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Last Week in the City: Central bankers ease inflation worries

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook for the week ending 28 May 2021.

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Garry White

in Features


Inflation worries that dominated previous weeks’ trading eased, as central bankers reassured markets that interest-rate rises are a long way off. This meant equities were in favour and the FTSE 100 and FTSE 250 both gained over the week.

There was a series of blows to the oil sector, with Royal Dutch Shell, ExxonMobil and Chevron all losing climate battles with activists attempting to reduce the industry’s carbon footprint.

Commodity prices fell as China moved to put a lid on soaring prices, as strong demand has resulted in price spikes in basic materials such as copper and iron ore this year. It was also another bad week for cryptocurrencies such as Bitcoin, as Beijing cracked down on trading and digital-coin mining in the country.


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Up to three quarters of new UK Covid-19 cases could be of the Indian variant, Health Secretary Matt Hancock said. Infections are now at the highest rate since mid-April, prompting the government to issue cautious statements about whether the UK will reopen fully on 21 June, as indicated in its roadmap. However, infections are mostly in younger, unvaccinated people and it is the rate of hospitalisations that will be a significant driver of the reopening decisions.

Facebook lifted a ban on posts claiming Covid-19 was man-made, following a resurgence of interest in the “lab leak” theory of the original source of the infection. The social network said its new policy comes “in light of ongoing investigations into the origin”. In February, Facebook explicitly banned the claim, as part of a broad policy update aimed at “removing more false claims about Covid-19 and vaccines”.

UK grocery sales have slowed, according to the latest data from market researchers Kantar, as pubs, bars and restaurants were permitted to reopen once again after lockdown measures were relaxed. However, Kantar noted UK grocery sales are still ahead of 2019's levels.

Dell Technologies beat Wall Street estimates for quarterly revenue on Thursday as demand for its notebooks and software products was fuelled by a pandemic-led remote working environment.

The US warned its citizens not to travel to Olympic Games host Japan, citing the growing risk of the Covid-19 pandemic just two months before the opening ceremony is scheduled. The warning from the State Department came as Japan, which has been criticized for its slow inoculation rate, opened its first mass vaccination centres in a push ahead of the event, which were postponed last year due to the pandemic.


Inflation fears that dominated markets in the previous week eased, as central bankers made dovish comments to soothe market concerns. The Federal Reserve reaffirmed its dovish approach to monetary policy, with its vice-chair Richard Clarida stating that the US central bank would be able to curb an outbreak of inflation and ensure a “soft landing” without hampering the country’s economic recovery.

Members of the Bank of England policy-setting committee hinted interest rate rises are unlikely until towards the end of 2022. Gertjan Vlieghe said it will be “well into” next year although it could come earlier if the economy rebounds quickly. Michael Saunders suggested a rate rise could be 18 months away. European Central Bank board member Fabio Panetta also said the central bank should not reduce the pace of asset purchases from next month.

Economic optimism across the UK reached its highest level in five years. The Lloyds Bank Business Barometer climbed five points to 37%, the highest since 2016, while companies’ trading prospects rose three percentage points to 28%.

President Biden is expected to propose a $6 trillion budget later on Friday that would take the US to its highest sustained levels of federal spending since World War II, as he looks to fund a sweeping economic agenda that includes large new investments in education, transportation and fighting climate change.

The US economy grew at a robust annual rate of 6.4% in the first three months of 2021, unchanged from the government's initial estimate. This was led by a robust 11.3% annualised gain in consumer spending, as residential activity and business investment maintained strong momentum.

The German economy fared slightly worse than initially expected at the start of 2021, revised figures showed. GDP shrank 1.8% quarter-on-quarter in the first three months of the year, compared with its previously stated contraction of 1.7%. It follows a growth of 0.5% in the fourth quarter of 2020.


US business groups have teamed up to form a coalition to oppose tax increase proposals by the Biden administration. The US government is proposing a global minimum corporation tax rate, as well as increasing the tax in the US to pay for infrastructure projects. Twenty-eight industry groups have now created an alliance called "America's Job Creators for a Strong Recovery". The tax proposals "could not come at a worse time" it said.

