Above page content

    Site map  Cookie policy

Features

Last Week in the City: Commodity prices hit record highs

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook for the week ending 7 May 2021.

Garry White, Chief Investment Commentator, provides a round-up of the market movements and the global investing outlook for the week ending 7 May 2021.
Garry white employee

by
Garry White

in Features

07.05.2021

UK equities had a positive week, as the Bank of England raised hopes of a stronger UK economic recovery and as Meggitt shares soared on a takeover report. US-based Woodward was in the frame as the potential acquirer, but the reports were unsubstantiated.

Both the copper and iron-ore price hit new records, as strong export data from China boosted recovery hopes – and investors eyed the significant investment in infrastructure proposed by governments worldwide.  

The FTSE 100 was up 1.9% over the week and the FTSE 250 was 0.6% ahead by the middle of Friday’s trading session.

*****************************************

Ed Clark, an investment manager based in London, thinks the biopharma industry will become increasingly important as we recover from the Covid-19 pandemic. He argues developments such as gene therapy offer exciting potential for investors here.

******************************************

Covid-19

The US threw its support behind a move at the World Trade Organization (WTO) to temporarily lift patent protection for Covid-19 vaccines. India and South Africa proposed the plan, which they said would increase vaccine production around the world. European Commission President Ursula von der Leyen said that the EU was “also ready to discuss any proposals that address the crisis in an effective and pragmatic manner".

A UK government spokesperson said Britain was "working with WTO members to resolve this issue" and was "in discussions with the US and WTO members to facilitate increased production and supply of Covid-19 vaccines". However, implementing such a move could be challenging as all 164 WTO member countries need to consent.

Moderna said it believed countries around the globe would continue buying its Covid-19 vaccine for years even if patents are waived, noting that rivals would face significant hurdles in scaling up manufacturing.

The revenue bump from Pfizer's Covid-19 vaccine could also last for years, the US drugs group said. Its management expects "durable demand" for the vaccine – in a similar way to flu inoculations. Revenue from the treatment is expected to hit $26bn this year – making up more than a third of Pfizer's sales.

In the last two weeks, India experienced 4.8 million new cases of Covid-19. Brazil, Turkey, the US and France also suffered badly. Western countries continue to vaccinate, but what about the world’s poorer nations? We discuss the importance of vaccinating the whole world here.

Economics

The UK economy will enjoy its fastest growth in more than 70 years in 2021 as Covid-19 restrictions are lifted, according to the Bank of England (BoE). It expects the economy will expand by 7.25% this year. The UK's impressive vaccine rollout is expected to support consumer confidence, with the economy expected to get back to its pre-pandemic size before the end of 2021, according to the BoE.

The BoE slowed the pace of its bond-buying but left interest rates unchanged. However, the central bank was at pains to insist it was not “tapering” and it did not consider the reduction of bond purchases to be a change in monetary policy.

The UK's services sector rebounded in April with growth climbing to a seven-year high as lockdown restrictions were eased, according to the purchasing managers' index from IHS Markit/CIPS. The sector, which accounts for 80% of the UK economy, had the fastest rise in output since October 2013. The index climbed to 61 in April, up from 56.3 in March. Any figure above 50 shows expansion.

US Treasury Secretary Janet Yellen had to row back on comments that interest rates might have to rise to keep the US economy from overheating, which she made earlier in the week. The former Federal Reserve chair clarified that she expects a low-interest-rate environment for some time.

The number of Americans filing new claims for unemployment benefits last week fell to a 13-month low. Other data showed that US-based employers announced the fewest job cuts in nearly 21 years in April. Nevertheless, about 16.2 million people are still on unemployment benefits in the country.

Joe Biden is fashioning his election phrase of ‘Build Back Better’ into an activist administration, a heavily unionised workforce – and a large expansion in state spending. We look at the growing cost of President Bien’s plans here.

The Chinese recovery continues to charge ahead. The Asian nation’s exports unexpectedly surged last month as the US’s rapid recovery from the pandemic spurred demand. Many factories in India are closed due to the Covid-19 crisis, which boosted demand for Chinese goods. China's exports in dollar terms surged 32% year on year, with its imports also growing at the fastest rate in more than a decade.

