Hello and welcome to the weekly market update. I’m Emma-Lou Montgomery.
Now, if worries about the potentially exorbitant cost of heating your home as the gas price has soared by 1,000% in 12 months, haven’t had you break out in a cold sweat yet, then the potential increased cost of your mortgage just might.
While the price cap on fuel will give households some respite until April at least when the next review takes place, the cost of paying your mortgage could hit home a lot sooner for anyone with a on a variable or discount rate.
Comments from Bank of England governor Andrew Bailey that he is “concerned about inflation” was never going to go unnoticed. And coupled with a remark from fellow monetary policy committee member Michael Saunders this weekend that a hike in interest rates would be “appropriate” - that certainly didn’t go unnoticed. The markets and investors are now braced for a rate rise sooner rather than later.
The smart money now is on a hike in interest rates to 0.25% by the end of the year. Then a further rise to 0.5% by March.
The prospect of higher rates - which previously hadn’t been expected to rise until around summertime - saw UK government bonds fall, with the yield on 10 year gilts hitting 1.21% - its highest level since May 2019.
Now moving on to company news. It’s probably fair to say that six years is a relatively long time in the fast-fashion industry. But for online fashion retailer ASOS today’s news that its CEO is departing with immediate effect has clearly sent investors into a spin. That wasn’t the sole factor for the fall in ASOS shares though. though. They slumped by almost 16% as news of after Nick Beighton’s departure broke amid a warning that profits could fall by more than a third this year because of supply chain problems and Brexit.
Just over two weeks ago shares in rival fast fashion chain Boohoo suffered a similar fate - dropping 15% after a warning that profits there would be lower.
There is no doubt that cost pressures are mounting in the supply chain and competition is increasing — both from reopened bricks-and-mortar retailers and online rivals.
Elsewhere on the companies front we get the start of the US banking results season, with JPMorgan Chase on Wednesday and Goldman Sachs reporting third-quarter earnings on Friday.
The two key items on the UK’s economic agenda this week will be the jobs numbers on Tuesday and, a day later the August gross domestic product estimate, which will give us a better idea as to what is really happening behind those news headlines about driver shortages and unfilled vacancies putting even our traditional Christmas turkey at risk.
Unfilled jobs have been a persistent cause of concern in recent weeks, but if last week’s US jobs data is anything to go by we shouldn’t assume all those 1 million-plus jobs going begging in the UK jobs market will have been flooded with willing applicants.
The US figures showed that the need for workers isn’t exactly being met with enthusiasm by potential candidates. Quite the opposite. The number of people who took up jobs in September at a mere 194,000 was way below the half a million expected, making it the weakest jobs growth in any month in 2021 so far.
On Wednesday too it’s the Opec monthly oil market report, which will probably be more keenly watched than usual for obvious reasons. The mounting energy crisis is of course not a UK-only problem. Cold winters in Europe and Asia drained gas in storage while the economic rebound from the pandemic has pushed up demand, all at the same time as lower wind speeds in Europe this summer have reduced renewable energy generation.
Another topic that isn’t just a major talking point here in the UK either is Inflation. This week we will get consumer and producer price index data for the US, India, Germany, Japan, France and Italy. There is a lot to digest right now and so the timing of our next Investment Outlook couldn’t be better. Investment Director Tom Stevenson will be giving his views on the outlook for the months ahead and answering your questions in both a webinar and podcast with Ed Monk that you can catch from Wednesday here at fidelity.co.uk or wherever you get your podcasts.
And that’s all for this week from me. Bye for now.