City thinking, local knowledge

December Market Commentary

By Questa Chartered


November was a month when supplies of both oil and gas – or the lack of them – dominated the news. You will read several comments below about the threat of inflation. In many countries, it is reaching levels not seen for two or three decades, and the escalating price of oil and gas – and the inevitable supply chain problems – has much to do with it.

At the time of writing, the price of oil is around $70 a barrel. Alarm bells started ringing in the middle of the month when the Bank of America forecast that it could reach $120 by June of next year – with the consequent knock-on for the price of petrol and hence prices in the shops.

The US announced that it was releasing 50m barrels from its reserves in an attempt to bring the price down. Several commentators, though, pointed out that in terms of total oil consumption, it was a ‘drop in the ocean’ and said the move would have little or no long term impact.

Meanwhile, the price of gas was also increasing sharply as German regulators suspended approval for the Nord Stream 2 pipeline. As we report below, Germany may well have a new Chancellor by the time you read this. With Europe getting 40% of its gas from Russia, relations with the Kremlin will be at the top of Olaf Scholz’s in-tray.

Also at the top – as with every other leader – will be Omicron, the new Covid variant and a new wave of infections and potential lockdowns. At the time of writing, there are suggestions that the new German administration could follow Austria’s lead and make vaccinations mandatory.

Away from the virus, tensions between the US and China over Taiwan continued. The US navy once more sailed through the contested Taiwan Strait, in what the US saw as part of its commitment to a “free and open Indo-Pacific” and China saw as “provocation”.  Matters were not improved when US President Joe Biden invited Taiwan to a Global Democracy Summit – and pointedly did not invite China.

We can expect more of the same in the coming months and, with China due to host the Winter Olympics in February, there’ll certainly be plenty more diplomatic tit-for-tat.

As always, let’s look at all of November’s news in more detail.


It was not a good month for the UK Government. Dogged by allegations of sleaze, the Conservative party lost their lead in the opinion polls to Labour. The Prime Minister made a less-than-successful speech to the CBI in which he frequently referenced Peppa Pig – giving the headline writers an open goal with ‘Peppa Pig’s ear’ – and a few days later, it was announced the HS2 rail link to Leeds was to be scrapped in order to save money.

We have mentioned the threat of inflation above, and figures for October saw UK inflation hit 4.2% – the highest figure for ten years – as higher fuel and energy costs pushed up prices. Supermarket price inflation reached its highest level for more than a year – as anyone who has done a recent weekly shop will know – with prices rising 2.1% in the four weeks to 31st October.

UK growth slowed in the third quarter of the year: the Office for National Statistics reported that consumer spending had continued to increase as the UK emerged from lockdown, but that this was offset by falls in other areas of the economy, leaving growth for the July to September period at 1.3%. That means the economy is currently 2.1% smaller than in the final three months of 2019, before it was impacted by the pandemic.

For ‘falls in other areas of the economy’, you can certainly read the UK car industry. ‘Problems in the supply chain’ translate as the ongoing shortage of semiconductor chips – which many experts believe will last into 2023 – and this meant that UK car production slumped to its lowest level for over 60 years as production dropped 40%.

There were suggestions that the UK/EU trade deal could collapse over the ongoing row over Northern Ireland. All in all, it was not surprising to see business confidence fall to its lowest level for 12 months as worries about inflation and the global supply chain weighed on company bosses.

Let’s try and find some good news amid the gloom – unless, that is, you are Tesco or Sainsbury’s. Amazon announced ‘aggressive’ plans to enter the UK supermarket sector, saying that it intends to open 260 stores by the end of 2024 and ‘take on Tesco and Sainsbury’s directly’. Like Amazon’s existing ‘Fresh’ stores, the new supermarkets will not have cashiers, with goods being scanned as customers take them off the shelves and bills being sent straight to their Amazon accounts.

Shell – Royal Dutch Shell to give the company its full name – announced plans to move its HQ to the UK as part of plans to simplify the company’s structure. And BP said that it would make Teesside the UK’s ‘green hydrogen hub,’ with plans to build a new, large-scale green hydrogen facility in the region by the end of the decade.

With Christmas approaching, there was good news on the retail front, with early Christmas shopping boosting retail sales in October. There was also record spending on Black Friday, with data from banks and credit card companies suggesting the country was on track to spend £9.2bn by the time the Black Friday weekend had finished.

Job vacancies hit a record in October, with the ONS reporting that there were 1.17m vacancies. Whether that is good or bad news probably depends on whether you’re looking for a job or trying to recruit. Plenty of employers reported having to offer improved pay and benefits as they struggled to recruit staff.

With worries about inflation, the supply chain, shortages and a possible fourth wave of Covid, November wasn’t a good month for global stock markets. With one exception, all the markets we report on in the Bulletin were down: the FTSE 100 index of leading shares fared better than most, dropping by 2% in November to end the month at 7,059. The pound declined against the dollar, and ended the month 3% lower, trading at $1.3249.


As we have already mentioned in the introduction, the month ended with new lockdowns and restrictions across much of Europe in the face of increasing numbers of Covid cases. Austria made vaccines mandatory and German health minister Jens Spahn gave the stark warning that by the end of the winter, German people would be “vaccinated, recovered or dead”.

