Stock markets rattled by signs of weakening consumer confidence

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20th May 2022

Bite-sized business news from the UK and beyond

Good morning Yesterday the Bank of England released its first book titled ‘Can’t We Just Print More Money?’, it promises to give a crash course in economics by answering 10 questions. It comes after a YouGov survey of 1,600 people in 2020 found public understanding of economic concepts to be 'generally very weak'.

Today's stories

Stock markets rattled by signs of weakening consumer confidence
Global fertiliser market faces a crunch

STOCK MARKET
Stock markets rattled by signs of weakening consumer confidence

What happened?
Yesterday UK stock markets continued their decline as investor concerns about the global economy deepened. The FTSE 100 closed down an additional 2% at 7,302 points taking the two-day performance to -3%, the day after the US S&P 500 index fell 4% - its worst daily loss in almost two years.

Earning results from the US triggered further worries over the global economy
This week Walmart, Target and Lowe’s – some of the biggest US retailers – reported disappointing quarterly results.

They all warned that supply-chain costs, inflationary pressures and unwanted inventory (as customers trade down to own-label brands) cut into their profits. Target’s stock fell 25%, its worst drop since the market meltdown of 1987.

With higher costs eroding profit margins and the US consumer, who make up nearly 70% of the America economy, looking under pressure, markets are worried global economic growth is slowing just as central banks are raising interest rates to try to tame inflation at its hottest in 40 years.

As the world’s biggest economy, any concerns in the US read across to the UK
The worsening outlook for the consumer weighed on retailers and food and drink company shares. Guinness owner Diageo and electronics retailer Currys were among the biggest fallers in the UK market.

Signs that consumers are cutting back could help prices cool down
While it’s bad news for anyone with a stock portfolio, poor retail earnings might be a hopeful sign for central banks in their fight against inflation. Both Target and Walmart execs said that consumers were spending less on merchandise and big-ticket items like TVs, which is the type of demand slowdown that could cool prices for goods in the future.

Other stories to keep you in the loop

Royal Mail warns it will put prices up again
EasyJet forecasts return to near pre-Covid flying levels in 2022
Fevertree shrugs of cost pressures as British hospitality trade recovers
Klarna faces valuation drop to $30bn as it seeks funding
US cult hit Impossible Foods lands in UK with meat-free duo
Sri Lanka defaults on debt for first time in its history
KPMG warns British corporate giants of big hike in audit fees
Amazon’s spend on TV and film in UK passes £1bn as Netflix cuts back
McDonald's restaurants in Russia to reopen under new name after buyer found
Iceland offers over-60s 10% discount on shopping bill

AGRICULTURE
Global fertiliser market faces a crunch

What happened?
Nitrogen, phosphorus, and potassium (often abbreviated to NPK, their chemical symbols) have become the latest commodities to shoot up in price, as reflected by the world fertiliser price index. Fertilisers are a key input in modern farming providing the nutrients crops need to grow.

Prices for NPK were up 125% in January from a year before, and have since risen another 20%.

What’s driving this?
Fertiliser prices were trending upward even before the war in Ukraine, due to pent up demand from the pandemic, supply chain troubles, high energy prices, and even a hurricane. Russia is a major fertiliser producer and its invasion of Ukraine has disrupted trading in the Black sea, exacerbating the issue.

Why does it matter?
Higher food production costs threaten food security around the world. While rich countries are certainly experiencing the effects of more expensive fertiliser, the situation is even worse in developing nations. Globally, the access to and use of chemical fertilisers is far from balanced, with many countries experiencing deficits while rich nations apply them in excess.

All this means further pressure to the price of food which will not only hit your wallet, but could create a humanitarian emergency not seen since the 2008 global food crisis which ignited the Arab Spring uprisings in the Middle East.

Stat of the day

There are now more apartments in New York City listed for rent on Airbnb than there are available rental units

Interesting links from around the web

Where to invest 10k right now
Why the price of women’s clothes is rising faster than men’s
We’ve all fibbed in a job interview, here are the lies you can actually get away with

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Stock markets rattled by signs of weakening consumer confidence

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Inflation approaches double digits

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