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Stocks suffer slightly in choppy week of trading – Weekly Investment Review 20 September 2021

Stocks suffered last week as the overall market fell in a week of choppy
trading. US markets started the week on a pessimistic note, as it emerged
over last weekend that key democrats would not support the full extent of
President Biden’s infrastructure package. There was better news on the
inflation front, as the latest US CPI release on Tuesday showed prices were
up just 0.1% versus an expectation of 0.3%. Whilst one data point does not
signal a trend, it was certainly evidence for those supporting the thesis that
inflation remains transitory; and is largely a consequence of pandemic
stimulus and the subsequent rebound. August’s retail sales number was a
positive for markets as e-commerce and back to school shopping led the
gauge to rise 0.7%.
The ECB’s Chief Economist Philip Lane raised some eyebrows in Europe as
the Financial Times reported that he has privately stated that he expects the
ECB’s 2% inflation target to be met by 2025, which would potentially see
higher interest rates sooner than current market estimates. Inflation was the
theme in the UK also, as it jumped to 3.2% in August, the highest level in nine
years. Interestingly, this now compels the Bank Of England Governor,
Andrew Bailey, to write to the Chancellor of the Exchequer to outline plans
on how the bank will bring it back down towards target levels.
In Asia, campaigning has continued in the race to become the leader of
Japan’s ruling Liberal Democratic Party, which will lead the winner to
become the next Prime Minister. Chinese stocks fell as economic data
disappointed for August. The growing crisis at property developer
Evergrande also cast a shadow on the domestic market