The big news in Germany was, of course, that discussions on forming a new coalition government had finally reached a conclusion, and that SDP leader Olaf Scholz will become the next Chancellor. He will head a coalition with the Greens and the Free Democrats, with Greens leader Annalena Baerbock becoming foreign minister. She hailed the new coalition agreement as a “paradigm shift” for German politics.

She may well be right, with the new government setting out a radical agenda, both economically and socially.

Economically, it is planning to borrow what are described as ‘unprecedented’ amounts to drive the decarbonisation and modernisation (especially digital) of Germany. The end of the coal industry will be brought forward from 2038 to 2030, with the government committing to generating 80% of the country’s electricity from renewables by that date. The sale of new petrol and diesel vehicles will be banned ‘early in the next decade’.

Scholz, who is expected to be sworn in as Chancellor in early December, said, “We [the coalition partners] are united by the will to make the country better, to advance it and to hold it together.”

The big worry – like Joe Biden’s giant infrastructure project in the US – is that government spending on the scale that is planned will be inflationary. German inflation reached 4.6% in October: analysts are expecting a rate of 5.2% for November and the Bundesbank is openly discussing the possibility of it reaching 6%. As we reported in a previous Bulletin, Germans have been buying record amounts of gold this year amid worries about rising inflation.

The other big worry for Europe with winter approaching was its power supplies. Approval for the controversial Nord Stream 2 gas pipeline – bringing Russian gas into Germany – was suspended by regulators, leading to a spike in gas prices. Many commentators are worrying about energy shortages if Europe has a severe winter. The situation wasn’t helped when Belarus also threatened to cut gas supplies into Europe if the EU imposes further sanctions on the country over its treatment of migrants.

Unsurprisingly given all this, Europe’s leading stock markets did not enjoy a happy month. The German DAX index fell 4% to 15,100 while the French market was down 2% to close November at 6,721.


As we have written elsewhere in the Bulletin, the threat of inflation hangs over many of the world’s economies. Figures released in November showed US inflation for October had jumped to 6.2% – the fastest rate of growth for three decades and well up on the 5.4% recorded in September.

This prompted suggestions, notably from Goldman Sachs, that the Federal Reserve could ‘pull forward’ the date on which it had planned to raise US interest rates, perhaps to the middle of next year. The Federal Reserve – where Jerome Powell will now stay on as Chair – is also expected to cut back its economic stimulus measures from this month.

Will that bring inflation under control? Many commentators are sceptical. November saw President Biden sign his $1.2tn (£907bn) ‘once in a generation’ infrastructure bill into law, and there are real worries that this level of government spending could further stoke inflation. There are already supply chain problems: sceptics worry that more money chasing the same number of goods will simply push up prices.

We shall see: for now figures for October showed strong jobs growth in the US, with firms adding 531,000 jobs and the unemployment rate falling slightly to 4.6%. Despite this, the President of the American Truckers Associations told CNN that the country needed 80,000 truckers to fix the supply chain problems.

Electric truck maker Rivian raised more than $11.9bn (£9bn) from investors as it floated on the stock market – despite only starting to deliver its electric pick-up trucks to customers in September. The shares jumped 30% on their opening day, making Rivian the second-most valuable car company in the US after Tesla.

The American people, though, were not happy in November. The unofficial ‘misery index’ spiked – apparently due to inflation and Covid measures – with Americans described as ‘their most miserable in decades.’ Perhaps the residents of Taylor in Texas are a little more cheerful: Samsung has chosen Taylor for its new $17bn (£12.8bn) computer chip plant, the South Korean company’s biggest-ever US investment.

Wall Street chose to share the general misery of the American people, rather than rejoicing with the citizens of Taylor. The Dow Jones index was down 4% at 34,484: the more broadly-based S&P500 index closed November at an aesthetically pleasing 4,567 – but was still down 1%.

Far East 

As regular readers know, we make notes and clip links throughout the month in order to write the Bulletin at the end of it. It says much for the ever-increasing importance of China and the wider Asian economy that three years ago we had seven notes for November 2018: this month we had 21 – the same as for the UK section.

For once the notes did not begin with China: rather with Japan, where the month opened with new Prime Minister Fumio Kishida describing his plans to redistribute wealth in the country as the ‘new capitalism’. Critics were quick to point out the similarities to China’s ‘common prosperity,’ with Hiroshi Mikitani, boss of Rakuten – Japan’s answer to Amazon – complaining about the ‘double taxation’ of the plans to raise both Capital Gains Tax and profits made from investments.

From the ‘new capitalism’ to the very old. We have written previously about China’s drive to stockpile energy, with the government having told regional authorities to secure energy supplies ‘at any cost’. That was extended to domestic consumers in November, as an unexpected cold snap courtesy of La Nina led to householders being told to stockpile food and coal. As City AM pointed out, China appears to be ‘addicted to coal’. This year, the number of coal-fired power stations granted approval globally has risen for the first time since 2015 – with China accounting for two-thirds of those approvals.

