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Market roundup
Global equities went on a rollercoaster ride this week after rising inflation and a cryptocurrency crash spooked investors.
Most indices started the week in the red as the spread of the Indian variant of Covid-19 raised concerns about the relaxation of lockdown measures. The FTSE 100 slipped 0.2%, while the Nasdaq declined 0.4% amid ongoing jitters caused by last week’s surprise surge in US inflation.
The FTSE 100 managed a brief recovery on Tuesday on better- than-expected UK jobs data, before sliding 1.2% on Wednesday when figures showed inflation hit its highest level in more than a year in April. Wall Street and European stocks also fell after the People’s Bank of China and the European Central Bank spoke out against cryptocurrencies, resulting in a crash in the crypto market.
Over in Asia, Australia’s S&P/ASX 200 lost 1.9% on Wednesday, led by a decline in banking stocks, while Japan’s Nikkei slipped 1.3%.
Wall Street stocks closed higher on Thursday as technology shares rebounded. The Nasdaq gained 1.8% and the S&P 500 added 1.1%. The FTSE 100 also rallied, rising 1.0% after figures showed factory growth saw its first material growth in May in almost two years.
The FTSE 100 was down 0.2% at Friday’s open ahead of the latest retail sales data.
Company in focus: Experian
Experian, the credit rating firm, grew its pre-tax profit by 6% on a constant currency basis to $1.1bn in the year ending 31 March, despite the “testing times posed by the Covid-19 pandemic”.
Revenue from ongoing activities grew by 7% on a constant currency basis to $5.4bn. The North America and Latin America regions performed strongly, with organic revenue growth of 7% and 9%, respectively. In contrast, organic revenue in the UK and Ireland and EMEA / Asia Pacific fell by 6% and 14%, respectively.
“We have shown again Experian’s resilience in the face of external shocks, which is due to the diversity of our portfolio and our successful innovation-led investments in new opportunities,” said Experian CEO Brian Cassin.
The company expects organic revenue growth of 15-20% in the first quarter, and 7-9% for the full 2022 financial year.
Cassin claimed that data would be a key driver of economic growth as the recovery gathers pace.
Economic roundup
After last week’s surprise surge in US inflation figures, the latest data from the UK’s Office for National Statistics (ONS) did little to allay investors’ fears of an interest rate hike. In April, the annual consumer price index including owner occupiers’ housing costs (CPIH) rose by 1.6% year-on-year, up from 1.0% growth in March. On a monthly basis, the CPIH rose by 0.7% in April following a 0.2% increase in March. The ONS said rising utility, clothing and petrol prices made the largest contribution to the increase in inflation.
Meanwhile, the annual headline CPI more than doubled from 0.7% in March to 1.5% in April, although the sharp increase largely reflected the low levels a year ago at the start of the pandemic. The Bank of England recently said UK inflation is expected to hit 2.5% at the end of 2021 because of a rise in oil prices, the end of VAT cuts in the hospitality sector in September, and comparisons with the pandemic slump of 2020.
This week, the Bank of England’s governor Andrew Bailey told parliament that it was watching movements in the prices of goods and services “extremely carefully”. According to the FT, Bailey said the monetary policy committee would not tolerate a persistent overshoot in inflation from its 2.0% target, and that any overshoot is likely to be temporary.
Separate ONS figures showed the UK unemployment rate unexpectedly fell to 4.8% between January and March. Economists had expected the rate to remain at 4.9% because of lockdown restrictions in the first quarter of the year. The number of people in employment jumped by 84,000 – the first rise since the pandemic began. However, the number of payroll employees is still 772,000 below pre-pandemic levels, and the headline measure of pay growth slowed to 4.0% from 4.5% in the three months to February.
The latest survey by Rightmove showed the average UK house price jumped by 1.8% in May from the previous month to £333,564 – a new national record and 1.8% above the previous all-time high recorded a month ago. London prices have edged up by only 0.2% since the first lockdown, whereas prices in Wales, the North West and Yorkshire and the Humber have surged by 13.0%, 11.1% and 10.5%, respectively.
Meanwhile, data released on Friday showed UK retail sales surged by 9.2% in April from the previous month, which the ONS said reflected the easing of coronavirus restrictions. This was double the 4.5% rise expected by economists. Sales rose by a record 42.4% from April 2020 – the first full month of the first lockdown.
This week also saw a slew of economic data from China. Industrial output grew by 9.8% in April from a year ago, in line with expectations but slower than the 14.1% surge in March. On a monthly basis, output edged down from 0.6% to 0.5%, the slowest pace since the pandemic hit last year. Retail sales rose by 17.7% year-on-year, which was much weaker than the 24.9% growth expected by analysts and down from the 34.2% jump seen in March. On a monthly basis, retail sales growth fell from 0.9% to just 0.3%, well below the average monthly growth rate of 0.7% in 2019.