Market Update – 1st April 2021.

1st April 2021

Although it is a shortened week thanks to the Easter holiday, it has already been filled with action – and we can expect plenty more as the week goes on.

While the clearing of the Suez Canal is good news as it means manufacturers waiting for their goods will now start to get them, in today’s just-in-time workflow and consumers’ demand for speed, supply chains (involving cargo ships, ports, lorries, factories, warehouses and retail outlets) are all intertwined and operate on very tight schedules.

As a result, even this short disruption has put significant stress on global logistics as cargo ships can’t all of a sudden be relocated and therefore ports may start to get snarled-up, meaning shipping containers may not be in the correct location at the correct time – and as such we are likely to see the impact in economic data in the coming weeks and months.

To top it off, as we have previously highlighted, there is currently a global shortage of semiconductors – the extent to which became clearly visible in the 2.1% drop in Japan’s industrial production.

Additionally, yesterday’s listing of Deliveroo was decidedly off the menu – and unfortunately won’t help a post-Brexit London.  Despite the fact that the food-delivery company priced its shares at 390p, the low end of initial guidance, hoping for a nice pop on its first day, the shares ended the day down just over 26% at 287.45p.

On a positive note, Joe Biden announced that 90% of American adults will be eligible for a coronavirus vaccine within three weeks – and as we have previously said, vaccinations will allow the global economy to reopen, and more importantly, stay open.

Economic data releases have also been positive.  For example, there was a 3.1% increase in Japanese retail sales during February, which suggests, like in the UK, people are getting used to living with coronavirus and as a result, the Q1 economic contraction is likely to be smaller than the major economists currently fear.

Likewise, the Eurozone CPI for March also cemented our views that there is no need for central banks to increase interest rates as the pickup in inflation is only transitory due to the pass-through of last year’s distorted oil price:  while Eurozone headline inflation rose from 0.9% to 1.3%, the core reading which excludes volatile items such as food and energy, actually fell from 1.1% to 0.9%.

Looking ahead at the rest of the week’s action, tomorrow the US employment data will be released despite the major equity markets being closed for Good Friday – meaning that liquidity will be low in those markets that are open.  Let’s hope it is a good Friday!

Investment Management Team