China’s ‘factory gate’ prices continued to increase, with November’s figures showing a rise of 13.5% which meant that producer prices were increasing at their fastest rate since records began in November 1995. Despite this – and the now seemingly ever-present supply chain problems – figures for October showed that China had posted a record trade surplus as exports surged.

Exports were up 27% on the previous year to $300.2bn (£225bn) – the 13th straight month of growth in double figures. Imports increased by just over 20%, leaving China with a trade surplus of $84.5bn (£63.3bn).

November also brought us ‘Singles Day’ (so called as the date 11.11 supposedly looks like four lonely figures). Traditionally this has seen a huge leap in sales for China’s online giant Alibaba. This year, sales for the event rose at their slowest rate since its launch in 2009, the first time the company has failed to achieve double-digit growth for the 11 day shopping festival (and you thought Black Friday was bad…).

Not surprisingly Alibaba duly warned that its annual revenue would grow at the slowest pace since its stock market debut in 2014, with the shares falling back by 10% on the Hong Kong stock market.

We have written about the Chinese property market in previous bulletins and the huge indebtedness of some of the leading companies. November brought us more of the same, with Evergrande apparently selling two Gulfstream jets to meet repayments to foreign creditors, and subsequently selling a stake in a streaming firm for $273m (£205m) for the same reason. Kaisa Group also missed a payment to creditors and although the month ended with a suggestion that Beijing may order local government to help out property firms (presumably by taking on more debt), there must at some point be a day of reckoning.

Elsewhere in the region, South Korea increased interest rates for the second time this year amid concerns over rising prices and rising household debt. In a widely expected move, the Bank of Korea increased rates by 0.25% to 1%. And to end where we began, Japan’s export growth dropped to just 9.4% in October, the slowest growth for eight months, as car exports to China and the US fell by almost 50% thanks to problems in the supply chain.

On the region’s stock markets, China’s Shanghai Composite Index was the only market on which we report not to lose ground in November. It inched up just 17 points to close the month at 3,564. Hong Kong’s Hang Seng index, in contrast, fell 7% to 23,475. The markets in Japan and South Korea were both down by 4% in the month to 27,822 and 2,839 respectively.

Emerging Markets 

In the October Bulletin, we mentioned El Salvador’s President Nayeb Bukele and his plans to mine Bitcoin – which his country now accepts as legal tender – using power harnessed from a volcano. We suggested it was a scheme a Bond villain might envy: little did we know. In November the President went one stage further, announcing the building of a circular city (to represent the shape of a large coin) at the base of the Conchagua volcano. The plan is to use the volcano’s geothermal energy to power the bitcoin mining.

India, meanwhile, went in precisely the opposite direction, introducing a bill to ban most cryptocurrencies and bring trading in those that remain under tighter regulatory control. There were also suggestions that India might impose some kind of ‘climate lockdown’ – closing schools and ordering people to work from home – in a bid to beat pollution in New Delhi.

Tensions between Russia and the Ukraine continued, with news agencies reporting that Russia now has 90,000 troops stationed on its border with Ukraine. With winter on its way, there are also the usual suggestions that Russia could simply turn off Ukraine’s gas supply and/or stop supplying coal. Ukraine’s power plants use 1.8m tons of coal per month, with the country importing around 670,000 tons from Russia.

As with virtually all the world’s stock markets, the three major emerging markets on which we report were down in November. Russia led the way, dropping 6% to end the month at 3,891. The Indian stock market fell 4% to 57,065 while the Brazilian market was down 2% at 101,915.

And Finally…

The ‘And finally…’ section of the Bulletin has been a regular tale of shortages this year – but perhaps we can take comfort in the fact that the suffering has not been confined to the UK. The last weekend of November was, of course, Thanksgiving weekend in the United States and preparation were well underway in New York, which was expecting an influx of tourists.

But visitors were being warned that ‘prices will be higher, menus will be more limited and toilet paper may not be as soft as you’d like’. The hospitality industry was also complaining of supply chain problems causing a shortage of plates and glasses. Still, if tourists can’t eat and drink they may be less worried about the softness – or otherwise – of the other item in short supply…

As regular readers will know, we spent more time in lockdown baking cakes, bingeing on Netflix and consulting our phones. We also, apparently, spent more time in hot tubs, with eBay reporting that sales had increased by a factor of five. Also significantly up were insurance claims relating to accidents, including one claim for an engagement ring ripping the lining, and another for a grass strimmer bursting the tub.

“I’m just going to strim the grass round the hot tub, darling.” Of course. What could possibly go wrong…?

The last Bulletin was written on October 31st and November 1st, so we weren’t able to bring you the latest research on the most widely-searched Halloween costumes. As you might expect, ‘witch’ stayed firmly at the top of the charts, followed by ‘rabbit’ and ‘dinosaur.’ Two traditional heroes of Halloween, ‘vampire’ and ‘zombie,’ fared less well, coming in at 15th and 17th respectively. An interesting newcomer was ‘Squid Game’ at no. 23.

We can expect an improved showing from that one next year and, hopefully, 80,000 new truckers recruited in the US – leading to an easing of the supply chain problems, and a much softer Thanksgiving for New York’s tourists…

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