Weekly markets update 1.3.2021. Markets fall on inflation fears

U.S.

As the benchmark 10-year Treasury note yield rose to its highest level in over a year, investors sold off riskier assets around the globe last week. The S&P 500 Index recorded its biggest weekly decline in a month, while the Nasdaq Composite index suffered its worst drop since October. Steep decline of automaker Tesla dragged down consumer discretionary shares and information technology sector fell too, led by Apple. Energy stocks outperformed as oil prices rose and value stocks outperformed growth stocks.

Producer prices, reported earlier, rose 1.3% in January, much more than consensus expectations and the largest increase in data going back to 2009. Inflation has also been registered in the housing sector and commodity prices rose as well. Copper prices are at their highest levels in a decade. 

EU

Shares in Europe fell along with global markets. The STOXX Europe 600 Index ended the week 2.38% lower. Major Continental stock indexes declined, including the UK’s FTSE 100 Index and Germany´s DAX30. Eurozone government bond yields rose, tracking moves in U.S. Treasury yields. Dovish rhetoric from Fed Chair Powell made yields to stall for a while, before continuing their ascent across most developed markets. Gilt yields also rose in line with other developed markets.

The UK plans to lift lockdown restrictions gradually from March 8. Almost all economy sections are due to reopen during May. Meanwhile only 6.4% of the EU´s population has received a vaccine, which shows that coming weeks will be difficult regarding fighting the pandemic. Germany´s fourth quarter revised GDP rose 0.3% on strong exports and construction activity. Consumer confidence was improving in Germany and Italy, but was little changed in France.

 

Japan

Japan’s stock markets tumbled on Friday, ending sharply lower for the holiday-shortened trading week. Japan’s stock markets were closed on Tuesday, February 23, in observance of the Emperor’s Birthday. For the week, the Nikkei 225 Stock Average declined 3.5% (1,052 points) and closed at 28,966.01. However, the widely watched yardstick is still ahead 5.5% for the year-to-date period. The broader equity market benchmarks, the large-cap TOPIX Index and the TOPIX Small Index, logged similarly punishing weekly losses. The yen weakened and closed above JPY 106 versus the U.S. dollar.