Market overview – Alan McIntosh, Chief Investment Strategist
Global stock markets wobbled at the start of last week as Chinese real estate giant Evergrande inched closer to sinking in a sea of debt. Can a largely Chinese problem transmit to other markets was the question being asked. A heavily indebted real estate sector is not a new feature on the Chinese landscape, but it is important to the economy. As the week progressed it became more likely that the authorities will deal with this in a way that causes minimal disruption. Thus markets found their footing once more and closed the week higher that they started.
All change today in German politics, with the Social Democrats led by Olaf Scholz beating Angela Merkel’s Christian Democrats by a narrow margin. After nearly sixteen years as Chancellor, “Muti” as she is affectionately known, will hand over the baton. A coalition is in sight, but if Scholz becomes the new chancellor he is at least a known quantity, serving as finance minister in the current government.
Sharply rising natural gas prices have hit the headlines in recent days along with the prospect of higher energy bills for consumers. The question of whether inflation is transitory, as most central banks believe, is being tested again. Both the US Federal Reserve and the Bank of England have recently raised their inflation forecasts for next year. The dictionary definition of “transitory” is something that lasts only for a short period of time. However, there is no standard definition of a short period of time!