Monthly Market Pulse: October 2021

Rising – and potentially long-lasting – inflation has continued to dominate the headlines across developed economies, including in the UK[i]. Meanwhile, the Bank of England has warned that rising inflation could trigger a sell-off in global financial markets, with damaging consequences for the UK economy[ii]. All these combinations of factors have accelerated investors’ search for yield, to diversify their stock market positions and also to protect against feared inflation.

Chart of the month: Inflation jumped to 3.2% in August 2021

Source: Office for National Statistics (ONS), BBC, Blend Network

Politics & Economics

  • Petrol queues, food shortage and 1.5 million cauliflowers left unpicked to rot. Those have been the types of headlines dominating in the UK over the past month or so[iii]. Although members of the armed forces have been drafted to help tackle the supply chain crisis by driving lorries, the issue appears far from being solved in the near-term[iv].
  • Levelling up’, the term first used by Prime Minister Boris Johnson in 2019, reappeared at the Conservative Party conference earlier this month[v]. In his speech, Mr Johnson focused on ‘levelling up’ the country to close the gap between the rich parts of Britain, mainly London and the south-east, and the rest of it, chiefly northern constituencies[vi].

Business

  • Rising energy prices caused inflation pressures in the EU. The EU’s September inflation rose to 3.4%, the highest level in 13 years. Germany CPI rose by 4.1%, a 29-year high[vii].
  • In the UK, the Bank of England expects inflation will rise above 4% this winter, the highest level seen in a decade, and will remain elevated until at least the summer of 2022 before gradually falling back towards the bank’s target rate of 2%. However, some analysts have warned inflation could increase at a higher level within months[viii].

Real Estate

  • According to the Nationwide House Price Index , annual house price growth remained in double digits for the fifth month in a row in September but eased back to 10.0% from 11.0% in August[ix]. Despite ongoing double-digit growth, momentum has eased since the start of summer, though prices remain c13% higher than before Covid began.
  • Wales, Scotland and Northern Ireland were the strongest performing regions in Q3, while London was the weakest. Price growth in most English regions saw a slowdown in Q3, and performance in the north continued to exceed that in southern England[x].

Equity Markets

  • The energy shortage rattled other financial markets too, as investors worried about the fallout. US and Europe government bond yields climbed, and UK yields on ten-year gilts jumped to their highest since May 2019[xi]. Markets are down led by energy stocks[xii].
  • Earlier this month, the Bank of England warned that rising inflation could trigger a sell-off in global financial markets, with damaging consequences for the UK economy[xiii].

FX & Commodities

  • October was another roller-coaster month for energy prices. After OPEC resisted calls to increase output, crude price surpassed $80 per barrel and reached the highest level in three years. OPEC said it will stick to a steady output increase agreed this summer[xiv].
  • In Europe, natural gas price jumped by over 60% in two days. But prices soon reversed when Vladimir Putin hinted that Russia could supply additional gas to Europe[xv].

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Data found in this article are the property of the sourced information. Whilst every effort has been made to ensure this data is correct, Blend Network cannot guarantee there are no errors in the sourced data.

Your capital is at risk if you lend to businesses. P2P lending is not covered by the Financial Services Compensation Scheme. Investments are illiquid (the inability to sell assets quickly or without substantial loss in value). Past performance is not a reliable indicator of future results.

BLEND Loan Network Limited is authorised and regulated by the Financial Conduct Authority (Reg No: 913456).


[i] Source: https://bit.ly/3lmmLz6

[ii] Source: https://bit.ly/2WRZTOr

[iii] Source: https://bit.ly/2Ytu2ok

[iv] Source: https://econ.st/3uTHnBN

[v] Source: https://econ.st/3iI3nuJ

[vi] Source: https://bit.ly/3iK6fHl

[vii] Source: https://bit.ly/3BfnoQx

[viii] Source: https://bit.ly/3BfnoQx

[ix] Source: https://econ.st/3iI3nuJ

[x] Source: https://on.ft.com/2YvA5bi

[xi] Source: https://bit.ly/3iK6fHl

[xii] Source: https://econ.st/3iI3nuJ

[xiii] Source: https://econ.st/3iI3nuJ

[xiv] Source: https://on.ft.com/3AoFoqj

[xv] Source: https://bit.ly/3ahILoj

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