What has happened
Markets trod water yesterday as investors awaited the CPI report tomorrow, with equity indices moving little on either side of the Atlantic. Yesterday’s US Job Openings and Labour Turnover Survey (JOLTS) data pointed to the continued difficulty facing employers in filling roles, with the figures showing a record high of 10.07m jobs available. This data shows that whilst unemployment levels are coming down there are still supply issues and as those that want jobs are hired, the participation rate across the US will become ever more important.
Fed Speakers
We are starting to hear the first set of Federal Reserve Speakers react to last Friday’s unemployment report. Bostic and Barkin were first out of the stalls and neither pushed back against expectations of a tapering announcement by the end of the year. Governor Bostic said that the Fed was ‘well on the road to substantial progress’ towards the employment target set by the bank earlier this year and that last week’s number helped evidence the momentum required. Governor Barkin said that substantial gains were still required in the jobs outlook however, suggesting that an announcement in the September meeting is unlikely. Both Speakers pointed towards an announcement around the November/December meeting of this year when the world’s most important central bank could begin to reduce some of its pandemic monetary stimulus.
Delta variant
The delta variant continued to weigh on the reopening trade yesterday and we saw US airlines as well as hospitality selloff as investors struggle to price in the exit from international restrictions. This comes as the US recorded 761,000 new cases over the last week which is the highest rate since February when the vaccine rollout was still in its relative infancy. This rise has prompted calls for an acceleration of the booster programme and Israel is considering rolling out its booster shots to younger cohorts ahead of the winter. In the UK, weekly cases have also begun to rise with the UK, US and Israel, all countries successful in their vaccine rollout, seeing some of the largest levels of weekly cases per 100k people.
What do we think
The market is very much in wait and see mode ahead of the US CPI number tomorrow but the jobs report last week was sufficiently upbeat that Fed Speakers have not shied away from reiterating their tapering timeline in the interim. Policymakers will be watching the COVID cases closely however as should the current positivity rates continue into the winter, governments will yet again need to weigh up a desire to move on from the pandemic with strains on the healthcare system.
| Index | 1 Day | 1 Week | 1 Month | YTD | |
| TR | TR | TR | TR | ||
| MSCI AC World GBP | 0.1% | 0.9% | 1.2% | 12.7% | |
| MSCI UK All Cap GBP | 0.1% | 0.8% | 0.9% | 14.0% | |
| MSCI USA GBP | 0.1% | 1.4% | 1.6% | 16.9% | |
| MSCI EMU GBP | 0.1% | 0.9% | 2.1% | 13.4% | |
| MSCI AC Asia ex Japan GBP | 0.4% | 0.7% | -1.9% | -1.3% | |
| MSCI Japan GBP | 0.2% | -0.9% | 0.8% | -0.1% | |
| MSCI Emerging Markets GBP | 0.3% | 0.4% | -1.6% | 0.2% | |
| MSCI AC World IT GBP | 0.0% | 1.4% | 2.6% | 15.6% | |
| MSCI AC World Healthcare GBP | 0.6% | 1.0% | 2.9% | 12.8% | |
| Barclays Sterling Gilts GBP | 0.8% | 0.1% | 2.5% | -2.7% | |
| Barclays Sterling Corps GBP | 0.4% | 0.1% | 1.4% | -1.0% | |
| WTI Oil GBP | -2.5% | -6.4% | -10.8% | 35.1% | |
| Dollar per Sterling | -0.2% | -0.3% | -0.4% | 1.3% | |
| Euro per Sterling | 0.0% | 0.9% | 0.8% | 5.5% | |
| MSCI PIMFA Income | 0.2% | 0.5% | 1.1% | 7.9% | |
| MSCI PIMFA Balanced | 0.2% | 0.6% | 1.1% | 9.1% | |
| MSCI PIMFA Growth | 0.1% | 0.8% | 1.0% | 11.1% | |
Source: Bloomberg as at 10/08/2021. TR denotes Net Total Return
