Global dividends are poised to recover from the pandemic sooner than expected, exceeding pre-pandemic levels by the end of the year. Miners in particular have benefitted from a commodities boom.

COP26 ended in disappointment as, after pressure from China and India, countries only agreed to “phase down” rather than “phase out” coal.

UK

The FTSE 100 lost 1.1% over the fortnight.

The UK economy grew by 0.6% in September, up from the downwardly revised 0.2% expansion in August. Over the third quarter, UK GDP grew 1.3%, down from 5.5% growth rate in the second quarter and below the 1.5% forecast by the Bank of England as supply chain disruptions and a shortage of workers hit output.

UK inflation rose to 4.2% in October, its highest level since 2011. This is more than double the Bank of England’s target and was above expectations. The news raised speculation that UK interest rates would be hiked in December.

UK consumer confidence rose 3 points to -14 in November despite surging inflation, easing some economists’ concerns about the spending recovery in the run-up to Black Friday and Christmas.

Royal Dutch Shell decided to simplify itself by moving its tax base and chief executive to the UK. Currently the company is incorporated in the UK but has Dutch tax residency, and a dual class share structure that trades in London, Amsterdam and New York.

US

The S&P 500 rose 0.3% over the two weeks.

Federal Reserve vice-chair Richard Clarida suggested the US central bank could take earlier than expected action to tame inflation, opening the door to a quicker tapering of its bond purchases.

US retail sales rose 1.7% over the month of October. The stronger-than-expected data indicated shoppers were accepting higher inflation but raised questions about how long the Federal Reserve could hold US interest rates at record lows.

The US inflation rate jumped to 6.2% in October, up from 5.4% the previous month and the fastest annual pace since 1990. Core inflation, which excludes volatile energy and food, hit 4.6%.

President Joe Biden highlighted rising energy costs as a primary driver of inflation, saying it was a “top priority” to reverse the continuing trend, while US Treasury Secretary Janet Yellen said controlling COVID was key to taming inflation.

The University of Michigan’s gauge of consumer sentiment fell to 66.8 in November, its lowest level in a decade due to inflation worries.

Electric carmaker Rivian surged on its Nasdaq IPO, giving it an opening market valuation of more than $100bn, which is greater than either Ford or General Motors.

General Electric and Johnson & Johnson each announced plans to split/spin off divisions.

Europe

The FTSEurofirst 300 gained 0.6% over the two weeks.

Austria implemented a lockdown to battle surging Covid-19 cases and plans to make vaccines mandatory in early 2022. Germany, the Czech Republic and Slovakia tightened coronavirus restrictions. The Dutch government imposed a short, partial lockdown to combat surging infections and Denmark reinstated proof-of-vaccination requirements to access certain indoor spaces.

The European Commission predicted that EU economic growth would reach 5% this year but warned of “mounting headwinds” as a result of logistics logjams, strained supply chains and shortages of raw materials.

The German Council of Economic Experts cut its forecasts for German GDP growth to 2.7% in 2021 due to supply chain problems. However, growth forecasts for 2022 were raised from 4.0% to 4.6%.

Alexander Lukashenko threatened to cut the transit of gas and goods through Belarus to Europe if the EU imposes further sanctions on his regime over the migrant crisis on the Belarusian-Polish border.

Japan

The Nikkei 225 gained 0.5% over the fortnight.

Fumio Kishida unveiled a ¥43.7tn ($383bn) stimulus package, including generous cash handouts for households and help for struggling businesses, to boost the country’s lagging recovery from the pandemic.

Producer prices in Japan surged 8.0% year on year in October. This marked the fastest pace of increase in around four decades and was attributable to both rising commodity prices and supply chain bottlenecks.

Japan’s economy contracted at an annualised rate of 3% in the third quarter, compared to expectations for a 0.8% contraction. The disappointing outcome was due to supply chain disruptions and a hit to spending caused by a resurgence in Covid-19 cases.

Elsewhere, the corporate earnings season mostly confirmed positive effects from yen weakness.

Pacific Basin ex Japan

China’s producer price index increased 13.5% in October on a year-on-year basis, taking input costs to a 26-year high.

Emerging Markets

Emerging market equities were hit by concerns over high global inflation, fears about a Chinese slowdown and worries over tighter US financing conditions.

Turkey’s central bank slashed interest rates by 100 basis points to 15%, the third large cut in as many months despite inflation hitting almost 20% in October.

Indian financial technology company Paytm fell by more than a quarter on its IPO amid scepticism about its path to profitability and ability to compete with Big Tech competitors such as Google.

Brazil’s annual inflation rate climbed to 10.67% in October.

The Mexican central bank raised its key interest rate by 25 basis points, from 4.75% to 5.00%. While higher rates were expected, some analysts had expected a larger increase given October inflation data showed both headline and core inflation once again surprising to the upside and reaching multi-year highs.

In Argentina, President Alberto Fernández’s Peronist party suffered a heavy setback in mid-term elections. He subsequently pledged to seek co-operation with the opposition and present a new economic programme in hopes of reaching a deal with the IMF on rescheduling $44bn in debt, most of which comes due for payment next year and in 2023.

Bonds

The yield on the 10-year US Treasury bond closed at 1.53%, a rise of 7 bps over the fortnight, while the yield on the two-year note reached as high as 0.52%.

Bond yields declined in the eurozone, with the yield on the 10-year German Bund ended at -0.35% compared to -0.28% two weeks’ prior.

Currencies

The euro fell to its lowest level in 16 months amid speculation that the European Central Bank would stick to its accommodative policies even though widespread inflation is prompting US and UK policymakers to raise interest rates. European Central Bank president Christine Lagarde commented that “we must not rush into a premature tightening”.

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Image by Gerd Altmann from Pixabay