130 of the world’s economies signed-up to a plan to force multinational companies to pay a global minimum corporate tax rate of at least 15% to be implemented in 2023. Only nine countries involved in the talks refused to sign-up, including Ireland, Estonia and Hungary. All of the G20 leading nations backed the plan as did some tax havens and investment hubs, including Switzerland and the Bahamas.

European companies are expected to report year-on-year earnings growth of more than 50% in 2021, according to FactSet, while companies in the S&P 500 Index are expected to achieve 37% earnings growth over the same period.

UK

The FTSE 100 eased 0.2% over the week.

While UK Covid-19 infections continued to climb as a result of the more infectious Delta variant, hospitalisations and fatalities rose at a far slower pace, indicating that vaccines were limiting the number of people becoming seriously ill. The UK government indicated the planned ending of most restrictions is likely to go ahead on 19 July.

US

The S&P 500 rallied 1.4% over the week, closing the week at a new all-time high.

Non-farm payrolls rose by a stronger-than-expected 850,000 in June, substantially above the upwardly revised figure of 583,000 in May.

The biggest US banks announced plans to pay out an extra $2bn of dividends next quarter after the Federal Reserve loosened restrictions on payouts to shareholders imposed during the pandemic. Morgan Stanley said it would double its quarterly dividend and boost the size of its share buyback programme from up to $10bn to as much as $12bn; Goldman Sachs raised its dividend to $2 from $1.25; JPMorgan Chase increased its payout to $1 from 90 cents; Bank of America boosted its dividend to 21 cents from 18 cents; and Wells Fargo doubled its dividend and said it also planned to spend about $18bn in the year starting in the third quarter to buy back its own stock.

Europe

The FTSEurofirst 300 slid 0.2% over the week.

The head of Germany’s Bundesbank urged the European Central Bank to reduce the rate of its bond purchases, warning that there were upside risks to inflation.

Eurozone inflation dipped to an annual rate of 1.9% in June, down from a more than two-year high of 2.0% in May. Core inflation fell from 1.0% in May to 0.9% in June.

The European Commission approved a three-month extension to a grace period on restrictions on chilled meat exports from Britain into the region.

The European Central Bank’s head of supervision said it would lift its cap on eurozone banks’ dividends and share buybacks. This follows a similar recent move by the US Federal Reserve.

Japan

The Nikkei 225 fell 1.0% over the week.

The Bank of Japan’s Tankan index of sentiment among large Japanese manufacturers rose from +5 to +14 in the second quarter of the year, marking the strongest level since the final quarter of 2018. However, sentiment in the services sector was disappointing, with the index inching higher from -1 to +1 as Japan experienced a wave of Covid-19 cases that triggered a state of emergency in large cities.

Pacific Basin ex Japan

China’s official manufacturing purchasing manager’s index eased slightly to 50.9 in June versus 51.0 in May.

Emerging Markets

The governor of Poland’s central bank indicated that recent higher inflation was partly driven by transient and external factors such as base effects, and fuel prices. Currently the second highest in the EU, Polish year-on-year inflation hit 4.7% but eased to 4.4% in June.

Bonds

The yield on the 10-year US Treasury bond closed the week at 1.44% as investors viewed the stronger-than-expected jobs data as a “Goldilocks” scenario, being neither too hot nor too cold.

The 10-year German Bund yield closed the week at -0.24%.

Commodities

Oil prices hovered near their highest level for two and half years after officials at the Opec+ meeting of key crude-producing nations struggled to reach an agreement on production output.

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Image by Gerd Altmann from Pixabay