While the UK seemed to be getting out of the woods and started to ease lockdown measures, France, Italy imposed Easter lockdowns as Covid cases started to surge in late-March and early-April and European nations struggle to contain a rising number of infections. But while the EU’s slow vaccination rollout and rising infections are forcing governments to reinstate full lockdowns, the US seems on its way out; Morgan Stanley said in a new report that the US economy will grow 8.1% in 2021 and GDP will return to pre-pandemic levels by the end of Q1.
Chart of the month: S&P500 Index breached 4,000 for the first time
Source: FT, Blend Network
Politics & Economics
- The jab war escalated as the EU outlined a mechanism to stop exports of covid-19 vaccine components to countries that do not export to the EU, or already have higher vaccination rates. Britain, meanwhile, said a domestic factory would produce the new Novavax vaccine, which will reduce the UK’s reliance on overseas production.
- According to a Morgan Stanley report, the US economy will grow 8.1% in 2021 and GDP will return to pre-pandemic levels by the end of Q1 as the Covid-19 threat fades.
- The Fed said that on 30 June it would lift the remaining restrictions on banks from buying back shares and paying out dividends, measures it took during the pandemic. Banks may still face curbs if they do not have the capital to pass the next stress tests.
- Deliveroo’s IPO started badly, when its share price dropped at the start of the first day of trading. The listing was the most hotly awaited IPO on the London Stock Exchange for years. But some asset managers have shunned the stock amid worries it might face the same crackdown in Britain as Uber has on its gig-economy conditions for workers.
- Average UK house prices grew by 5.7% year-on-year in March. While having eased off December’s 6-year high growth of 7.3% year-on-year, momentum remains striking.
- Looking at the quarterly trends, we see that the UK northwest remains the fastest-growing area. This region saw an impressive 8.2% year-on-year growth in Q1 2020 and was also the fast-growing region in 2020 with 5% growth last year amid the pandemic.
- April kick-started with renewed force in the equity markets as technology and energy shares pulled US stocks to a new record in on 31 March while government bonds rallied ahead of the Easter bank holiday weekend. The S&P500 passed the 4,000 level for the first time and yields on benchmark 10-year Treasury note rose sharply in Q1.
FX & Commodities
- Relative growth expectations across different countries post-Covid have continued to drive global exchange rates in recent months and weeks. Generally, expectations of US outperformance have continued to sustain underlying US dollar support. However, US dollar support has also been driven by concerns over Europe’s Covid-19 resurgence as well as an escalation of tensions between the West and China, after the US, Canada, the UK and the EU imposed sanctions on Beijing for human rights abuses in Xinjiang.
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