’s two largest corporate lobbying spenders, investing almost twice as much as oil giant ExxonMobil and tobacco company Philip Morris in 2020, according to a new report. Public Citizen, a consumer rights advocacy group used data from the Center for Responsive Politics and discovered Amazon upped spending on lobbyists by 30% between 2018 and 2020, with Facebook’s spending rising 56%.

Chinese telecoms giant Huawei conceded that sanctions imposed on it by the US in 2019 had a major impact on its mobile-phone business. However, growth elsewhere in the company meant that it did make a profit overall. Chairman Ken Hu called for a review of the global supply chain of critical technology.

Smartphones, computers and other smart devices purchased in Russia must now come pre-installed with Russian software after legislation came into force. The move is an attempt to help Russian IT companies compete with foreign counterparts.

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

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