Weekly market recap 8.2.2021

Markets rebound after a losing week

US

The major benchmarks closed with gains last week, erasing losses from the previous week. Fiscal stimulus plans and vaccine optimism raised investors´ risk appetite. The S&P 500 manged to reach a new record high, but the Dow Jones failed to copy it. Oil prices reached their highest level since January 2020, helping the energy sector to outperform. Over 100 of the S&P 500 companies reported their earnings last week, shares in Google parent Alphabet rose sharply on Wednesday after the company beat earnings and revenue estimates on better-than-expected advertising growth.

We saw some positive macroeconomic data last week too. The Institute for Supply Management’s (ISM’s) gauge of services sector activity rose to its highest level in two years. It reached 58,7, while reading above 50 is indicating expansion. Weekly jobless claims fell more than expected and reached their lowest level (779,000) since late November. On Friday, the Labor Department reported that employers had added 49,000 jobs in January, which was in line with expectations. 

EU

European shares moved in tandem with the global markets on hopes of economic recovery, coronavirus vaccinations, and by the prospect of more U.S. fiscal stimulus. The pan-European STOXX Europe 600 Index ended the week 3.46% higher.

Germany’s Xetra DAX Index and France’s CAC 40 posted solid gains but lagged Italy’s FTSE MIB Index, which rallied 7.00% after Mario Draghi, the former president of the European Central Bank, was given a mandate to form a new government. The FTSE 100 Index advanced 1.28%, as some disappointing earnings reports and a strong UK pound curbed its gains.

The eurozone’s economy contracted less than expected in the fourth quarter, as GDP fell 5.1% year over year. France’s and Italy’s economies shrank the most, while GDP expanded 0.1% in Germany and 0.4% in Spain. Economists expect a steeper GDP contraction in the first quarter due to the continuing lockdowns.

The BoE said it expected the UK economy to recover quickly over the year and return to its pre-pandemic size by the first quarter of 2022. The central bank lowered its forecast for economic growth in 2021 to 5% from the 7.25% it predicted in November but raised its estimate of 2022 GDP growth to 7.25% from 6.25%.

Japan

Japan’s stock markets closed in the green for the week. The Nikkei 225 Stock Average advanced 4.0% (1,116 points) and closed at 28,779.19. For the year-to-date period, the widely watched yardstick is ahead 4.9%. The broader equity market benchmarks, the large-cap TOPIX Index and the TOPIX Small Index, logged similar strong weekly gains. The yen weakened and closed above JPY 105 versus the U.S. dollar.

China

Chinese stocks rose for the week too. The large-cap CSI 300 Index gained 2.5% and outperformed the Shanghai Composite Index’s 0.4% rise. Chinese e-commerce leader Alibaba Group reached an agreement with regulators over the restructuring of its fintech affiliate Ant Group, whose record USD 34.4 billion initial public offering (IPO) was canceled in November. In Hong Kong, a record oversubscription by retail investors for the USD 5.4 billion initial public offering of Kuaishou Technology revealed huge investor appetite for Chinese tech companies. Shares of the video app company surged 161% in its Hong Kong public trading debut on Friday, making it the largest internet IPO since Uber went public in 2019.