Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
MARKETS have started the week in an upbeat mood, focusing on calming words from the US Federal Reserve Chairman and ignoring the scenes from Afghanistan for now.
The deadline for the US withdrawal from Afghanistan passes today but investors appear unconcerned with markets in the US, Asia and Europe all moving higher so far this week.
Only the UK, which opened on Tuesday after the Bank Holiday break, posted modest falls among the major markets.
In the US, both the S&P 500 and the Nasdaq moved to new records last week as investors reacted well to words from US Federal Reserve Chairman Jerome Powell. As expected, Powell confirmed at a virtual Jackson Hole economic symposium that some tightening of monetary policy was likely as the Fed’s goals for inflation and the Labour market get closer to being met.
The first move is likely to be a scaling back of asset purchases by the Fed, and that could happen this year, although Powell indicated that rises to interest rates were much further away. It is apparently that which has eased fears in the market.
It’s a quiet week for economic news in the UK, with house price and mortgage borrowing figures on the calendar. The news on Tuesday included the Bank of England's latest money and credit report which showed households deposited an additional £7.1billion with banks and building societies in July.
That was slightly lower than the average net flow of £8.8billion between April and June 2021, but still relatively strong, the Bank said.
It’ll be much busier in the eurozone this week where consumer confidence will figure in the schedule of economic data, along with GDP growth readings from France and Italy.
Eurozone inflation data released on Tuesday showed price rises on the continent running at their highest level for three years. Just as in the UK and the US, monetary policymakers will have to decide whether the spike in inflation is temporary and something that will clear once pandemic-related disruption to supply chains eases, or if a more robust tightening will be required to choke it off.
The corporate diary is also quiet this week, with the biggest name globally to report being Zoom in the US. In the UK the housebuilder Barrett Developments reports on Thursday.
Other news of interest to investors will be a warning over the weekend that the strong recovery for UK dividends could be held back due to concerns over defined benefit pension scheme deficits.
New powers for the Pensions Regulator, which begin in October, mean that company management who have agreed dividend payments could face a legal challenge if their company then goes bust, leaving a pension scheme in deficit.
There have been warnings that this threat of legal liability could dissuade companies from paying dividends where they are also running a shortfall in their pension scheme. More than 5,000 UK companies are currently running such a deficit.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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