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Market Updates

Weekly Market Update

Shares in Europe rose on growing hopes that injections of fiscal stimulus and pacifistic central bank policies would stimulate a global economic rebound. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.16% higher. Major stock indexes were mixed. France’s CAC 40 gained 1.09%, Germany’s Xetra DAX Index added 0.84%, and Italy’s FTSE MIB fell 1.14%. The UK’s FTSE 100 Index advanced 2.65%, to some extent owing to a weaker UK pound, which fell on worries about vaccine supply issues and profit taking after a strong quarter.

Treasury bond yields in the eurozone ended slightly higher. They initially rose on the better-than-expected U.S. jobs data released the previous week, before falling on worries about the slow progress in Europe’s vaccination program. Once conditions become favourable, yields climbed again after minutes from the European Central Bank’s March meeting suggested it was willing to slow bond purchases. Peripheral Eurozone yields were mixed. Italian yields rose as investors sold existing bonds to include the country’s unexpected sovereign bond offering. Portuguese and Spanish bond yields fell on vaccine worries and tighter coronavirus restrictions. UK gilt yields followed U.S. Treasury yields lower.

Most of the major US benchmarks moved gradually higher to record highs, although the small-cap Russell 2000 Index recorded a modest loss. The technology-heavy Nasdaq Composite Index outperformed the broad market S & P 500 Index, but remained below its February peak. Tech shares also gained back the lead within the S&P 500 during the week, assisted by solid gains in Apple and Microsoft– which together represent roughly 40% of the sector’s market capitalisation.

The yield on the benchmark 10-year U.S. Treasury note increased to some degree on Friday morning in response to the producer price inflation data but moved slightly lower for the week as a whole. (Bond prices and yields move in opposite directions.) Speaking Thursday before the International Monetary Fund (IMF), Fed Chair Jerome Powell stressed that the global economy would remain fragile until the pandemic is brought under firm control and that the U.S. recovery remained “incomplete and uneven.”

Japanese stock markets started the week positively, with the extensively followed Nikkei 225 Stock Average breaking through the 30,000 mark early in the period. The rest of the week made for a more mixed picture, however, and the Nikkei 225 ultimately finished slightly lower than it started. The broader TOPIX was also marginally lower. The yen strengthened a little against the U.S. dollar, closing in the high JPY 109 range. Benchmark 10-year government bond yields were a little lower at just above 0.10%.

Chinese stocks recorded a weekly loss, extending several weeks of underperformance against other major global markets. The large-cap CSI 300 Index fell 2.4% and the benchmark Shanghai Composite Index shed 1.0%. In fixed income markets, the yield on China’s 10-year bond rose slightly to close at 3.21% amid signs of ongoing economic recovery. Global funds reduced their holdings of Chinese government bonds in March for the first time since February 2019, Bloomberg published.

Commodity prices were also mixed with oil down but metals like gold, iron and copper ore up for the week. US West Texas Intermediate (WTI) crude dipped 0.5% to settle at $59.32 a barrel, while Brent Crude settled at $62.95 a barrel, down 0.4% the day. For the week WTI fell 3% and Brent was off 2.8%. Gold fell from Thursday’s one-month peak, weighed down by a rebounding dollar and rising Treasury yields. It settled at $1,744,80, down 0.8% on the day but up the same amount for the week.

Market Update 2/4/21

Europe’s shares climbed to near record highs in a short trading week, confident about a rapid economic recovery. (Markets closed on Friday in recognition of the Good Friday holiday). Expectations for U.S. infrastructure spending helped minimise concerns of a longer than expected lockdown on the Continent. In local currency terms, the pan-European STOXX Europe 600 Index ended 2% higher. France’s CAC 40 Index and Italy’s FTSE MIB made similar gains, while Germany’s Xetra DAX Index rose about 3.0%. The UK’s FTSE 100 Index was little changed.

Core eurozone government bond yields ended higher overall. They rose early in the week with U.S Treasuries, which sold off on expectations of more U.S. fiscal stimulus and U.S. vaccination progress. However, surging coronavirus cases in Europe amid vaccine rollout challenges and widened lockdown measures in some countries, including France, drove demand for core bonds, causing yields to fall midweek onward. They were pushed lower after European Central Bank President Christine Lagarde said the end of the Pandemic Emergency Purchase Programme is “not set in stone.” Peripheral government bond yields largely tracked core markets. UK gilt yields rose primarily due to the sell-off in U.S. Treasuries, the efficient vaccine rollout in the UK, and the easing of restrictions in England.

