Weekly Market Insight

Weekly Market Insights – 23rd May

23rd May 2022

Cost pressures hit US consumer bellwethers Target and Walmart, UK consumer confidence bears the brunt of higher inflation and is Irish house price inflation finally peaking? All these stories and more are covered in this week’s insights update from BlackBee.

Global Economy

Last week was another one where we saw further evidence that stubbornly high inflation is testing the resilience of many of the leading global economies. In the US core retail sales held up better than expectations (rising by 1% in April) although elsewhere some key sentiment barometers such as the NAHB Builder Sentiment Index and the Philly Fed Business Sentiment Indicator moved lower, reflecting a wide range of concerns around rising interest rates and inflation levels. In the midst of all of this Fed Chair Powell again reiterated his commitment to tame inflation, again another signal to investors that interest rates will continue to rise for the time being.

UK economic data last week also bore the scars of rising inflation which hit a forty year high of 9% in April. The most visible victim of the latest rise in UK prices was consumer confidence which hit its lowest level on record (going back to 1974, see this week’s chart of the week). Price rises all around the world are clearly beginning to take their toll on consumers and if the global economy is to avoid a recession then investors will need to see consumer spending indicators muddle through over the next few months until inflation begins to ease. On this front we still take encouragement from the fact that PMI service sector readings (a good gauge of consumer spending) are still holding up above the critical ‘50’ level which indicate expanding service sectors.

One bright point however last week was another sign of Chinese authorities’ willingness to support the economy there which has struggled of late as a result of COVID lockdowns in addition to well publicised problems in the property sector. The five-year prime loan rate was reduced by 0.15% to 4.45% last week, a small move but one which at least signals an ongoing commitment to provide help to the economy.  


There was little sign of respite for stock markets last week given the backdrop of slowing economic momentum and the stance of a number of key global central banks. Profit warnings from Walmart and Target (bellwethers in the US consumer staples sector) also weighed heavily on stocks during the week as up to this point investors had seen companies like these as defensive plays in the midst of market volatility. Both companies noted that across the board cost increases would weigh on profits in the short term which crushed their share prices by around 20%, some of the biggest falls seen for both since the ‘Black Monday’ market crash in 1987.


Bond markets remained somewhere between a rock and a hard place again last week, sandwiched by concerns about high inflation and weaker economic growth. Sovereign yields continued to rise in Europe, buffeted by inflation readings and the likelihood that the ECB and Bank of England may tighten monetary policy over the next few months. However, US longer dated bond yields eased, perhaps an acknowledgement from bond investors that US economic growth is slowing. In the credit space, the volatility in equities again played into a nervous backdrop for both high yield and emerging market bond investors.


Commodities moved higher last week with both energy and metals posting solid gains. Oil price sentiment was buoyed by new research from JP Morgan suggesting that US prices at the pump could grind higher thanks to a combination of the start of the US summer driving season together with lower oil stocks and refining capacity. On the metals side both silver and gold were helped by the nervy backdrop across risk asset classes like equities and credit.

Sector News:

Housing – Could Irish house price inflation be peaking?

Last week’s release of the latest Irish house price data for March from the CSO would have provided little solace for those trying to get onto the property ladder. The data showed prices nationally rose by 15.2% over the past year. However, it was interesting that the annual rate of increase appears to be flattening out which we think could be a signal of slowing price inflation as we move further through 2022. Any interest rate increases from the ECB over the next year could also help take some heat out of the housing market in the next year. However, the combination of strong demand, supply bottlenecks, and a healthy supply of credit to housing still points to a positive outlook for house prices over the next twelve months in our view.

Commercial Real Estate – E-Commerce and supply chain issues continue to buoy Industrial sector

The industrial and logistics sector has been the darling of the commercial property market in Ireland over the past number of years, helped by greater e-commerce volumes during the pandemic era and efforts towards easing supply chain issues. Based on JLL’s Q1 2022 update last week the outlook remains very positive. Demand remains strong for such assets based on the prevailing drivers of the past couple of years. However, another familiar theme – lack of supply, has also continued to drive rents higher and yields lower. Prime rents have risen by approximately 20% over the past three years and given the lack of supply, this rent inflation has also fed into the secondary market for industrial and logistic assets. Looking forward, JLL expects the positive momentum in rents to continue and this should help underpin prime yields which have fallen to 4% over the past year.