Weird Whales and NFTs – But Where Is ‘Silly Season?’

The defining moments of August 2021 had little to do with the stock markets. It was, of course, the withdrawal of British and American troops from Afghanistan that took centre stage. But as many of you will know, Afghanistan has significant mineral reserves, with some estimates reaching the $1tn mark. These reserves include lithium. So, it will be little surprise if we see the China/Pakistan economic corridor extended into Afghanistan at some point.  August was, on the whole, a relatively good month for most of the stock markets we cover. Most markets gained ground, and the Indian stock market had a stellar month. 

Things were not so positive, however, for the blockchain site Poly Network. Hackers exploited a “vulnerability in its systems” to the tune of some $600m in digital currency tokens. Following an appeal on Twitter, the good-hearted  hackers duly returned some of the money. It was, though, one of the largest reported thefts of digital currency. 

Various purchasing managers’ indices around the world indicated that the pace of recovery from the pandemic might be slowing down. These worries were compounded when China was forced to closed Ningbo-Zhoushan. The world’s third-busiest cargo port had to close its doors when it was hit by a mass outbreak of Covid. A tumultuous month in so many ways, August ended with images of the last American troops leaving Afghanistan, and with Hurricane Ida hitting New Orleans.  Let’s take a closer look at the detail! 

UK 

August brought mixed news for the UK economy. While it continues to recover well, there are increasing concerns that staff shortages may hamper that recovery. As such, the Bank of England may need to tread a tightrope. They will need to balance stimulating the economy, and keeping a lid on inflationary pressures. 

Figures for the second quarter showed that UK GDP was up by 4.8% between April and June. As expected, the strongest performance came from the services sector. The rise in output leaves the economy 4.4% below where it was before the pandemic hit. 

Meanwhile, the continuing shortage of staff continues to cause alarm. The Purchasing Managers’ Index for August hit a six month low of 55.3. While still indicative of optimism, this remains significantly down on the 59.2 recorded in July.  The news on the high street also remains bleak. Despite the boost provided by the Euros, it continues to struggle. In fact, City AM reported that footfall in July was 34% down on prior year. So far, it seems that shoppers are still unwilling to return to town centres. 

That can only bode well for online shopping. So, it comes with little surprise that online spending hit £10bn in July. That marks the highest monthly spend in 2021 so far, bringing this year’s online total to £64.9bn. That’s a massive increase of 56% on 2019. 

When all was said and done for August, the UK’s FTSE-100 index rose just 1% to close at 7,120. The pound was down by 1% against the dollar and ended the month trading at $1.3755. 

Europe 

August is the month when Europe traditionally goes on holiday. So, we were expecting news in this section to be in short supply, and we were not disappointed.  

Tesla boss, Elon Musk, came to our rescue, though – he can usually be relied upon! This time, he made headlines by announcing plans to start making cars at the Gigafactory just outside Berlin in October, “or soon afterwards.” The scheduled start date has been deferred, though after battles with local environmental campaigners and what Musk described as “German bureaucratic delays.” 

Like many central banks, the ECB has taken the first tentative steps towards creating a digital currency. It has begun a two-year investigation phase that could see a digital Euro by 2025. The ECB is worried that failing to implement a digital currency will undermine the Eurozone’s monetary autonomy. They probably have a valid point as foreign technology giants – and other digital currencies – are rapidly gaining ground.

We report below on steps taken by the South Korean central bank to curb rising prices, and the ECB could soon run into similar problems. Rising prices, a surge in Covid cases numbers, and a drop in vaccinations dented German consumer confidence as Europe’s biggest economy headed into September. 

Despite this, August was a good month for the German stock market. It grew 2% to end August at 15,835. Meanwhile, the French stock market rose 1% to close at 6,680. 

US 

The US greeted August with good news on the jobs front. The US economy grew by 6.5% in the second quarter, and figures for July revealed some 943,000 jobs had been created, against a general consensus of 870,000. 

We have previously mentioned President Biden’s staggering $3.5tn budget proposals. And, now we can report that they have been approved by US Congress. It is almost certain that the proposal – which includes significant packages for health, family support and climate schemes – will go ahead. The President also unveiled plans for 50% of all car sales to be electric by 2030. 

