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Markets higher as central bankers take centre stage – Zurich Weekly November 8th 2021

Stocks enjoyed another solid week of gains as investors took both a Fed
announcement and US jobs report in their stride. In Friday’s unemployment
report, headline payrolls rose by a better than expected 531,000. This was
the fastest rate in three months, with August and September also both
seeing upward revisions. Total employment is still roughly 4.5 million below
pre pandemic levels, but the direction of travel is clear, and the
unemployment rate now stands at 4.6%. Nine of the eleven sectors in the
S&P 500 moved higher, as optimism in the US market was clearly evident.
On Wednesday, a move very much forecast by the market, the US Federal
Reserve announced it would begin to ‘taper’ its bond purchase programme
by $15 billion per month. If this pace is maintained the programme will be
fully wound down by next June. However, the accompanying commentary
was relatively dovish, and Chair Powell did nothing to upset the market as
US treasury yields moved lower. Other US data releases pointed to
continuing supply chain issues with the manufacturing PMI moving lower to
60.1 (albeit still well in expansionary territory) as the purchase price paid
component jumped materially.
The Bank of England surprised markets last Thursday by not raising interest
rates when the market had fully priced in a 15bps movement. The Monetary
Policy Committee voted 7-2 in favour of leaving rates unchanged in a move
which led to Sterling weakening against the majority of major currencies. The
asset purchase programme was also left unchanged, as the somewhat
unkind moniker of the ‘unreliable boyfriend’ spread throughout markets