The major US benchmarks closed higher for the holiday-shortened trading week. The large-cap S&P 500 Index made news on Thursday for crossing the 4,000 threshold for the first time, and the S&P MidCap 400 Index also set a new intraday record. The technology-heavy Nasdaq Composite index led the advance, however, helped by gains in a wide range of semiconductor and hardware stocks, as well as a rally on Facebook shares. The consumer staples and materials sectors lagged within the S&P 500. Relatedly, growth stocks widely outperformed value shares for the first time since January.

The jobless claims data seemed to drive a decline in the yield on the benchmark 10-year U.S. Treasury note at the end of the trading week. (Bond prices and yields move in opposite directions.) Municipal bonds continued to outperform Treasuries for much of the week, as the technical tailwinds of muted supply and strong cash flows remained intact.

Japanese markets were also buoyed late by technology stocks, mirroring gains on the tech-heavy Nasdaq index. The benchmark Nikkei 225 Stock Average finished ahead 0.7% for the week through Thursday, while the broader TOPIX closed approximately 1% lower. A spike in U.S. Treasury yields saw the U.S. dollar climb to a one-year high against the yen on Wednesday and, at Thursday’s close, the USD was trading in the high JPY 110 range.

Chinese equities were strong ahead of a long weekend, with sentiment buoyed by the news of an additional tax reduction of RMB 550 billion to consolidate the economic recovery, strong March purchasing manager’s index data, and the better tone of U.S. and global markets. From the previous Friday to Thursday, April 1, the CSI 300 and Shanghai Composite each rose by 1.4%. In the bond markets, yields were flat over the week, with the 10-year sovereign bond yielding 3.22%. FTSE Russell confirmed the inclusion of Chinese central government bonds (CGBs) in its WGBI global bond index, with a 36-month phase in from the end of September 2021.

Oil prices jumped sharply for a second day in a row on Friday, hitting their highest levels in more than a year, after the stronger-than-expected US jobs report and decision by OPEC and its allies not to increase supply in April. Brent futures rose $2.62, to settle at $69.36 a barrel. WTI crude rose $2.26 for the week, Brent was up 5.2%, rising for a seventh week in a row for the first time since December, while WTI was up about 7.4% after gaining almost 4% last week.

Gold finished the week under $1,700 an ounce and at a 9-month low and is now more than $290 an ounce under its all-time high of $2.089 last August. Silver fell as well, following gold lower but suffering a larger, 0.65% drop to end the week at $25.295. Silver shed 5.6% in value over a rough week.

Market Update 26/3/21

Shares in Europe rose on hopes of an economic recovery, turning around previous losses resulting from concerns about added restrictions to curb the spread of the coronavirus and the European Commission’s (EC) threat to stop vaccine exports. In local currency terms, the pan-European STOXX Europe 600 Index added 0.85%. Major stock indexes were mixed: France’s CAC 40 ended the week down modestly, while Italy’s FTSE MIB, Germany’s Xetra DAX Index, and the UK’s FTSE 100 Index posted gains. Elsewhere, UK inflation took a surprise dip and one of the world’s biggest container ships blocked a major trade route, the Suez Canal.

Core and peripheral eurozone government bond yields fell over all. Concerns over Europe’s sluggish vaccine rollout amid the onset of a fresh wave of coronavirus infections drove demand for high-quality government bonds. Data showing an EUR 7.1 billion increase in the European Central Bank’s weekly bond purchases also weighed on yields. Gilt’s yields fell on worries the EC could block vaccine exports to the UK, potentially slowing down the country’s vaccination campaign. Weaker inflation data, which pushed out expectations of the Bank of England to tighten up its monetary policy, also led to lower yields.

The major US indexes have been mixed for the week, as investors seem to continue to weigh a positive outlook about reopening against inflation and interest rate concerns. Small-cap stocks lagged for the second consecutive week, signalling a potential pause or turn around in their recent market position. Likewise, communication services stocks fared worst within the S&P 500 Index, dragged down by sharp declines in shares of several traditional media companies following a stretch of strong performance.

Inflation data – perhaps at the top of the list of current investor concerns – remain muted. The personal consumption index (excluding food and energy) increased by 1.4% year-on-year in February, down from 1.5% in January and still well below the Federal Reserve’s 2% target. On Wednesday, both Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen testified before Congress that they saw little danger of an overheating economy.

The yield on the 10-year U.S. Treasury notes fell much of the week, but seemed to rise in response to Thursday’s claims data. Stability in the yield of the notes boosted the performance of high yield bonds. However, the asset class experienced some weakness due to growing virus concerns throughout Europe.

Japan’s stock markets suffered considerable losses, even though they were able to recover some lost ground later in the week. The Nikkei 225 Stock Average fell 2.1% while the broader TOPIX gave up 1.4%. The yen weakened, closing at just below JPY 110 compared to the US dollar. The yield of the 10-year Japanese government bond ended up the week lower, at 0.08%.