What won’t be going ahead any time soon, is a return to the office for Apple’s staff. The company, which gave CEO Tim Cook a $750m payday, has said that it will delay calling staff back to the office until January 2022 at the earliest. It cited fears of a further Covid resurgence.  Elsewhere, in an odd turn of events, Amazon, having done so much to impact the traditional high street, is apparently considering opening department stores. Ohio and California are already earmarked for the first sites. 

The month ended with the Federal Reserve hinting that it may start to withdraw post-Covid stimulus measures later this year. It depends on how the US economy continues to recover. However, there are currently no plans to increase interest rates, despite a recent spike in inflation. 

The Dow Jones index grew 1% to end August at 35,361, while the S&P 500 index rose 3% to 4,523. 

Far East 

Many of our previous Far East market commentaries have covered the pro-democracy movement in Hong Kong. We have also spent much column width on the subsequent crackdowns by the Chinese authorities. Perhaps unsurprisingly, official figures released in August showed that Hong Kong’s population had shrunk by 87,100 in the year to June. 89,200 Hong Kong residents left the city, although this was partially offset by inflows from mainland China. 

The Beijing authorities, as expected, continued their crackdown on the tech companies, with Tencent the latest to come under fire. Prosecutors have been filing legal action over claims the company’s messaging app did not comply with laws protecting minors. With the authorities branding online games “electronic drugs”, we can expect this tighter control of the tech sector to continue for some time. 

Meanwhile, the month brought good news for Japan, whose economy rebounded faster than expected, ahead of the Tokyo Olympics. The country’s GDP rose by 1.3% in the second quarter of the year. That’s roughly twice the forecasted rate. 

The news, though, was less favourable for Toyota. The car manufacturer announced plans to slash car production in September from 900,000 vehicles to 540,000 due to the global microchip shortage. At the end of August, the South Korean central bank became the first in the region to raise interest rates (from 0.5% to 0.75%) in a move aimed at curbing household debt and house prices. Both of these have risen sharply in recent months. 

In terms of the region’s stock markets, China’s Shanghai Composite index rose 4% to end the month at 3,544. The Japanese stock market rose 3% to 28,090, but the markets in Hong Kong and South Korea were unchanged in percentage terms, finishing at 25,879 and 3,199, respectively. 

Emerging Markets 

There was some intriguing business news in the Emerging Markets section. Square, the digital payments platform owned by the co-founder of Twitter, agreed to pay £21bn for the Australian ‘buy now, pay later’ firm Afterpay. With more than 16m customers, the company is used by 100m businesses around the world. It was also seen as a key indicator for the no-credit-checks online payments industry that boomed in the pandemic. 

In a rather more conventional industry, Saudi Arabia’s oil giant Aramco saw its profits jump almost four times as the world recovered from the pandemic and demand for oil picked up. The world’s biggest oil producer said net income had risen to $25.5bn for the second quarter of the year. 

On the stock markets, August was an excellent month for India’s BSE Sensex index, which jumped 9% to close at 57,552. The Russian market rose 4% to 3,919, but the Brazilian stock market fell 2% to 118,781. 

And finally…

Disappointingly, August was uncharacteristically bland for our favourite section of the commentary. The month is typically known “silly season:” parliament doesn’t sit, everyone in Europe is on holiday, and journalists scramble furiously to find stories to fill their column inches. So, we can usually expect a plethora of hidden gems to report. But, as we alluded to in the introduction, August 2021 was very far from the typical “silly season” we all know and love. But was there anything out there to lighten the gloom? 

Well, insurer Zurich warned against the increased risk of outdoor fires – up 16% since 2019. Not in the woods, though, but (you guessed it!) in your garage. Lockdown is to blame! We’ve apparently now all rushed out and bought outdoor pizza ovens, converted our garages into gyms (or bars) and made the old garden shed into a “shoffice.” 

There’ll certainly be no problem for 12-year-old Benyamin Ahmed, from London, if he wants to put a shed/office at the bottom of the garden. He has made approximately £290,000 in his summer holidays, after creating a series of pixelated artworks called Weird Whales and selling non-fungible tokens (NFTs), which allow artwork to be ‘tokenised,’ creating a digital certificate of ownership that can be bought and sold. 

If you have no idea what that last sentence meant, then you are not alone: it’s clearly indicative of how quickly the world is changing. But let’s spare a thought for Benyamin’s teacher: any day now, they will be struggling to understand an essay entitled “What I did in my summer holidays…”  And, on that note: stay safe, and we’ll see you next month!

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