Post-Covid Recovery and Inflation:

Last week, the UK’s post-Covid recovery and inflation remained the centre of attention. We saw the first hint that the great reopening might not go as planned. Increasing spread of the delta variant of Covid-19 has caused concern. So, there is now doubt on whether the country will fully unlock in June as planned. Additionally, much of Joe Biden’s ambitious spending plan is on the rocks in the US Congress. This means the prevailing assumption that a turbocharged recovery, fuelled by post-Covid euphoria and buckets of government spending, would boost inflation has taken a knock. It comes even as inflation stats released last week showed prices continuing to climb.

So far, it has mainly been government bond markets affected by the news. Both US treasuries and UK gilts had a good week. Grant though – a good week in government bond markets isn’t that exciting overall. Stock markets haven’t appeared too bothered, with no wild movements recorded on any major exchanges. If anything at all can be inferred from short-term market movements, the message seems to be things are still expected to get better, but with a little more insurance just in case.

Plan For A Global Corporate Tax Rate Already Faces Hurdles

G7 finance ministers have agreed on a tax deal. It’s aimed at ending the ability of multinational corporations to move profits to the most advantageous locations. It is also designed to ensure companies make a fair contribution to post-pandemic recovery. The agreement would end the practice of sending earnings offshore to a jurisdiction with a lower tax rate. It also forces companies to pay tax in the countries where they make their sales. The ministers pledged that company profits above an earnings margin of 10 per cent would be taxed. A global minimum tax of at least 15 per cent will be set on a country-by-country basis.

For the deal to be successful many countries will need to agree, but there has already been dissent. The UK is seeking exemptions for financial services, and Hungary and Poland are demanding the ability to exempt businesses based there. The share price for major companies, such as Amazon and Apple, have also shown a lack of movement, which shows investors think the tax deal is not a threat to businesses any time soon.

Fastly Shares Jump After Glitch Takes Website Offline

The key role that web service providers play in the smooth running of the internet was highlighted last week. It came as infrastructure provider Fastly encountered a technical ‘glitch.’ The problem took a large number of high-profile websites offline, including Amazon, Ebay and Paypal. The outage was caused by a single customer changing its account settings which cascaded the issue across Fastly’s network.

Fastly provides a content delivery network that uses a distributed group of servers. These then route traffic to websites in the most efficient way. The company has over 400,000 clients and is valued at more than $6bn. However, it is a relatively small player in its market. Its shares fell in the immediate aftermath of the problems on Tuesday. But the company fixed the issue quickly, and shares bounced back strongly to end the day up 11 per cent. Web traffic has increased dramatically during the pandemic. Fastly and rivals Akamai and Cloudflare have seen steep revenue growth over the last 12 months. Fastly’s share are down around 35 per cent this year on signs that some new business was temporary.

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