30th July – 6th August 2021

Market Update

Shares in Europe rose on strong growth in corporate earnings and optimism about an economic recovery. In local-currency terms, the pan-European STOXX Europe 600 Index ended 1.78% higher. Major stock indexes also gained ground: France’s CAC 40 Index advanced 3.09%, Italy’s FTSE MIB Index climbed 2.51%; and Germany’s Xetra DAX Index added 1.45%. The UK’s FTSE 100 Index gained 1.29%.

Core eurozone bond yields trended lower, as an increase in coronavirus cases fueled doubts about the wider economic recovery. Peripheral eurozone bond yields largely tracked core markets. UK gilt yields also fell, broadly following core markets. However, this pullback in yields moderated later in the week due to hawkish messaging from the Bank of England (BoE).

The BoE said that “some modest tightening of monetary policy over the forecast period is likely to be necessary” should the economy evolve broadly in line with the bank’s central projections. The BoE, which left its monetary policy and quantitative easing program unchanged at its latest meeting, now expects interest rates to rise from 0.1% to 0.2% in 2022 and to 0.5% in August 2024. The central bank updated its forecast for inflation, which is likely to peak at 4% either late in 2021 or in early 2022. The outlook still calls for the economy to grow 7.25% this year, but the BoE increased its forecast for 2022 gross domestic product to 6% from 5.75%.

US Stocks recorded gains for the week, helping the large-cap benchmarks and the technology-heavy Nasdaq Composite Index to new highs. A sharp rise in longer-term interest rates following Friday’s strong monthly payrolls report augured well for banks’ lending margins and boosted financials shares, and the small utilities sector also outperformed. Energy shares lagged within the S&P 500 Index. Intermediate- and long-term Treasury yields jumped Friday morning following news of stronger-than-expected employment growth in July. (Bond prices and yields move in opposite directions.)

Japan’s stock markets made gains over the week, with the Nikkei 225 rising 1.97% and the broader TOPIX Index up 1.49%, buoyed by upbeat earnings reports. However, gains were dented by a worsening in the country’s coronavirus situation, as daily cases in Tokyo topped 5,000 for the first time, with an advisory panel of experts warning that the situation could deteriorate further. Nationwide cases also reached a record high. These developments prompted the government to expand its quasi-state of emergency to eight more prefectures, where the highly contagious delta variant is spreading rapidly. Against this backdrop, the yen was broadly unchanged, finishing the week at JPY109.7 against the U.S. dollar, while the yield on the 10-year Japanese government bond fell slightly to 0.01%.

Chinese stocks rose as the previous week’s steep declines attracted some buyers. For the week, the Shanghai Composite Index added 1.8% and the large-cap CSI 300 Index ended up 2.3% In China’s bond markets, yields stabilised after falling the previous week. The yield on the 10-year government bond declined two basis points to end the week at 2.83%.

In commodities, Gold suffered its largest fall in months as the price slid 2.6% to settle at $1,763.10 an ounce. Silver also slumped, down 3.8% to $23.30 an ounce. Brent crude oil settled down 59 cents, or 0.8%, at $70.70 a barrel, while in New York, West Texas Intermediate (WTI) crude futures fell 81, or 1.2%, to settle at $68.28 a barrel. For the week, Brent shed more than 6%, its largest week of losses in four months, and WTI tumbled nearly 7% in its biggest weekly decline in nine months. US crude prices have corrected as a result of last week’s fall and are now down 24% from the peak in May.

Lawsons Equity – Financial Planners Malta

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.