Weekly Market Update 9/5/21
Equities in Europe rose on stronger-than-expected earnings results and growing confidence in an economic recovery. In local currency terms, the pan-European STOXX Europe 600 Index finished the week 1.72% higher. The French and German stock indexes climbed by more than 1.5%. Italy’s FTSE MIB Index added 1.95%. The UK’s FTSE 100 Index gained 2.29%.
Core bond yields of the Eurozone fell in the first half of the week on underwhelming US manufacturing data. Yields steadied following a European Central Bank policymaker implied that the institution’s bond purchases could slow down in June. The yields on peripheral eurozone government bonds largely rose. They initially tracked core markets lower, but Italian government bonds then sold off after reports surfaced the country would issue debt with 30-year maturity.
Skepticism over the timing of Italy’s recovery package also pushed peripheral yields higher. UK gilt yields fell, tracking early moves in core markets. The Bank of England then revised its forecast for 2021 UK economic growth to 7.25% from 5%, and said it planned to slow bond purchases, causing a momentary rise in yields.
The major US indexes generated mixed returns across a wide range as a Friday rally wiped out some losses early in the week. The narrowly focused Dow Jones Industrial Average fared best, although the technology-heavy Nasdaq Composite Index recorded its worst weekly decline in two months. Technology shares underperformed within the S&P 500 Index, along with consumer discretionary, utilities, and real estate shares.
The discouraging jobs data triggered a temporary but sharp decrease in Treasury yields on Friday morning, helping temporarily push the yield on the benchmark 10-year note to a two-month low before ending up lower for the week. (Bond prices and yields move in opposite directions.).
In a holiday-shortened week, Japanese equities at least temporarily disregarded worries about the coronavirus and associated restriction measures to record a gain.
The Nikkei 225 rose 1.89%, while the broader TOPIX Index finished 1.83% higher. (The market was closed for Golden Week for the first 3 trading days.) Investor confidence was supported by the prospects of a global economic recovery following better-than-expected U.S. data in recent weeks. The yen was broadly unchanged at just above JPY 109 against the U.S. dollar, while the yield on the 10-year Japanese government bond dropped to 0.08%.
Chinese stocks fell also in a holiday-shortened week. The large-cap CSI 300 Index fell 2.5% from the previous Friday, while the Shanghai Stock Exchange Composite Index shed 0.8%. Mainland markets resumed Thursday after being closed Monday through Wednesday for the Labor Day holiday. The yield on China’s 10-year sovereign bond declined three basis points to 3.17%.
In commodities, copper and iron ore hit new all-time highs on Friday as demand for both commodities continued to surge, especially from China. Gold settled higher as prices remained above $1,800 an ounce at week’s end for the first in three months. Gold closed up 0.9% or $1,560 to settle at $1,831 an ounce. Silver rose 6.1% last week after settling Friday at $27.477 an ounce.
US energy companies added oil and natural gas rigs for a second week in a row, as higher oil prices prompted more drillers to return to the field. Oil futures rose 2.1% last week for US West Texas crude, which ended up 0.3% on Friday at $64.90. Brent futures rose 2.7% for the week to settle at $68.28 a barrel.