Global Markets Update – Monday 20 September 2021

Natural Gas

Natural gas prices surged to record levels across the UK and continental Europe. In the UK, the surge forced the closure of fertiliser plants, drove up consumer energy costs and threatened the supply of products from meat to steel.

Australia announced a trilateral defence partnership with the US and UK which will provide its navy with new nuclear power submarines. The agreement, which means abandoning an existing agreement with France, is aimed at tackling China’s growing presence in the Indo-Pacific region.


The FTSE 100 declined 0.9% over the week.

In a week that saw a major cabinet reshuffle, the UK government announced that all 12-15 year olds would be offered a single dose of a COVID-19 vaccine, while all adults in the top nine priority groups would be offered a booster shot. The need for travel-related COVID tests will also be reduced in October, boosting demand for holidays as well as shares in holiday-related businesses.

UK inflation surged to 3.2% in August, due to a sharp increase in food and transport costs. This is the highest rate of inflation since 2012.

UK retail sales declined 0.9% over the month of August, well below analysts’ forecasts of a 0.5% expansion. In part the drop is due to a drop in food stores’ sales which is linked to an increase in eating out following the lifting of coronavirus restrictions.

The UK announced it will delay imposing checks on EU goods entering the UK until mid-2022 as it attempts to stop Brexit further exacerbating supply chain problems.


The S&P 500 slid 0.4% over the week.

US retail sales rose 0.7% in August, far outpacing the 0.8% drop that had been expected. However, data for July was revised down to a 1.8% fall compared with an initial estimate of a 1.1% drop.

The University of Michigan’s gauge of consumer sentiment rebounded slightly to a preliminary September reading of 71 from a final August reading of 70.3.


The FTSEurofirst 300 lost 0.9% over the week.

Spain announced a €3bn raid on the profits of utility companies that do not use gas but have benefitted from higher electricity prices as a result of soaring natural gas prices.


The Nikkei 225 gained 0.4% over the week.

Pacific Basin ex Japan

China’s economic slowdown worsened in August, due in part to fresh COVID outbreaks. Retail sales rose just 2.5% in August year-on-year, far below economists’ forecasts of a 7% rise, and the slowest increase in 12 months. Industrial production was also weaker than expected, rising 5.3%. Over the past week, dozens of new cases were reported in the southern province of Fujian, where authorities have closed schools.

The People’s Bank of China injected an extra $14bn of short-term funds into the country’s banking system, its most since February. Analysts viewed this as a move to ease lending conditions following a debt crisis at the major homebuilder Evergrande and a coronavirus-driven slowdown in retail sales, industrial production and the property market.

Debt-laden Chinese homebuilder Evergrande hired restructuring advisers to help it through a liquidity crisis after its monthly sales almost halved from June to August. Contagion effects have also hit insurer Ping An Insurance, forcing it to state it had no exposure to the property group.

The Chinese government further intensified a crackdown on the nation’s tech sector with a move to break up Alipay, a smartphone app with more than 1bn users owned by Jack Ma’s Ant Group.

The Hang Seng plunged 4.9% over the week as Macau casino stocks were hit hard by fears of greater oversight. The Chinese territory opened a 45-day public consultation on revising its gaming law, which is expected to step up scrutiny of operators in the world’s biggest gambling hub. Casino groups’ 20-year concessions to operate in Macau are set to expire next year.


The yield on the 10-year US Treasury bond closed the week 3 bps higher at 1.37%.

Eurozone bond yields rose on a report by the Financial Times that the European Central Bank expects to hit its 2% inflation target by 2025, implying that a rate rise could happen as soon as late 2023, well before many economists expect. The yield on the 10-year German Bund rose 5 bps over the week to close at -0.28%, its highest level in two months.


Brent crude rose above $75 a barrel after Hurricane Ida shut US refineries and surging natural gas prices drove speculation of energy consumers switching from gas to oil.

Iron ore prices plunged 22% over the week as Chinese steel mills dumped the commodity in response to government production curbs and a cooling property market.

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Image by Ratfink1973 from Pixabay