Chinese stocks recorded a weekly gain, thanks to a rally on Friday after the country’s central bank signalled it was not about to tighten monetary policy. The Shanghai Stock Exchange Composite (SSEC) Index rose 0.4% to 3418.3, while the large-cap CSI 300 Index ended up 0.6% at 5038.0, its first weekly gain after five straight weeks of losses. Since reaching a record high on February 18, the CSI 300 has fallen 15%, while the SSEC is 8% below a 5 1/2- year high also touched on February 18. In China’s bond markets, the yield on the sovereign 10-year bond closed at 3.22%, off four basis points from the previous week, amidst expectations that monetary policy would remain supportive in the near term.

The fiasco in the Suez Canal reigned over commodity markets last week and will do so this week as oil prices kicked higher again on Friday, copper and gold rose, as did iron ore. The Suez blockage saw US West Texas Intermediate crude rise 4.1% to $US60.97 a barrel on Friday while Brent crude in Europe was up 4.04% a barrel to $US64.43. But for the week WTI fell 1.1% and Brent eased 0.4%. Gold rose 0.4% to $US1,732.30 on Friday, but shed 0.5% for the week for the first negative week in the last three.

Weekly Market Update 19/03/21

Shares in Europe have changed little in the last week. Even though central banks maintained their policy to stand behind an economic recovery, worries about a revival in coronavirus infections in some countries have limited the upside. In local currency terms, the pan-European STOXX Europe 600 Index ended the week approximately flat. Major European indexes were mixed. Germany’s Xetra DAX Index gained 0.82%, while Italy’s FTSE MIB Index advanced 0.36%. However, France’s CAC 40 Index fell 0.80%, and the UK’s FTSE 100 Index fell 0.61%.

Core eurozone bond yields ended a little higher. Germany’s 10-year bund yield climbed midweek, tracking U.S. Treasuries in response to expectations for an uptick in inflation. Yields eased somewhat on Friday on worries about the escalating number of coronavirus infections in Europe and consequent constraints on economic activity. Outer eurozone yields largely tracked core markets. UK gilt yields also increased, lifted in part by the Bank of England’s (BoE) positive tone relating to the economic outlook and its decision to keep interest rates the same.

The BoE’s policymakers unanimously voted to keep the benchmark interest rate at a record low of 0.1% and to carry on its existing bond buying program. The central bank said that global economic developments “had been a little stronger than anticipated” last month and indicated the U.S. fiscal stimulus package should provide “significant additional support.” It said bond yields had increased to demonstrate the stronger recovery while observing that the prices of risk assets had held up.

The Bank of France (BoF) increased its 2021 forecast for economic growth to 5.4% from 4.8% and said that activity at the end of last year held up better than predicted. The new projections may prove conservative, as they assume coronavirus constraints remain through the first half of 2021.

The major US indexes continued to move to record highs early in the week but then lost ground as bond yields reached their highest levels in over a year. Energy stocks fell sharply as oil prices saw their biggest daily drop since the summer, seemingly driven by rising U.S. inventories and demand worries due to renewed lockdowns and the slow vaccine rollout in Europe. The increase in yields read well for banks’ lending margins and supported financial shares for most of the week, but the sector fell back on Friday soon after the Federal Reserve announced it was not extending an exemption put in place early in the pandemic that allowed banks to hold lower capital reserves. The small-cap Russell 2000 Index fell the most, giving back some of its leadership for the year to date.

The equity rally stalled on Tuesday morning after longer-term Treasury yields resumed their rise– over the next two trading days, the yield on the benchmark 10-year note soared roughly 17 basis points (0.17%) and hit a new pandemic-era high of around 1.75% before retreating slightly.

The performance of Japan’s stock markets was mixed over the week. The Bank of Japan’s (BoJ’s) announcement, it will limit its purchases of exchange-traded funds (ETFs) to those tracking the TOPIX, contributing to the index’s 3.13% gain. The Nikkei 225 Stock Average underperformed, returning 0.25%. The yen strengthened slightly, closing at just below JPY 109 versus the U.S. dollar. The yield of the 10-year Japanese government bond finished the week at 0.11%.

Chinese stocks fell for the week, with the Shanghai Composite Index slipping 1.4% and the large-cap CSI 300 Index shedding 2.7%. Chinese stocks underperformed other Asian markets on Friday after negative headlines about the first day of talks at the US-China meeting in Alaska, with each side criticising the other. The yield on China’s 10-year bond rose after the release of strong economic data for January and February, but fell on Friday to 3.26%, unchanged from the previous week.

In commodities, oil rose by more than 2% in volatile trading on Friday and ended the week by about 7%, the biggest weekly decline since October. Friday saw Brent Crude settle up $US1.25 a barrel, or 2%, at $US64.53 a barrel while in the US West Texas Intermediate (WTI) crude rose $US1.42, or 2.4%, to $US61.42.