Could Covid-19 derail essential Indian reforms? Indian leader Narendra Modi wishes to make it easier to do business in the county and remodel the labour laws. We ask whether the pandemic could make his reforms more challenging as his popularity wanes here.

More than 34,000 Hong Kong citizens have applied in 2021 for bespoke UK visas that were launched last year in the wake of Beijing’s democracy crackdown. We look at the centralisation of power in China and its implications here.

The European Union said Minsk was playing "Russian roulette" after a Ryanair flight was diverted and a prominent critic of the Belarus government was arrested. Journalist Roman Protasevich was on board a Ryanair flight from Athens to Vilnius when it was forced to change course to head for the Belarussian capital after a reported bomb scare, The EU and the UK have issued new sanctions against Belarus in light of the incident, but Russian support appears to have emboldened president Alexander Lukashenko. Russia did not approve new flight paths bypassing Belarus from Austrian Airlines and Air France, forcing the companies to scrap flights.


Online furniture retailer Made.com aims to raise £100m in its London flotation, as management forecast sales will quadruple by 2025 to £1.2bn. There was no potential valuation stated in its intention-to-float notice, but the company is expected to be valued at about £1bn.


It was another bad week for digital coins after Beijing intensified a crackdown on bitcoin mining and trading, forcing bitcoin miners in the country to cease operations. China accounts for nearly 70% of the world’s cryptocurrency mining, a complex process to produce new coins that involve sophisticated computer calculations. Regulators globally are starting to look at digital currencies and price remains extremely volatile. 

Environment, Social and Governance (ESG)

Royal Dutch Shell, ExxonMobil and Chevron all lost climate battles with activists. We look at the implications of “the year of net-zero” here.

A court in the Hague ordered Royal Dutch Shell to cut its global carbon emissions by 45% by the end of 2030 compared with 2019 levels, in a landmark case brought by Friends of the Earth and more than 17,000 co-plaintiffs. The oil giant’s sustainability policy was found to be insufficiently “concrete” by the Dutch court in an unprecedented ruling. Shell was told it had a duty of care and that the level of emission reductions of Shell and its suppliers and buyers should be brought into line with the Paris climate agreement. The Anglo-Dutch oil group is expected to appeal.

At ExxonMobil’s AGM shareholders voted for the election of at least two new members on Exxon’s board of directors, which was seen as a powerful rebuke to the company’s long-running failure to act on the climate crisis and put forward a sustainable business plan. Meanwhile, more than 60% of shareholders at Chevron voted to pass an activist-led resolution demanding the company set targets to slash emissions of its energy products.

The UK oil and gas sector is on the "cusp of transformation" into renewables, according to the Aberdeen and Grampian Chamber of Commerce (AGCC). It said that 75% of contractors surveyed anticipated moving into renewables work over the next three to five years. This is the highest level recorded since the question was first asked in 2015, the organisation said.

ESG is set to become a significant driver of company valuations, as investors position themselves into the ESG winners and steer clear of the losers. Garry White notes it may already be having an impact on valuations here.

Driving the electric vehicle revolution and the law: Transport is one of the UK’s largest source of greenhouse gas emissions, and a key challenge for the government has been how to meet its net-zero carbon emissions target. Law firm CMS looks at the legal aspects of the electrification of vehicles here.


Self-driving electric vehicles, which can carry up to 10 people, are to be trialled in Cambridge starting in June. Known as Auto-Shuttles, the vehicles will operate on a route between Madingley park and ride, West Cambridge campus, and the Institute of Astronomy.

Mining & commodities

Prices for industrial metals fell after Chinese authorities warned commodity companies in the country over rising prices. China's National Development and Reform Commission (NDRC) urged the companies to maintain "normal market orders". According to a report in state media outlet The Global Times, key Chinese companies in steel, iron and aluminium were among those "collectively summoned" on Sunday for interviews.


The pandemic has sent the commercial property sector into a state of flux with valuations falling sharply as the future remains uncertain. We examine what lies in store for Britain’s landlords here.

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