Weekly Market Update – 3/05/21

European shares ended barely changed this week after a rise in Eurozone bond yields prompted investors to take profits at near record levels. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.38% lower. The major indexes posted mixed results: Germany’s Xetra DAX Index eased 0.94% and Italy’s FTSE MIB slipped 1.00%, while France’s CAC 40 advanced 0.18% and the UK’s FTSE 100 Index gained 0.45%.

Core eurozone bond yields trended higher amid concerns the U.S. Federal Reserve might consider tapering its bond buying program. Higher-than-expected German inflation data published also raised core yields. Yields in the UK and peripheral bond markets in the Eurozone also climbed higher, largely tracking movements in US Treasuries and core Eurozone bonds.

The major US indexes ended mostly lower, but the S&P 500, the Nasdaq Composite, and the S&P MidCap indexes all reached new highs before giving up their gains on Friday. Returns within and among sectors varied widely, as investors acted in response to a flood of first-quarter earnings reports, although an increase in oil prices to six-week highs provided a general boost to energy stocks.

Communication services shares outperformed within the S&P 500, aided by earnings and revenue beats from Facebook and Alphabet (Google). Technology stocks underperformed, weighed upon by a decline in Microsoft despite the company reporting earnings that surpassed consensus estimates. Health care shares were also weak, pulled lower by declines in several major drugmakers.

The solid economic data pushed the yield on the benchmark 10-year Treasury note higher for the week, but the generally pacifistic tone of Powell’s press conference on Wednesday seemed to help moderate the increase. (Bond prices and yields move in opposite directions.) Municipal bonds outperformed Treasuries for much of the week, helped by inadequate new supply. Demand was focused in shorter-term munis, however.

Japan’s stock markets ended up the week lower, with the Nikkei 225 Index down 0.72% and the broader TOPIX Index dropping 0.87%. Declines were notable on Friday, as some firms’ worse-than-expected earnings releases exerted downward pressure on markets. Investors also adjusted positions ahead of the continuation of the Golden Week holiday, which sees markets close May 3– 5. The yen weakened against the U.S. dollar, closing at JPY 108.9, while the yield on the 10-year Japanese government bond rose to 0.09%.

Chinese shares noted a weekly loss as the government’s continued crackdown on technology firms dampened buying sentiment. The large-cap CSI 300 Index declined 0.2%, while the Shanghai Composite Index shed 0.8%. In bond markets, the yield on China’s sovereign 10-year bond edged up 2 basis points to 3.20%.

April was a good month for commodities, even though the final day of the period– Friday, April 30– wasn’t so good with small falls across the board. Gold dipped sightly on Friday to settle at $1768.70, still range bound and unable to sustain a move back above $1,700 an ounce. After closing in on a record on Thursday, three-month copper’s turned lower on Friday on the London Metal Exchange to close at $9,825 a tonne, down $60 from Thursday. The red metal did reach $10,008 per tonne on Thursday, closing in on the all-time high of $10,190 per tonne from February 2011.

In oil markets, Brent crude futures settled down $1.30, or 1.9%, at $67.26 a barrel on Friday, while US West Texas Intermediate (WTI) crude futures settled down $1.47, or 2.26%, at $3.54 per barrel. Brent gained 1.7% over the week, and WTI rose 2.3%. While WTI and Brent saw their biggest daily drops in more than three weeks, they also saw monthly gains of near 6% and 8%, respectively.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

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