Weekly Market Insight

Weekly Market Insight - 10th May 2021

10th May 2021

Why vaccines need to be directed to the developing world, wood’s use as a fuel source is feeding growing Irish timber demand and April debit card spending data shows Irish people are ready to ‘splash the cash’ on travel and accommodation. All of these stories are covered in this week’s Insights update from BlackBee.


Last week saw the release of Purchasing Manager Index (PMI) data for April for many major economies. The PMIs, a closely watched economic indicator, signalled that the major developed economies continue to recover strongly. US readings for April were well above the 50 mark indicating a growing economy while the same readings for the Euro zone manufacturing sector were the strongest since records began in 1997. Even in Ireland we saw good progress with April PMI readings growing solidly compared to March.

The US economy has certainly been the first ‘out of the traps’ in the recovery and it really has been boosted by the speed at which its population has been vaccinated, allowing the economy to reopen quickly. However other economic blocs around the world could also benefit from greater access to the range of COVID vaccines. Our chart of the week shows the massive difference between the percentage of the US and Asian populations that have been vaccinated thus far. So we think it was timely last week for President Biden in particular to bring up the possibility of vaccine waivers to speed up the global inoculation effort.

Although it is heartening to see the US economy (the world’s largest economy) now thriving, it is important to remember that once the world economy regains its lost ground from the pandemic, it is the developing economies that will likely be the greatest contributors to world economic growth. So from a long-term economic perspective, it’s important that the vaccine needs of developing economies are also catered for.


Last week was a positive one for equities on the whole with US first quarter earnings helping push markets higher. So far US first quarter earnings are up 46% year on year, the strongest year on year earnings growth since 2010! However not all companies shared in the gains. A number of COVID 19 vaccine producers were hit badly by the news that vaccine patents could be waived temporarily to aid the global inoculation effort. Moderna and Biontech for example had shed over 10% by Thursday however industry officials commented on Friday that the patent waivers would not have an immediate effect on financials as they were not counting on sales from developing countries. Moderna and Biontech rebounded somewhat on Friday closing the week 9% and 2.5% lower. Elsewhere the technology sector hit a speed bump on Tuesday from an unlikely source. Janet Yellen, former Fed Chairperson and now US Treasury Secretary suggested that were the US economy to overheat as a result of stimulus spending the US Fed would have to consider raising interest rates. These comments caused the technology sector to fall by nearly 2% on the day, hurting its performance on the week.


Long term sovereign government bond yields were largely unchanged last week with little reaction to either Treasury Secretary Yellen’s comments on the possible need for tighter US monetary policy or the Bank of England increasing its 2021 UK growth forecast to 7.25% which if achieved would market the fastest UK growth rate in more than 70 years! The risker parts of the bond space such as high yield and emerging market credits were the winners during the week, riding on the coattails of the gains in the equity market and economically sensitive commodities.


Commodities were on the front foot again last week, racking up a decent gain on the back of further strength in the metals sector in particular. Silver and copper, both metals whose demand is linked to an upturn in economic activity, posted solid gains. Meanwhile gold managed to claw back some gains following what has been a tricky year so far for bullion investors. It was a quieter week for oil prices as good economic data and a ‘risk on’ investment backdrop was offset by rising COVID case numbers in the developing world, a huge source of demand for crude.

Sector News:

Residential/Social Housing – Sharp fall in Q1 housing completions adding to supply/demand imbalance. 

Last week we got some further insights on housing supply and demand which has been a major factor in the recent upward pressure on house prices. Speaking to RTE’s Morning Ireland, Housing Minister Darragh O’Brien admitted that 30,000 homes are needed each year. When contrasting this with the latest figures from the Central Statistics Office of the number of new dwellings completed in Q1 2021, we get a clear insight of the large imbalance between demand and supply. The number of new dwellings completed in Q1 2021 (4,945) was 20.1% lower than the same period a year earlier (3,954). The Covid-19 restrictions in place during Q1 have had a large impact on the level of new dwellings completed with forecasts for completions now ranging between 16,000 to 20,000 for 2021.

Hospitality – Consumers eyeing up travel and accommodation as lockdown restrictions ease. 

Bank of Ireland’s debit card spending analysis for April published last week provided an clear insight into life after lockdown for consumers. The positive news for the hotel sector is that spending on travel, recreation and accommodation rose in April as consumers reacted to the easing of restrictions and looked ahead to a time where they can freely travel the country. It is clear that there is a focus on consumption in these areas as restrictions ease and according to the Central Bank of Ireland in their latest Quarterly Bulletin Report, a return of the savings ratio from recent high values towards more normal levels will support a rebound in consumption in 2022.

Forestry – Biomass and Wood the predominant renewable energy source.

Biomass is the most consumed renewable energy source globally according to a new publication “Wood as a Fuel” authored by industry experts Pierer D Korfman and Eugene Hendrick. The authors found that biomass is over 70% of the world’s global renewable energy consumption. Timber is one of the contributors to biomass material. Hydro is the next most used renewable fuel sources, comprising of almost 17% of sustainable energy consumption. According to The Farmer’s Journal, renewable energy accounts for almost 18% of global energy consumption. In an Irish
context, COFORD (National Council for Forest Research and Development) predicts a supply and demand imbalance for the volume of wood in Ireland up to 2035. One of the reasons is the growing demand for wood is its as an alternative fuel source. With studies such as “Wood as a Fuel” showing that biomass via wood as the predominate renewable energy source, we are excited to be entering the forestry sector and continuing to provide sustainable investment opportunities. We expect that the supply and demand imbalance will put an upward pressure on the price of timber and timberland portfolios and deliver investor returns.