Slower Economic Growth and Covid Surge Weigh on Markets

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Disappointing earnings from retailers, slower than expected US economic growth and rising Covid-19 infections in Europe weighed on markets on Wednesday.

Wall Street traded in the red at 19h30 after data showed that the US economy advanced by an annualised 2.10% in the third quarter of 2021.

A second estimate released by the US Bureau of Economic Analysis showed this underwhelming rise followed an increase of 6.70% in the second quarter and below expectations of 2.20%.

While personal consumption was boosted by international travel, transportation services, and healthcare, the lower-than-expected GDP growth rate reflected a deceleration in consumer spending as a spike in Covid-19 cases and new lockdown restrictions delayed the reopening of some establishments and supply chains challenges made certain items scarce.

Even though business growth in the Eurozone grew unexpectedly this month, European shares still fell to three-week lows as a new Covid-19 wave continued to knock investor sentiment.

In the local markets, the JSE closed 0.64% lower at 70 558.89 points led by financials and industrials, while the rand dipped alongside its emerging market peers to trade at R15.90/$ at the closing bell.

While Japan’s benchmark Nikkei fell 1.13% a day after a public holiday in the country, markets in the rest of Asia traded flat after a rise in US Treasury yields and volatile oil prices.

The price of Brent crude remained steady a day after a 3% increase “after the US said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain to try and cool prices after repeated calls for more crude failed to sway OPEC+ producers,” Reuters noted.

Gold prices dropped on Wednesday after US economic data lifted the dollar and Treasury yields ahead of minutes from the Federal Reserve's November meeting that could provide cues on monetary policy going forward.

Reuters added that “ gold slid below the key $1 800 mark earlier this week as the re-nomination of Fed Chair Jerome Powell bolstered bets of faster monetary policy tightening, boosting the dollar and in turn making bullion more expensive for overseas buyers.”

PSG Wealth Daily Investment Update, 25 November 2021

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