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D-PIMS Weekly Market Update - Week of 11th to 17th October 2021

Today’s Monday Update:

Over the course of the last week, headlines were mostly economy and Covid related, although Brexit also made an appearance or two:

• On Monday, British government bond yields soared to their highest level in two-and-a-half years as investors became increasingly convinced that the Bank of England will raise interest rates before the end of the year. The lurch higher came in light of comments from BoE Governor Andrew Bailey and fellow rate-setter Michael Saunders, who both stressed the need to prevent expectations of rising inflation from becoming embedded. Investors have singled out gilts for heavy selling among major government bond markets, reflecting not just the prospect of BoE rate hikes, but a judgement that Britain appears to be especially prone to entrenched inflation pressure right now.

The Australian city of Sydney has emerged from lockdown after almost four months, with locals celebrating a range of new freedoms for the fully vaccinated. People queued for pubs and shops that opened at midnight on Monday specifically for the occasion. Many others have been enjoying anticipated reunions and visits to the homes of relatives and friends.

• On Tuesday, the BBC said it understands that the Department for Business expects to get Prime Minister Boris Johnson's backing for a package to help energy-intensive industries as gas prices soar. The Business Secretary Kwasi Kwarteng asked the Treasury to support firms hit by rising energy costs. The proposals could involve loans worth hundreds of millions of pounds. The Treasury is said to be still analysing the proposal, while Number 10 has declined to comment. Businesses have said they hope for a "swift response" from the Treasury. High energy costs have been forcing manufacturers to warn of higher prices for their goods as they pass on increases to consumers.

The government made “big mistakes” in its handling of the coronavirus pandemic, the first official report into Britain’s response has found. It urges swift changes to prevent a repeat. “Group-think” among ministers, scientific advisers and civil servants meant that a lockdown was not brought in quickly enough early last year, ranking as “one of the most important public health failures the United Kingdom has ever experienced”. But the report by the cross-party group said there had been successes too - in particular, the vaccination programme. It described the whole approach - from the research and development through to the rollout of the jabs - as "one of the most effective initiatives in UK history".

According to the latest official figures out on Tuesday, the number of job vacancies in the UK has hit a record high. Vacancies hit 1.1 million between July and September, the Office for National Statistics said, the highest level since records began in 2001. The largest increase in vacancies was in the retail sector and in motor vehicle repair, it said. The UK unemployment rate was estimated at 4.5%, compared with a rate of 4% before the pandemic.

Government borrowing this year could be more than £50bn lower than was forecast in March, thanks to the UK's strong economic recovery in the wake of the vaccine rollout, according to the Institute for Fiscal Studies. But "ever-growing spending on the NHS, and an economy smaller than projected pre-pandemic" will mean there is no room for big spending announcements on other public services, says the think tank's director Paul Johnson.

• On Wednesday, the European Union offered Britain a package of measures to ease the transit of goods to Northern Ireland, but it looked unlikely to end tensions over post-Brexit trading rules for the province, as it stopped short of the overhaul that London has demanded. The EU's executive said the measures could halve customs paperwork and cut checks on meat, dairy and other food products coming to Northern Ireland from mainland Britain by 80%. New EU rules would ensure the flow of medicines, notably generics, was not disturbed. The Commission says that, in return for concessions, the EU wants proper sharing of live data, reinforced monitoring of supply chains and labelling to ensure British products do not slip into the EU single market via a Northern Ireland back door.

Britain and Italy have agreed to pursue a new trade partnership, the British trade department said on Wednesday following talks on the side-lines of a G20 ministerial meeting in Italy. As a member of the EU, Italy's trade with Britain is governed by the EU-wide deal which came into force after Brexit. But talks with Italy could promote British exports like life sciences and defence, and help improve ties in growth sectors like digital services and green technology. The aim is to form a new partnership, which sees both sides meet annually at ministerial level and fosters more business-to-business partnerships, the trade department said.

• On Thursday, President Joe Biden pushed to ease supply shortages in the U.S. and tame rising prices in time for Christmas, but unsnarling U.S. supply lines could take far longer, experts told Reuters. Biden brought together powerbrokers from ports, unions and big business to address shipping, labour and warehousing pain in the U.S. supply chain, and announced new around-the-clock port operations in Los Angeles.

COVID-19 infections in children in England rose in September after schools returned from summer holidays, helping to keep cases high even as there was a fall among adults, a large prevalence study showed on Thursday. Infection numbers in Britain are currently much higher than in other western European countries. "Prevalence was high and increasing in school aged children during September," Paul Elliott, director of the study, told reporters, adding that increased vaccination uptake in school-aged children and adults would help limit transmission.

Britain's plan for a "green industrial revolution" has already attracted billions of pounds of investment, the government said on Thursday ahead of an investment summit in London which will bring together some of the world's most powerful financiers. Government data showed that investment worth £5.85 billion pounds had been delivered or committed since November 2020, when Prime Minister Boris Johnson launched a 10-point plan to prioritise green technology and climate goals in Britain's economic recovery from the COVID-19 pandemic. The plan targets £42 billion pounds of private investment by 2030 in energy, buildings, transport, innovation and the natural environment, alongside the creation of 250,000 ‘green jobs’.

• Chinese President Xi Jinping will not attend the COP26 climate summit in person, British Prime Minister Boris Johnson has been told, The Times newspaper reported on Friday. Britain, which hosts the 26th United Nations Climate Change Conference of the Parties, or COP26, in Glasgow on 31st October to 12th November, is seeking to get major powers support for a more radical plan to tackle climate change.

• Over the week, the main Global Stockmarkets were up, with Germany and India being the front runners. However after taking the strengthening Pound into account, returns on overseas investments were reduced for UK investors, leaving the UK indices in the lead. All the D-PIMS Portfolios were well up especially the higher risk portfolios. They were helped by their UK allocations and diversity.


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