Market Update

The past week brimmed with monetary policy developments, with central bank gatherings in the US, UK, and Australia. Amid heightened concerns that responses to the recent inflation surges could hinder economic recovery, the actions and statements of these banks were closely watched.
On Tuesday (2 November 2021), the Reserve Bank of Australia (RBA) made its move. Philip Lowe, the RBA Governor, acknowledged global inflationary concerns but quashed speculations about an imminent rise in Australian interest rates. He attributed the current inflation spike to COVID-19 restrictions and signaled that the RBA wasn't rushing to adjust rates.
The narrative was mirrored in the US on Wednesday (3 November 2021) when Jay Powell, the Fed Chair, emphasized the Fed's patient approach towards any interest rate alterations, despite potential inflation arising from supply-chain delays and bottlenecks. Additionally, as anticipated, the Fed unveiled plans to taper their QE program by $15bn monthly.
The UK presented a more dramatic scene with the Bank of England's (BoE) decision causing quite the ripple. Despite market anticipations leaning towards a rate hike, the BoE, aligning with our long-held stance in previous commentaries, opted to keep the rates steady at 0.1%. The 7-2 voting split in favor of unchanged rates, especially given the recent hawkish remarks from some BoE officials, was indeed unexpected.
This collective approach by central banks suggests a recognition that current inflationary pressures largely stem from supply chain and logistic challenges. As we've often emphasized, raising interest rates won't magically enhance gas or semiconductor supply, nor will it hasten shipping logistics.
We're inclined to believe that conditions reminiscent of the "Goldilocks" scenario are re-emerging. Even when rates begin to rise, they are likely to remain low, and we're witnessing alleviation in semiconductor shortages and stabilization in some commodity prices. This scenario bodes well for global equity landscapes.
For the upcoming week, our focus will be on the UK's Q3 GDP, industrial production figures from the UK & Eurozone, PPI metrics from the US, China, and Japan, CPI inflation data from the US & China, and the University of Michigan Consumer Sentiment Index.