Archinomics Weekly 08.11.21
Architas (Now AXA IM Select)
Now a member of the AXA Investment Managers family and is now formally known as the business unit, AXA IM Select
Equities
All major US indices hit record highs, buoyed by a strong end to Q3 earnings season, as well as dovish rhetoric from the US Federal Reserve (Fed). European indices were also boosted by strong earnings and a supportive central bank. Japanese equities responded positively to a win for the ruling party of Prime Minister Kishida, while China underperformed, on continued weakness in the property sector.
Bonds
US Treasury bond yields fell, and prices rose, as the Fed confirmed its ‘patient’ approach to monetary policy tightening. Investment grade corporate bond yields fell closer to government bond yields, while a similar dynamic was seen in the high yield sector.
Currencies
Sterling dipped against all majors, as the Bank of England left interest rates unchanged, while the yen gained ground across the board. The euro improved against the US dollar, despite assurances from the European Central Bank that interest rates were unlikely to rise in 2022.
Commodities
Oil slipped from recent highs, as the Biden administration raised the prospect of releasing strategic reserves. Gold rose 2% on the week.
Responsible Investing
At the UN Climate Change Conference, or COP26, world leaders pledged action on deforestation, as well as methane and coal production. The International Energy Agency estimated these pledges could limit the rise in global temperatures to 1.8˚C from their previous estimate of 2.7˚C.
Macro
- The Fed announced plans for a gradual tapering of its pandemic-era bond buying programme, while committing to remaining ‘patient’ on inflation.
- US non-farm payrolls added 531,000 jobs, comfortably beating estimates, while the unemployment rate fell to 4.6%.
- President Biden’s $1 trillion Infrastructure plan became law, prompting a vow to secure success for his $1.75 trillion social package.
On the radar
- Inflation data from the US, China and Japan will be closely analysed.
- The Chinese Communist Party looks set to prepare the path for President Xi Jinping’s historic third term of office.