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NO SHORTAGE OF SHORTAGES AS LACK OF LORRY DRIVERS CONTINUES TO DISRUPT SUPPLY CHAINS

  • NO SHORTAGE OF SHORTAGES AS LACK OF LORRY DRIVERS CONTINUES TO DISRUPT SUPPLY CHAINS

    NO SHORTAGE OF SHORTAGES AS LACK OF LORRY DRIVERS CONTINUES TO DISRUPT SUPPLY CHAINS

    Data Sourced from FE Analytics, and Bloomberg Finance LP

    NO SHORTAGE OF SHORTAGES AS LACK OF LORRY DRIVERS CONTINUES TO DISRUPT SUPPLY CHAINS

    This week shortages continue to dominate the headlines, suggesting perhaps the greatest shortage is something else to write about. A lack of lorry drivers has been stressing supply chains all summer and news this has started to impact a few petrol stations has prompted panic, with queues on garage forecourts witnessed first-hand. Brexit isn’t the sole cause or possibly even the primary cause, as the pandemic and people not wanting to be lorry drivers also contributed, but the government’s refusal to let in overseas drivers temporarily is prolonging the problem.

    Elsewhere, the failure of giant Chinese property firm Evergrande has shaken markets as some international investors finally noticed its plight. However, propping up growth, especially in rural areas, by building a lot of useless infrastructure funded by heavily government-influenced cheap bank loans is something of a tradition. This has led to a huge property bubble that will need to be unwound. While it is unlikely to cause a Lehman’s type collapse, it is going to contribute to a slowdown as it becomes harder to juice economic growth with infrastructure spending.

    US: FED FIRMS UP PLANS TO START WINDING DOWN BOND BUYING

    This week has seen a packed schedule of central bank policy meetings, with the Bank of England, Bank of Japan, European Central Bank and US Federal Reserve all deliberating. All the banks met expectations by leaving interest rates and bond buying undisturbed for now. The US Fed received the most attention as it edged ever closer to tapering its bond purchases with chair Jerome Powell saying that he felt the substantial progress he has been waiting to see in the jobs market has effectively been achieved. Committee members’s expectations edged closer to an interest rate increase in 2022.

    Economic recovery in the US has been running ahead of Europe and Japan, and inflation has also been running considerably above target for the last 6 months and it is expected to be the first major central bank to begin tightening monetary policy. Financial markets were initially unmoved by the Fed’s announcements but yields on longer dated US Treasuries moved up towards the end of the week.

    UK: BANK OF ENGLAND EXPECTS INFLATION TO EXCEED 4% THIS YEAR

    The Bank of England says it expects the rate of consumer prices growth to rise above 4% this year before falling back in the middle of 2022. Echoing the US Federal Reserve’s position on employment, the Monetary Policy Committee held interest rates at 0.1% and said it would wait to see what happened to unemployment after the furlough scheme is withdrawn at the end of the month. The recent rises in natural gas prices and other fuel costs have contributed to rising inflation but the MPC is unchanged on its view that the elevated inflation rate will be temporary.

    Although the Bank of England’s forecast for GDP growth this year has been revised downwards due to a slowdown in the economic recovery, the MPC said the case for raising interest rates is strengthening. The prospect of an early rate rise pushed up the pound against the dollar and saw 10-year gilt yields rise from 0.8% to 0.9% on Thursday.

    EQUITIES: CHINA EVERGRANDE DEBT CRISIS SPARKS MARKET VOLATILITY

    Global equity markets dropped sharply on Monday and safe-haven assets like US Treasuries and the US dollar rose due to fears that one of China’s biggest property developers is about to default on its vast pile of debt. Hong Kong-listed China

    Evergrande this week failed to make an interest payment of $84m. It is one of the world’s most indebted developers with outstanding debt in excess of £305bn. Only a small part of this debt is held by overseas investors but markets were spooked by the potential impact of a disorderly collapse on the Chinese financial system.

    Most developed equity markets recovered due to the consensus view that contagion is unlikely, although Hong Kong and Chinese equities remain down this week. The crisis has been a long time coming. Investors have been concerned that debt levels among Chinese property developers are unsustainable and last year the Chinese government introduced much tighter restrictions on borrowing to try and curb rapid house price growth.

    For more information regarding our weekly market reports, we encourage you to give us a call on 01732 746188 or send us an email at enquiries@foxgroveassociates.co.uk.

    This document has been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. Financial Express Investments Ltd, registration number 03110696, is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit https://www.fefundinfo.com/en-gb/about/legal-and-policies/.

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