Gold and copper rose on Friday as the US dollar weakened slightly in the wake of a fall in bond yields. Gold rose 1% over the week after a solid session on Friday (up around 1.4%) with the price settling at $US1,740.70 and then rising further in after hours trading to end the week at $US1,744.50.

Copper rose by around 0.11% to end at $US4.11 a pound and fell nearly 1.3% for the week while silver eased at the end to finish the week at $US26.335 an ounce, up around 1.3% over the five days.

Weekly Market Update 12/03/2021

Shares in Europe rose over the week as the U.S. prepared to inject a massive amount of fiscal stimulus into the economy and the European Central Bank (ECB) promised to buy more bonds to counter rising borrowing costs. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 3.52% higher. Germany’s Xetra DAX Index climbed 4.18%, France’s CAC 40 advanced 4.56%, and Italy’s FTSE MIB gained 5.00%. The UK’s FTSE 100 Index added 1.97%.

Core eurozone government bond yields fell. The ECB announced it would accelerate bond purchases in the second quarter to suppress the recent rise in yields, pushing bond prices up. Fourth-quarter gross domestic product (GDP) for the region was also revised down slightly, further suppressing yields. Peripheral eurozone government bond yields largely tracked core markets. UK gilt yields also declined broadly. However, optimism coming from the UK’s vaccine rollout and the final approval of U.S. fiscal stimulus helped to moderate this decline later in the week. Better-than-expected January GDP data for the UK also supported gilt yields relative to other developed markets.

The ECB’s latest estimations call for EU GDP growth at 4% in 2021, an increase from the 3.9% expansion that the central bank forecast in December. The ECB also revised its inflation outlook to 1.5% from 1% for 2021 and adjusted its 2022 estimate to 1.2% from 1.1%. ECB President Christine Lagarde credited these adjustments primarily to “temporary factors and higher energy price inflation.”

UK economic output shrank 2.9% sequentially in January due to a sharp slowdown in the services sector, official data presented. Economists in a Reuters survey had forecast a 4.9% contraction, likely reflecting the new lockdown measures instituted at the start of the year. Exports of UK goods to the EU, excluding gold and other precious metals, fell 40.7% from the preceding month. UK imports from the EU tumbled 28.8%.

US Stocks moved broadly higher for the week, raising most of the major benchmarks to new records. Investors seemed to remain focused on fluctuating longer-term bond yields and the discount they place on future earnings, resulting in substantial swings in the technology-oriented Nasdaq Composite Index. Shares in heavily weighted automaker Tesla rebounded after the previous week’s sell-off, lifting the consumer discretionary sector. The small-cap Russell 2000 Index outperformed and extended its recent market leadership, ending the week up roughly 19% on a price (excluding dividends) basis for the year to date.

The week started out on a down note as the yield on the benchmark 10-year U.S. Treasury note stayed near one-year highs. Bond yields retreated over the following days, which seemed to provide a lift to sentiment. Tesla and other high-growth stocks that had sold off in previous weeks were particularly strong as interest rate fears abated. On Wednesday, the Labor Department reported that core (excluding food and energy) consumer prices had increased only 0.1% in February, slightly below expectations. Core producer prices, reported Friday, rose 0.2%, in line with expectations and well below January’s 1.2% jump.

The Nasdaq gave back some of its gains after Treasury yields bounced back Friday to end higher for the week. (Bond prices and yields move in opposite directions.) The broad municipal bond market posted strong gains through most of the week as cash flowed back into the market and new issuance remained relatively modest

Japan’s stock markets advanced over the week, with the Nikkei 225 Stock Average gaining 2.96% and the broader TOPIX Index up 2.89%. Japanese value stocks continued their strong outperformance relative to their growth peers, amid increased global interest in companies whose fortunes are closely tied to the economic cycle: The TOPIX Value Index has surged so far this year. The yen weakened to near a nine-month low, closing above JPY 109 versus the U.S. dollar. The yield of the 10-year Japanese government bond finished the week at 0.11%.

Chinese stocks posted a weekly loss as the Shanghai Composite Index fell 1.4% and the large-cap CSI 300 Index shed 2.2%. Despite recent weeks’ underperformance, investor appetite for Chinese stocks appeared undiminished. Net inflows into Chinese stocks have turned neutral for the first time since November, according to data from global custodian bank State Street, reflecting improving demand from China’s major trading partners and the country’s ongoing recovery. The recent weakness in Chinese stocks comes as Beijing appears to be focusing more on longer-term economic restructuring and financial deleveraging amid a strong post-pandemic recovery. In the bond market, the yield on China’s sovereign 10-year bond declined nine basis points to 3.27% for the week.

