Market Update

4th June – 11th June 2021

Shares in Europe advanced for the fourth week in a row, to some extent lifted by the European Central Bank’s (ECB) pledge to carry on with its high bond purchases in the upcoming quarter. In local-currency terms, the pan-European STOXX Europe 600 Index ended up 1.09% higher. France’s CAC 40 Index climbed 1.30%, while Italy’s FTSE MIB Index advanced 0.57%. Germany’s Xetra DAX Index was little changed. The UK’s FTSE 100 Index gained 0.92%.

Treasury yields in the Eurozone fell largely, reflecting the ECB’s commitment to continue its bond-buying program at its current pace for another quarter. The central bank forecast also called for inflation to come and subside in well below its target in 2023. UK gilt yields broadly tracked yield in core markets.

The European Central Bank (ECB) anticipates inflation in the Eurozone to rise by 1.9% in 2021, compared to the previous estimation of 1.5%. The central bank’s revised forecast calls for inflation to slow to 1.4% in 2023. The Eurozone economy is expected to grow 4.6% this year and 4.7% next year — in both of these instances, a 60-basis point rise from the ECB’s previous forecast.

In the UK, outgoing Bank of England (BoE) chief economist Andy Haldane warned the BoE could face an inflationary spiral if it does not act swiftly. The economy expanded 2.3% in April, the fastest rate since July, driven by growth in services as lockdown measures eased.

A sharp decline in longer-term bond yields appeared to help push the S & P 500 index to a record high in a week of relatively light summer trading. The decline in yields favoured growth stocks by reducing the implied discount on future earnings while weighing on financials by threatening bank lending margins. The technology-heavy Nasdaq Composite Index outperformed and marked its fourth consecutive weekly gain, while the narrowly focused Dow Jones Industrial Average recorded a modest loss.

U.S. Treasuries rallied through most of the week as many investors sought to unwind positions that would benefit from price declines, as the yield on the 10-year U.S. Treasury note fell to its lowest level in three months. (Bond prices and yields move in opposite directions.).

Japan’s stock market returns were broadly unchanged for the week, with the Nikkei 225 Index up 0.02% and the broader TOPIX Index falling 0.26%. While the economic recovery in the country remains fragile, the government has lifted the coronavirus quasi-states of emergency in three prefectures in the face of steadily falling infection rates and easing pressure on hospitals.

The yield on the Japanese 10-year government bond fell to 0.03%, its lowest level since January, as the U.S. Centres for Disease Control and Prevention announced it was easing travel recommendations for more than 110 territories and countries, including Japan just ahead of the Olympics. The yen continued to hover around the JPY 109.5 level against the U.S. dollar.

Chinese stocks fell for a second week. The CSI 300 Index of large-cap stocks fell 1.1%, while the broader Shanghai Composite Index edged down 0.1%. In China’s bond markets, the trend in yields since late May has been progressively higher. The yield on the 10-year Chinese government bond rose four basis points to close at 3.15% following higher producer price inflation. In currency markets, the RMB (renminbi) finished flat against the U.S. dollar in a week marked by near-zero volatility.

Oil prices reached fresh multi-year highs on Friday, closing out a third straight week of gains on an improved outlook for worldwide demand, as rising COVID-19 vaccination rates help lift pandemic curbs.

Brent crude futures settled at $72.69 a barrel, rising 17 cents after reaching their highest since May 2019. For the week, Brent was up 1%.

U.S. West Texas Intermediate (WTI) crude futures settled at $70.91 a barrel, up 62 cents, settling at their highest since October 2018. WTI was up 1.9% on the week.

Gold for August delivery fell $16.80 to $1,879.60 an ounce. Silver for July delivery rose 12 cents to $28.15 an ounce, and July copper rose 5 cents to $4.54 a pound.

Lawsons Equity – Financial Advisors (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.