Geopolitics

China "indefinitely" suspended key economic dialogue with Australia, escalating a growing diplomatic rift between the two countries. Relations have been on the decline since Australia called for a probe into the origins of the Covid-19 virus and banned Huawei from building its 5G network. China accused Australia of having a "Cold War mindset".

Boris Johnson’s parliamentary majority was increased after a Conservative victory in a by-election in Hartlepool, part of Labour’s traditional heartlands. The result was bad news for opposition leader Kier Starmer, who pledged to reinvigorate the Labour Party’s fortunes.

Technology

IBM said it had made a significant breakthrough in computer processors by creating a 2-nanometre chip in its test lab. IBM claims its test chip can improve performance by 45% over current 7 nanometres commercially available products. It also uses 75% less energy to match current performance, IBM said.

The US is pressuring Taiwanese semiconductor manufacturers to allocate some of their supply to American automakers grappling with a shortage of the crucial components, the US Commerce Secretary Gina Raimondo said. This followed news from Ford that a shortage of chips may hit its production by 50%. Garry White looks at the rising importance of the semiconductors industry and why the demand for chips is causing ripples in the South China Sea here.  

Two pioneering web services, Yahoo! and AOL, were sold again after their latest owner, Verizon, failed to revive their fortunes. The US telecoms giant is selling its media companies, which include the two brands, to a US private-equity group in a deal worth $5bn. Verizon bought Yahoo! in 2017 and AOL in 2015 for a combined $9bn.

Invading and defending forces need to ward off cyberattacks on intelligence, communications and control systems. We look at the big changes in world threats and defence requirements here.

Mining & commodities

The price of copper hit an all-time high in London, as a tight supply outlook combined with expectations of a surge in demand from infrastructure projects and other post-pandemic measures. Iron-ore prices imported into China also hit a new record high.

High mineral prices could delay the global transition to clean energy, as the demand for metals in solar panels, wind turbines and batteries outstrips supply, the International Energy Agency warned. Garry White asks whether a shortage of copper could derail the energy transition here.

Pandora, the world's biggest jeweller, said it will no longer sell mined diamonds and will switch to exclusively laboratory-made diamonds. The Danish company said it was looking to "transform the market for diamond jewellery with affordable, sustainably-created products". Last year, the group made 85 million pieces of jewellery and sold 50,000 diamonds.

Travel

Airline tickets are likely to be more expensive in the second half of 2021 than they were before the Covid-19 pandemic, Booking.com's chief executive Glenn Fogel said in an interview with the BBC. Flight prices are expected to increase due to the combination of pent-up demand and fewer aeroplanes in service, he said. The uncertainty surrounding when economies will reopen is making it particularly challenging for airlines planning to relaunch their schedules.

Package holiday group Tui said it will subsidise the cost of Covid-19 testing for customers who book its package holidays. The Anglo-German tour group is offering test packages for between £20 and £90 to “make holidays more affordable”. The expected high cost of testing requirements when travelling threatens to dampen any recovery. Other holiday companies are offering testing deals too, including airlines easyJet, and IAG’s British Airways.

Retail

Fashion retailers Next and Superdry both saw a surge in sales after stores reopened in April after Covid-19-related closures. Next raised its full-year profit forecast but noted that previous experience suggested the post-lockdown sales surge would be "short-lived". Online-only retailer BooHoo revealed that full-year sales jumped 41%.

Retail footfall significantly improved throughout April as pandemic restrictions were eased but remained firmly below pre-pandemic levels. The latest monthly monitor by research firm Springboard revealed that footfall in April was almost a third below the levels seen in April 2019.

Property

March was HSBC’s strongest mortgage completion month in the UK in more than 40 years, including deals for more than 3,000 first-time buyers. The bank declined to give further details about the exact number due to commercial considerations.

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.

Get in touch

Find out more

Our focus on clients has endured since the foundation of Charles Stanley in 1792 and has helped make us one of the UK's leading wealth management firms. Your interests give shape to everything we do.

Please call us to talk about your circumstances or complete the enquiry form.

020 3797 1783

Make an enquiry

If you have some questions we'd be happy to help.

Get in touch

Coronavirus (COVID-19)

Our latest information

Stay updated

Subscribe to our weekly email newsletter.

Subscribe here

Local Office

Your local office

Your local Charles Stanley office can help advise you on a wide range of investment management services.

Select an office

Share

Newsletter banner signup