Commodities face another buffeting this week with the US Federal Reserve meeting, statement and forecasts very likely to send prices in all directions. Ahead of the meeting, last week saw oil prices fall, gold weaken, silver rise, copper remain solid and iron ore lose up to 5% by Friday’s close.

Global benchmark Brent futures fell 0.6% on Friday and West Texas Intermediate also dipped 0.7% for its first weekly decline in three weeks.Both Brent and WTI down slightly for the week after rising more than 10% over the past two. WTI settled at $US65.58 per barrel and Brent settled at $US69.20.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and Licenced 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

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Market Update 5/3/21

Shares in Europe ended higher this week, buoyed by the possibility that easing restrictions implemented to suppress the coronavirus’s spread and encouraging monetary and fiscal policies could set the stage for an economic recovery. However, growing expectations curbed gains that central banks would act to stem inflation. The pan-European STOXX Europe 600 Index rose 0.91% in local currency terms. Major stock indexes also advanced, while the UK’s FTSE 100 Index climbed 2.27% on the week, lifted by finance minister Rishi Sunak’s annual budget, which called for more fiscal stimulus, and the Office for Budget Responsibility’s forecasts that the economy would recover to its former size earlier than previously expected.

Core and peripheral eurozone bond yields rose as long-term inflation expectations strengthened. Doubt about whether the European Central Bank would act to suppress the increase in borrowing costs, combined with the Federal Reserve reiterating its pacifistic stance, gave yields another boost. UK gilt yields broadly moved higher, lifted by Sunak’s unveiling of the annual budget.

In his budget speech to Parliament, Sunak pledged GBP 65 billion of additional fiscal spending in a temporary tax and the short term break for business investment. He extended welfare payments and the jobs-support program until September. But most individuals will have to pay more tax over time, and corporate taxes would rise to 25% in 2023 from 19% currently.

The major US benchmarks finished mixed as longer-term interest rates continued their ascent. The rise in rates again weighed on growth stocks by increasing the discount on future earnings, while value stocks managed gains, according to Russell indexes. Within the S&P 500 Index, energy shares outperformed as oil prices hit their highest levels in over a year. Technology shares were broadly weak, while consumer discretionary stocks continued to be dragged lower by electric vehicle maker Tesla.

The US Treasury sell-off rattled on this week, intensified by assurances from Federal Reserve chair Jay Powell, the central bank would stick to its monetary policy and better than expected US non-farm payroll figures. The 10-year Treasury yield traded flat at 1.56% after popping above 1.61% to hit a 2021 high following the employment growth. The superstar US tech stocks continued to bear the heat with shares in Apple, Amazon, Microsoft and Alphabet losing more than 2% on Wednesday.

Japan’s stock markets produced mixed returns for the week, with the Nikkei 225 Stock Average dropping 0.35% and the broader TOPIX Index gaining 1.70%. The yen weakened and closed above JPY 108 versus the U.S. dollar. The yield of the 10-year Japanese government bond finished the week at 0.09%, its lowest level since mid-February, on dovish comments from the Governor of the Bank of Japan.

Chinese shares fell in choppy trade as rising U.S. yields and inflation expectations spilled into the country’s stock market. The large-cap CSI 300 Index fell 1.4%, while local currency A shares shed 0.2%. Technology shares fell in sympathy with recent highflying names related to consumers, electric vehicles, and property management. The yield on China’s sovereign 10-year bond rose to end the week at 3.36%, and the renminbi currency ended broadly flat against the U.S. dollar.

How soon China will normalise economic policy after the coronavirus crisis is a more urgent concern to investors. On Friday, China unveiled its official 2021 growth target of above 6%, a goal widely perceived as conservative. Beijing also decreased its fiscal deficit target to 3.2% of gross domestic product from 3.6% in 2020, as widely expected.

Oil prices rose sharply for a second day in a row on Friday, hitting their highest levels in more than a year, after the stronger-than-expected US jobs report and decision by OPEC and its allies not to increase supply in April. The surge took weekly gains to between 5% and 7% for Brent and West Texas Intermediate (WTI) crude as prices reached levels last seen in January 2020. Gold drooped again, as did silver, iron ore faded, but copper bounced on Friday. Gold finished the week under $US1,700 an ounce and at a 9-month low. While the stronger US dollar played a significant part in the weakness on Friday, it didn’t impact copper (or oil) which rose by nearly 2.5% on the day.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and Licenced 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

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Market Update 26/2/21

Focus was on interest rates last week, as the increase in government bond yields sped up, unsettling both equity and fixed-income markets. Bond volatility has risen to the highest level since April last year and spread to other asset classes.

