This market commentary has been produced for some time now, but March 2021 was the first month when a ship made the headlines. Anyone who watched a news bulletin will have seen the mega-container ship the Ever Green firmly wedged across the Suez Canal. The ship, which is 400m long, was finally re-floated having caused perhaps the most expensive traffic jam in history as it held up an estimated $9.6bn (£7bn) of goods every day.
The month also saw a major hacking attack by what Microsoft described as a “highly skilled and sophisticated actor”, reports have suggested a link to hacking group called Hafnium, allegedly backed by the Chinese government. North Korea caused the world to furrow its brow again as it fired two ballistic missiles and virtual currency Bitcoin surged past $60,000 (£43,500).
March was also the month when at least one central bank signalled its intention to introduce its own crypto currency.
Trade talks were held between the US and China in Alaska: the exchanges were politely described as ‘angry,’ but this did not stop many stock markets in this report having a good month, as vaccine rollouts gathered pace and hopes rose that lockdowns could soon be eased with economies starting to recover.
It seems a remarkably long time ago, but March in the UK started with Chancellor Rishi Sunak presenting his Budget as he started to plot an economic recovery from the pandemic and pay the bill for the commitment to ‘do whatever it takes’ to protect jobs and businesses.
The Chancellor defended his Budget as, “Not popular, but honest.” Predictably, though, it was the bill for the pandemic – and the consequent tax rises – that captured most of the headlines. With tax thresholds frozen for five years millions of us will end up paying more tax. ‘Sunak’s five-year tax grab’ said the Telegraph headline, with many commentators pointing out that tax levels are now at their highest since the 1960s.
Despite this a snap poll for YouGov showed that most people backed the Chancellor’s measures and – with the UK vaccine roll-out proceeding rapidly – the Government is comfortably ahead in the opinion polls.
In the wider UK economy, there was the usual bad news on jobs as travel agent Tui announced it would close 48 shops and the Government turned down Liberty Steel’s request for a £170m bailout despite fears for 5,000 jobs.
Perhaps, though, some light at the end of the tunnel is in sight. Retail sales rose 2.1% in February, recovering some of the ground lost in January, and British firms planned fewer job cuts in February, despite the continuing pressure of the pandemic. Figures reported by the BBC showed that 26,000 jobs were put at risk in the month, around one-fifth of the January figure and slightly lower than February 2020. Shops are apparently going to open until 10pm when lockdown is fully eased, and the retail sector is currently calling on the Chancellor to implement a ‘shop out to help out’ scheme to help struggling high streets.
More concretely, it was announced that a new wind turbine factory will create 750 new jobs on Teesside, and pub chain JD Wetherspoon announced plans to open 18 new pubs and create 2,000 new jobs – assuming there are no more Coronavirus restrictions. ‘Thousands of jobs’ are also set to be created with the news that US firm Panattoni is to buy the car manufacturing plant in Swindon from Honda, in a deal worth £700m.
The North East was certainly the place to be in March.
Despite all this the Bank of England said that the economic outlook for the UK remained ‘unusually uncertain’ and depended on the ‘evolution of the pandemic.’ With Government borrowing due to the pandemic hitting another record in February (borrowing for the month was £19.1bn, the highest figure for the month since records began in 1993) you can understand the Bank’s caution. But consumers were rather more optimistic, as confidence surged to a 12-month high in March and estate agents reported house buyers ‘at record levels.’
As stated in the introduction, March was generally a good month for world stock markets, and the FT-SE 100 index of leading shares followed this trend. It rose 4% to close the month at 6,714. The pound was down 1% against the dollar in the month, and finished March trading at $1.3804.
There has been plenty of gloomy news in the Europe section of the commentary over the last 12 months, so it was good to see the month start on a positive note. Reuters reported that February had seen European factories ‘buzzing’ as demand soared. The European Purchasing Managers’ Index jumped to a three year high of 57.9 in February, up from 54.8 in January and one of the highest figures in 20 years of the Index.
One factory that was certainly ‘buzzing’ was Lamborghini’s in Italy. Despite the factory being shut down for two months the company recorded its most profitable year ever in 2020 as it sold more expensive, customised sports cars. Inevitably, much of the demand came from China which is poised to overtake Germany as the company’s second-biggest market.
France, Italy, and Poland did impose new lockdowns over Easter – as the pandemic continued and wrangles over the vaccine roll-out escalated.
…But Europe’s leading stock markets took their cue in March from the factories, not further lockdowns. The German DAX index was the best performer of all the markets covered, rising 9% in the month to close at 15,008. The French stock market was not too far behind, climbing 6% to end March at 6,067.
The month in the US started with perhaps the least surprising news of the year so far. Zoom – the video conferencing app everyone from grandparents to CEOs has become reliant on over the last 12 months – is looking forward to yet more growth this year. 2020 was ‘unprecedented’ for the company, with boss Eric Yuan declaring that working from home is “here to stay.”
More importantly, there was good news on jobs in the wider US economy as the hospitality sector brought back workers previously made redundant. The economy added 379,000 jobs in February, breaking a two-month run of minimal gains. The jobless rate dipped from 6.3% to 6.2%: millions remain out of work due to the pandemic, but the February figures were hopefully a step in the right direction.
March was not without its problems, however, with Microsoft pointing to a Chinese cyber-espionage group – supposedly with links to the Chinese government – for an attack which allowed hackers to remotely access email inboxes.
The US stock market was, though, far more in step with the optimistic forecasts of the Fed than it was with Microsoft’s problems. The Dow Jones index rose 7% to end the month at 32,982 while the more broadly based S&P 500 index was up 4% to 3,973.
March in the Far East opened with the meeting of China’s parliament. As had been widely expected, the Chinese Communist Party unveiled new controls on Hong Kong, with only ‘patriots’ – those loyal to Beijing – allowed to run Hong Kong. Martin Liao, who sits on both the Hong Kong and China legislatures, suggested that there were many “politically immature” people in Hong Kong. He said, “they think ‘one man one vote’ is the best thing, and they take advice from countries that don’t even have ‘one man one vote’, referring to how neither the U.S. President nor the British Prime Minister is elected by popular vote.
As the rest of the world struggles to recover economically from the pandemic, Chinese Premier Li Keqiang unveiled a growth target of ‘above 6%’ for this year. As if that were not enough, former Minister of Industry and IT Miao Wei said that China was still too reliant on other countries for ‘core technologies’ and was 30 years away from becoming a manufacturing nation of “great power.”
With more than a third of the world’s output from cars to phones already coming from China, most observers would suggest it already is a ‘great power.’ Key economic data certainly confirmed China’s bounce back from the pandemic, with industrial output in the first two months of the year up 35.1% on January and February 2020.
March was a mixed month for the major Far Eastern stock markets. Whereas markets in the West rose on hopes of an economic recovery from the pandemic, that was probably already factored in to the Chinese and Hong Kong markets. Both were down 2% in the month, closing March at 3,442 and 28,366, respectively. The markets in South Korea and Japan both moved cautiously upwards though. The South Korean index rose 2% to 3,061 while Japan’s Nikkei Dow index was up 1% to 29,179.