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Global Markets Weekly Review: Week 15, 2021

Good economic news propelled global markets to new highs last week, with equities, bonds and commodities all rallying. Data from Asia showed that Chinese growth data added to signs of a global economic recovery. The dollar slipped. A string of positive economic figures out from various global markets were out, pushing the MSCI All-Country World Index to a fresh record.

United States

Major U.S benchmarks recorded their fourth consecutive week of gains and moved to record highs, leading most activities across global markets. The technology-heavy Nasdaq Composite index and the small-cap Russell 2000 Index slightly lagged the large- and mid-cap benchmarks and stayed below their recent highs. Health care shares were particularly strong within the S&P 500 Index, helped by gains in insurance stocks, while rising gold and copper prices boosted mining shares. Energy shares were roughly flat after retreating late in the week.

The week kicked off the unofficial start of earnings season with 22 of the S&P 500 companies scheduled to report first-quarter results, according to Refinitiv. Despite stronger-than-expected economic data, U.S. Treasury yields fell over the week, with the 10-year Treasury note yield declining to 1.57% from 1.67% the previous Friday.

Index Friday’s Close Week’s Change % Change YTD
DJIA 34,200.67 400.07 11.74%
S&P 500 4,185.47 56.67 11.43%
Nasdaq Composite 14,052.34 152.15 9.03%
S&P MidCap 400 2,723.01 52.49 18.05%
Russell 2000 2,264.89 21.42 14.51%
Europe

Shares in Europe rose to follow other global markets on hopes of a strong recovery in the global economy and corporate earnings, despite a resurgence in coronavirus infections. In local currency terms, the pan-European STOXX Europe 600 Index posted a seventh consecutive week of gains, rising 1.20%. Germany’s Xetra DAX Index advanced 1.48%, France’s CAC 40 gained 1.91%, and Italy’s FTSE MIB added 1.29%. The UK’s FTSE 100 Index added 1.5%.

Global Markets
FTSE 100 Index one year performance

Core eurozone bond yields crept higher as investors sold existing bonds to make space for long-dated issues from several eurozone countries. News reports indicating that Europe would receive additional vaccine supplies in the second quarter also lifted yields. However, yields dipped slightly after the U.S. imposed new sanctions on Russia. Yields in peripheral European economies widely tracked the core markets this week. UK gilt yields broadly followed U.S. Treasury yields lower.

The UK economy grew 0.4% in February, helped by an uptick in factory output and retail and wholesale sales, official data showed. The 2.9% contraction that the economy suffered in January was revised to a 2.2% slowdown.

Asia

China’s Shanghai Composite broad market index of A-shares fell 0.7% over the week to Friday. The CSI 300 large-cap index, with its higher weight in technology stocks, fell 1.4%. Asian and Chinese markets were broadly higher Friday following key Chinese economic data.

In China’s bond markets, rumors spread that state-owned asset manager Huarong Asset Management might fail to meet its upcoming bond payments. The price of Huarong’s bonds fell sharply but began to recover on Thursday after Huarong said it would repay an SGD (Singapore dollar) 600 million bond in April. Contagion to other bonds (and equities) due to Huarong has been relatively mild, seemingly due to expectations that Beijing will step in with financial support for the prominent state-owned enterprise.

The economy surged 18.3% year over year in the first quarter, albeit versus a very low base in 2020, when stringent shutdowns were imposed to contain the initial COVID-19 outbreak. Earlier in the week, China’s Customs reported that exports rose 30.6% in March in U.S. dollar terms. Exports were a key growth driver for China in 2020. Despite the strong headline number, exports slowed in March on a two-year average comparison with 2019. Among the other March data prints, retail sales beat consensus estimates (33.9% versus 28%), while industrial production missed (14.1% versus 18%).

Japanese stock markets were mixed during the week with both the Nikkei 225 Stock Average (-0.6%) and the broader TOPIX (-0.3%) ultimately finishing the period marginally lower. The yen weakened a little against the U.S. dollar, closing in the high JPY 108 range. Meanwhile, benchmark 10-year government bond yields declined, finishing the week at 0.085%.

Global Markets
Japan’s Nikkei 225 Index one year performance

Global markets began cautiously with investors seemingly content to hold their fire ahead of some significant economic updates from China and the U.S. later in the week. A lack of fresh triggers following the record highs across global markets set last week also contributed to the sluggish start.

Other Key Global Markets
  • Turkey – On Thursday, the Turkish central bank decided to leave its one-week repo auction rate unchanged at 19%. The decision was in line with the commitment to policy continuity expressed recently by Governor Sahap Kavcioglu, but the new governor is considered an AKP Party loyalist who seems to share President Recep Tayyip Erdogan’s unorthodox view that high interest rates cause high inflation. Turkish stocks, as measured by the BIST-100 Index, returned about 1.1%, in line with global markets expectations.
  • Russia – Russian stocks, as measured by the Russian Trading System (RTS) Index, returned about 5.6%, following global markets. In recent weeks, there have been media reports of intensified fighting in the Donbass region of eastern Ukraine between pro-Russian separatists and Ukrainian forces—a conflict that has simmered for seven years—as well as a Russian military buildup along its border with Ukraine.
Data Sources:Thomson Reuters, Barrons (Dow Jones & Company), Bloomberg, The Economist Europe, Brazil Business Post, Edward Jones Financial Markets Report.