The major benchmarks pulled back sharply in response to the steep rise in longer-term Treasury interest rates. The S & P 500 index recorded its largest weekly decline in a month, while the Nasdaq Composite Index suffered its worst decline since October. Consumer discretionary shares were specifically weak, driven in part by a steep decline in the automaker Tesla, while a decline in Apple shares weighed on the information technology sector. Energy stocks outperformed as oil prices rose. 

Consumer inflation data published earlier in the month surprised on the downside, but producer prices, reported at mid-month, rose 1.3% in January, much more than consensus expectations and the largest increase in data going back to 2009. Inflation has also been pronounced in the housing sector, and Tuesday brought news that home prices had increased 10.1% in December from a year before. Relatedly, lumber futures have reached record highs, while copper prices are at their highest levels in a decade.

Inflation concerns, stronger-than-expected economic data, technical factors, and weak auction results combined to push the yield on the benchmark 10-year U.S. Treasury note to around 1.61% on Thursday afternoon, its highest level in over a year. The broad municipal bond market also was affected through most of the week as tax-exempt yields continued to follow Treasury yields upward.

Shares in Europe dropped along with global markets. Trading was volatile during the week as worries grew that central banks might need to act sooner than anticipated to subdue inflationary pressures that could come with an economic recovery. In local currency terms, the STOXX Europe 600 Index ended the week 2.38% lower. Major Continental stock indexes decreased, as did the UK’s FTSE 100 Index, which came under pressure from a stronger British pound. The currency rose to its highest level in almost three years, reaching USD 1.42 before pulling back from this peak, as the swift rollout of coronavirus vaccines fuelled recovery hopes and investors priced in an interest rate hike over the next two to three years.

Core and peripheral eurozone government bond yields rose, tracking moves in U.S. Treasury yields. Pacifistic rhetoric from Fed Chair Powell triggered a sharp bond sell-off throughout most developed markets as it struggled to ease fears of inflation rising. Christine Lagarde, president of the European Central Bank, and other policymakers warned markets they were keeping an eye on borrowing costs, but the consequent decline in yields was temporary. Gilt yields also rose in line with other developed markets.

British finance minister Rishi Sunak is predicted to extend the jobs support program until at least May in his budget next week, and there may be state support for sectors hit the hardest by the lockdowns, such as aviation. Denmark also said it would ease restrictions in the retail sector and allow some schools to reopen on March 1.

Fourth-quarter German gross domestic product (GDP) data were revised up unexpectedly to a growth rate of 0.3% from an initial estimation of 0.1% on strong exports and solid construction activity. The full-year figure was increased to -4.9% from -5.0%. The Eurozone Economic Sentiment Indicator rose to 93.4 in February from 91.5 the month before, the highest since March last year, the EC said. 

Japan’s stock markets tumbled on Friday, the last trading day of the month, ending sharply lower for the holiday-shortened trading week. Japan’s stock markets were closed on Tuesday, February 23, in observance of the Emperor’s Birthday. For the week, the Nikkei 225 Stock Average declined 3.5% (1,052 points) and closed at 28,966.01. Chinese shares fell in tandem with the global sell-off. The Shanghai Composite Index shed 5.1%, while the large-cap CSI 300 Index fell 7.7% in its worst weekly performance since October 12, 2018.

Important economic data being released next week include the PMI composite, jobs data, and consumer credit levels.

Weekly Market Update 19/02/21

Shares in Europe ended the week modestly higher, supported by companies delivering reassuring quarterly earnings. Those gains were tempered, however, by worries that rising inflation and higher bond yields might prompt central banks to tighten monetary policy. In local currency terms, the STOXX Europe 600 Index advanced 0.21%. Equities in Germany and Italy fell, while France’s CAC 40 Index and the UK’s FTSE 100 Index gained ground.

Core euro-zone bond yields rose. The yield on 10-year German bonds hit -0.32% on Friday, the highest level since June 2020, as rising US inflation expectations weighed on core asset demand. Strong Purchasing Managers’ Index (PMI) numbers also put upward pressure on yields. Yields on peripheral euro-zone bonds largely tracked core markets. Ten-year gilt yields reached 0.64% on Friday, up from 0.57% at the start of the week.

The major US indexes ended the holiday-shortened trading week mostly lower, with the large-cap benchmarks and technology-heavy Nasdaq Composite index hitting record intraday highs before falling back. A boost in longer-term interest rates weighed on fast-growing technology stocks by raising the discount rate on future profits. Conversely, the increase favoured bank shares by boosting lending margins and helping value shares– heavily weighted in financial– outperform growth stocks.

Trading began Tuesday on a solid note, attributed to a mixture of hopes for further fiscal stimulus, continued soft monetary policy, a better-than-expected fourth-quarter earnings season, and progression in fighting the coronavirus. Wall Street also seemed stimulated by a Bloomberg report that vaccine supply is anticipated to double by April, partly thanks to the approval of additional candidates.

