Global Markets Update – Monday 31 May 2021

Global Tax Rate

Speculation grew that central banks were starting to talk about tapering their bond-buying programmes.

The US moderated its proposals for a global minimum tax rate for large multinational companies, lowering the rate to 15% from its original suggestion of 21%.


The FTSE 100 slid 0.3% over the two-week period.

The flash UK composite purchasing managers’ index rose to 62 in May, up from 60.7 in April and marking its highest reading since records began in January 1998. The survey was based on data collected between 12 and 19 May, and so only partly reflected the opening of indoor hospitality on 17 May. Services sector activity rose to 61.8 in May from 61 the previous month, resulting in the fastest pace of job creation since May 2015. Manufacturing activity jumped to 66.1 in May from 60.9 in April. Manufacturers noted a sharp improvement in demand from the US and China, as well as an easing in Brexit-related difficulties when exporting to the EU. However, cost pressures rose at the fastest pace in 13 years, with manufacturers facing shortages of raw materials and high shipping costs, and service providers pointing to higher staff salaries.

UK retail sales rose 9.2% in April against the previous month, more than double the 4.5% increase expected.

The annual rate of UK inflation rose to 1.5% in April from 0.7% in March on the back of higher petrol prices and gas and electricity bills. This was the highest level since the start of the coronavirus pandemic.

Royal Dutch Shell was ordered by a Dutch court to accelerate its strategy for the energy transition by making steeper and quicker cuts to greenhouse gas emissions.


The S&P 500 gained 1.0% over the two weeks, while the Nasdaq surged 2.8%.

President Joe Biden prepared to unveil a $6tn annual budget that incorporates sweeping plans for large-scale government investment.

With 95% of S&P 500 companies that have reported first-quarter earnings, 86% have beaten expectations, according to FactSet. The quarter is looking to be the best for earnings growth in a decade with year-on-year earnings growth of more than 50%. While companies are seeing higher input costs, they are managing to pass these onto customers.

The Fed’s preferred measure of inflation, core personal consumption expenditure, rose more than expected in April, hitting 3.1% compared to the same month last year and its highest annual reading since 1992.

The Fed appeared to acknowledge that the increase in the rate of inflation will be temporary as industries reopen following the height of the coronavirus crisis. However, minutes of the latest FOMC meeting showed some policymakers thought the US central bank should “at some point” start to discuss “a plan for adjusting the pace of asset purchases”.

The flash reading of IHS Markit’s US composite purchasing managers’ index rose to its highest-ever reading of 68.1 in May, although the rate of input price inflation soared to a new record high.

Durable goods orders fell 1.3% month-over-month in April, marking the first decline in durable goods orders in almost a year as supply shortages continued to impact production.

Personal spending rose 0.5% over April, following an upwardly revised 4.7% rise in March, amid higher spending on services, dining out and travelling.


The FTSEurofirst 300 rose 1.4% over the fortnight, reaching a fresh record high. Germany’s DAX finished above 15,500 for the first time.

With around 50% of European companies having reported first-quarter results, year-over-year earnings growth is pointing to around a 93%, based on a blend of reported results and estimates. The rebound is stronger in Europe than the US due to the heavy hit the continent’s economy took early last year from the pandemic.

Christine Lagarde, the European Central Bank president, dismissed concerns about inflation being driven up by rebounding economic activity and supply constraints, saying these pricing pressures were “of a temporary nature”. Expectations that the European Central Bank would start to taper its bond-buying programme in June were dampened when policymakers signalled that it was too soon to dial down their emergency stimulus efforts.

The flash estimate of May’s IHS Markit’s eurozone composite purchasing managers’ index rose to a stronger-than-expected 56.9 and the highest reading since February 2018. There were several signs that the rebound in activity was creating capacity constraints and disrupting supply chains. French companies said they had struggled to hire enough staff to meet demand, while German companies reported “severe supply chain bottlenecks” and the fastest rise in output prices since records began in 1997. Services sector activity rose to a three-year high of 55.1, while manufacturing activity dipped slightly from an all-time high to 62.8.

Italy’s economy appears to be leading the surge, with the EC economic sentiment index for the country registering the strongest monthly increase all the main eurozone countries and Italy’s strongest reading since 2000. In contrast, France’s economy fell into recession after GDP shrank 0.1% in the first quarter, compared with an initial estimate of a 0.4% growth.

Switzerland withdrew from a new framework agreement with the European Union due to differences over wages and immigration which were seen as infringing Swiss sovereignty.


The Nikkei 225 rallied 3.8% over the two weeks.

Japan’s GDP contracted by a worse-than-expected 1.3% in the first quarter of 2021 as a renewed Covid-19 state of emergency and a slow vaccine roll-out weighed on the economy. Consumption was the largest drag on output, costing 0.7% of the decline, while business investment also cost 0.2%. Government spending and net exports were also weak.

Japan’s state of emergency was extended until 20 June, one month before the start data of the Tokyo Olympics.

Pacific Basin

Australian shares hit 15-month high, with miners surging as iron ore rebounded.

Emerging Markets

Brazil’s stockmarket hit a record high as global sentiment continued to be supported by robust economic data from the US and expectations of massive fiscal stimulus. Signs of progress in delayed tax reform further supported market sentiment.

Indian shares hit a three-month high, supported by hopes of an economic recovery in India, amid a steady decline in daily COVID-19 cases.


The yield on the 10-year US Treasury bond closed the two weeks at 1.59%, while the 10-year German Bund yield ended at -0.19%, having hit a two-year high of -0.07% during the fortnight.


China’s renminbi hit its strongest level against the US dollar in three years as the renewed drop in US bond yields takes a toll on the greenback.

The Turkish lira slumped to a new low against the US dollar amid mounting concerns that new leadership at the country’s central bank would not defy President Recep Tayyip Erdogan and keep monetary policy tight to fight inflation.


Brent crude briefly touched $70 a barrel for only the third time during the pandemic amid expectations that demand will increase later this year.

Gold, which can be perceived as a hedge against inflation, traded at $1,880 an ounce, its highest level since January.

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Image by Gerd Altmann from Pixabay