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Global Markets Weekly Review: Week 14, 2021

Global markets hit record highs on Tuesday, supported by strong economic data from China and the US, while currency and bond markets paused for breath after a month of rapid gains in the dollar and treasury yields. Equities as measured by the 49-country spanning MSCI all-country world index hit a high as European stocks played catch-up with gains in Asia and Wall Street overnight in their first trading session since the Easter holiday.

United States

Most of the major benchmarks moved steadily higher as per their global counterparts 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 stayed below its February peak. Tech shares also regained the lead within the S&P 500 during the week, helped by solid gains in Apple and Microsoft—which together account for roughly 40% of the sector’s market capitalization. Casino and cruise line shares were also especially strong, while energy stocks lagged as oil prices pulled back early in the week. Growth stocks handily outperformed value shares, narrowing the performance gap for the year to date.

The yield on the benchmark 10-year U.S. Treasury note increased somewhat 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.) The firm’s traders noted that the Federal Reserve’s commitment to continued low rates seemed to keep a lid on yields. 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 “uneven and incomplete.”

Index Thursday’s Close Week’s Change % Change YTD
DJIA 33,800.60 647.39 10.44%
S&P 500 4,128.80 108.93 9.92%
Nasdaq Composite 13,900.19 420.08 7.85%
S&P MidCap 400 2,663.99 16.28 15.49%
Russell 2000 2,243.29 -10.61 13.42%
Europe

Shares in Europe rose on growing hopes that injections of fiscal stimulus and dovish central bank policies would spur 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%, partly owing to a weaker UK pound, which fell on concerns about vaccine supply issues and profit taking after a strong quarter. UK stocks tend to gain when the pound falls because many companies in the FTSE 100 Index generate a meaningful proportion of their revenues internationally.

Global Markets
Germany’s Xetra DAX 30 Index, one year performance chart

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

Asia

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%. Data indicating higher inflation and elevated U.S.-Sino tensions weighed on sentiment and outweighed positive corporate earnings. According to Citi Research, about 67% of the 33 Chinese industrial companies it covers recorded earnings that either beat or met consensus forecasts, with about half of that number reporting better-than-expected earnings—far exceeding the typical one-third ratio, the bank noted.

Economic data over China’s Qingming holiday weekend (April 3 to 5) showed a recovery in domestic tourism close to pre-pandemic levels. Box office and cinema admissions also rebounded strongly from 2019 levels to set new records. However, tourism revenue over the long weekend slumped from 2019, a drop that analysts attributed to shorter visits and price discounts.

Japanese stock markets started the week positively, following global counterparts, with the widely 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 began. The broader TOPIX was also marginally lower. The yen strengthened a little against the U.S. dollar, closing in the high JPY 109 range. Meanwhile, benchmark 10-year government bond yields were a little lower at just above 0.10%. 

Global economic news weighed on stocks after the week got off to a strong start. Investors were dealt a blow on Tuesday with the release of data showing that household spending plunged 6.6% in February, year on year, worse than the anticipated 5.3% decline. This came on the heels of a similarly precipitous 6.1% annual decline in January. On a monthly basis, household spending was up 2.4% in February, but this too proved disappointing as expectations were for a 2.8% increase.
Other Key Global Markets
  • Mexico – Mexican stocks, as measured by the IPC Index, returned about 0.8%, as a global average. On Thursday, the government reported that inflation in March increased 0.8% month over month and 4.7% year over year. While the data were in line with expectations, the consumer price index is now at a two-year high and well above the central bank’s 2% to 4% target range for inflation.
  • Chile – Chilean stocks, as measured by the IPSA Index, returned about 1.2% on global comparison. On Tuesday, the legislature voted—as proposed by President Sebastián Piñera—to officially push back the constitutional convention and regional elections by over a month due to the recent surge in coronavirus cases and new lockdowns.
Global Markets
Chile’s IPSA Index, one year performance chart

New rights could be introduced in the areas of pensions, wages, health care, and education, all of which imply more fiscal outlays. While the new constitution will likely not upend Chile’s open market economy and institutional framework