US stocks fell on Thursday morning after Walmart reported weaker-than-expected earnings. The company also forecast slower earnings growth in the coming year, in part due to its commitment to raise the average wage of its employees to $15 an hour. The news followed Wednesday’s Labor Department report that producer prices rose 1.3% in January, the largest increase since December 2009. Retail sales also rose by 5.3% in the month – well above consensus expectations of a 1.1% gain, which many attributed to 600 dollars in direct payments to lower- and middle-income Americans approved as part of the December stimulus package. Weekly jobless claims, reported Thursday, jumped to 861,000, the highest level since mid-January. Data on the housing market also surprised on the downside, with house prices falling sharply from a nearly 14-year high. Inflation worries and retail sales data helped push the yield on the 10-year U.S. Treasury note to its highest level in nearly a year.

Japan’s stock benchmarks produced mixed results for the week. The Nikkei 225 Stock Average advanced 1.7% (497.85 points) and closed at 30,017.92. This was the first time the widely watched benchmark had topped the 30,000 milestone in more than 30 years– although it remained well below the all-time high of 38,597 it reached in 1989. For the year-to-date period, the Nikkei index is ahead 9.38%. The broader equity market benchmarks, the large-cap TOPIX Index and the TOPIX Small Index, finished the week with modest losses. In other market news, the yen was slightly weaker and traded above JPY 105 versus the U.S. dollar on Friday. Meanwhile, the yield of the 10-year Japanese government bond finished the week at 0.11%, the highest level since November 2018.

Chinese shares ended on a mixed note on a holiday-shortened week. The large-cap CSI 300 Index slipped 0.5%, while the benchmark Shanghai Composite Index rose 1.1%. China’s financial markets reopened Thursday, February 18, after a weeklong Lunar New Year holiday. In fixed income markets, the yield on China’s 10-year government bond closed at 3.31%, five basis points above its pre-holiday level. The People’s Bank of China (PBOC) drained RMB 260 billion from the financial system, which dampened buying momentum. Now that China’s economy is on firm footing, analysts expect the PBOC will gradually dial back pandemic stimulus measures. In currency trading, the renminbi closed at 6.487 against the U.S. dollar, slightly weaker from its pre-holiday level.

Commodities traded lower for a second week with the US and China attempting to get a trade deal across the finish line. Gold found support at a key level while a week-long oil rally ran out of steam with OPEC+ under pressure to cut production further. West Texas Intermediate fell $1.28 to settle at $59.24 a barrel, falling less than 1% over the week. Brent for the April settlement slipped $1.02 to end the session at $62.91 a barrel, posting its largest daily drop since 15th January.

Weekly Market Update 5/2/21

US stocks posted their best weekly gain since November, with major indexes closing at record highs. Economic expectations and progress in vaccine distribution continue to underpin the narrative of the bullish market. Crude oil traded at its highest level in more than a year, rising nearly 10% for the week. Energy stocks outperformed as domestic oil prices hit their highest level in over a year on a surprising drawdown in U.S. reserves. Healthcare stocks lagged.

Investors kept a close eye on the Biden administration’s USD 1.9 trillion stimulus proposal during the week. On Tuesday, President Joe Biden met with Republican Senate leaders to discuss a compromise, with Republicans proposing instead a relief bill totalling USD 618 billion. It became increasingly clear, however, that Senate Democrats were prepared to move ahead alone using the so-called “budget reconciliation” process, which would require a simple majority in the chamber (including the tie-breaking vote from Vice President Kamala Harris).

Shares in Europe rose with global markets on hopes of a quicker economic recovery, spurred in part by hopes that the pace of coronavirus vaccinations would improve and by the prospect of more U.S. fiscal stimulus. The pan-European STOXX Europe 600 Index ended the week 3.46% higher.

Germany’s Xetra DAX Index and France’s CAC 40 lagged but posted solid gains Italy’s FTSE MIB Index, which rallied 7.00% after Mario Draghi, the former president of the European Central Bank, was given a mandate to form a new government. The FTSE 100 Index advanced 1.28%, as some disappointing earnings reports and a strong UK pound curbed its gains. The currency strengthened after traders reduced bets on a possible interest rate cut and data highlighted the UK’s rapid rollout of its coronavirus vaccination program.

The eurozone’s economy contracted less than expected in the fourth quarter, according to Eurostat’s initial estimate, which suggested that GDP fell 0.7% sequentially and 5.1% year over year. France’s and Italy’s economies shrank the most, while GDP expanded 0.1% in Germany and 0.4% in Spain. Economists expect a steeper GDP contraction in the first quarter due to the continuing lockdowns.

The Bank of England said it expected the UK economy to recover quickly over the year and return to its pre-pandemic size by the first quarter of 2022. The central bank lowered its forecast for economic growth in 2021 to 5% from the 7.25% it predicted in November but raised its estimate of 2022 GDP growth to 7.25% from 6.25%.

Japan’s stock markets surged for the week. The Nikkei 225 Stock Average advanced 4.0% (1,116 points) and closed at 28,779.19. For the year-to-date period, the widely watched yardstick is ahead 4.9%. The broader equity market benchmarks, the large-cap TOPIX Index and the TOPIX Small Index, logged similar strong weekly gains. The yen weakened and closed above JPY 105 versus the U.S. dollar.

Chinese stocks rose for the week. The large-cap CSI 300 Index gained 2.5% and outperformed the Shanghai Composite Index’s 0.4% rise. Sentiment improved following reports that Chinese e-commerce leader Alibaba Group, which has been the target of unfavourable regulatory actions, reached an agreement with regulators over the restructuring of its Fintech affiliate Ant Group, whose record USD 34.4 billion initial public offering (IPO) was cancelled in November. In Hong Kong, a record oversubscription by retail investors for the USD 5.4 billion initial public offering of Kuaishou Technology revealed huge investor appetite for Chinese tech companies. Shares of the video app company surged 161% in its Hong Kong public trading debut on Friday, making it the largest internet IPO since Uber went public in 2019, according to Bloomberg.

US Treasuries rose over the week, with the 10-year yielding 1.20%, German bunds are yielding -0.42% and UK gilts 0.52%. Futures for gold on Wednesday finished solidly higher after a report on U.S. inflation and as investors responded to a House vote on impeaching President Donald Trump, for a second time, days before he is set to relinquish power to President-elect Joe Biden on Jan. 20. February gold prices traded $10.70, or 0.6%, higher to settle at $1,854.90 an ounce, after settling 0.4% lower on Tuesday.

Economic data being released include the small-business optimism report on Tuesday, inflation on Wednesday, and consumer confidence on Friday.

Weekly Market Update 29/01/2021

Equities suffered their biggest weekly loss in three months last week as volatile trading continued in some areas of the market. President Joe Biden has experienced a resistance against his $1.9 trillion fiscal stimulus package, leading to concerns it will have to be diluted to get passed, whilst Europe publicly strains with the rollout of vaccines.

U.S. stocks fell % over the week, with U.S. technology stocks falling 1.5 %. European stocks lost 2.2%, while UK stocks fell 3.2%, although much of the pain was in high-yield stocks, which suffered from the continued strength of sterling as the currency rose to $1.37 and $1.12 against the dollar and euro, respectively. Japanese stocks fell 2.6% and Australian stocks lost 2.8%.

Emerging markets fell 3.0%, with domestic Chinese stocks down 3.4% and Hong Kong stocks down 4.0% as the People’s Bank of China withdrew $23.2 billion in liquidity from the market to try to protect against asset bubbles from forming in the markets.

Haven assets like US Treasuries rose this week, with the yield on 10-year German government bonds, which moved inversely, temporarily falling below 1% and now trading at 1.07%, with 10-year German Bunds trading at -0.51% and UK Gilts at 0.32%.

Market volatility has increased despite the strong start to the company’s earnings season. Of the 34% of companies included in the main US equity index, 82% have exceeded earnings expectations, with an average earnings per share outperformance of 19%. Not as many companies have published results in Europe, of those that have, earnings have followed a comparable pattern, with 62% exceeding expectations with an average earnings per share outperformance of 20%.

The US stock market suffered its worst sell-off since October 2020 on Wednesday, due to concerns President Biden’s fiscal package needs to be diluted to enforce it, and disappointing news about the introduction of vaccines in many countries, particularly Europe. This has led to a high-profile disagreement between pharmaceutical company AstraZeneca and the European Commission over the anticipated delivery of Covid19 vaccines in the first quarter of 2021 relative to the volume ordered, with a major shortage probable.

The introduction of the vaccine in Europe became even more complicated when the German Vaccination Committee decided AstraZeneca’s vaccine should only be provided to people under 65, while they found inadequate trial data for more mature age groups.

Market volatility is worsened by well-organized retail investors who use online message boards like Reddit to target hedge funds that are shorting individual stocks. By purchasing heavily shortened stocks and driving up stock prices, these retail investors forced many hedge funds to close their short positions as their losses mounted. Retail investors will gain if the share price continues to rise, as hedge funds attempt to cover their short positions by buying shares. One high-profile hedge fund, Melvin Capital, lost $3.7 billion in the first three weeks of January as a result of such a targeted ploy by retail investors.

The information contained in this article is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation.

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