Weekly markets update 15.3.2021

U.S.

Stocks moved higher last week and the major benchmarks made new records. Investors seemed to remain focused on fluctuating longer-term bond yields and the discount they place on future earnings, resulting in substantial swings in the technology-oriented Nasdaq Composite Index. The week started out on a down note as the yield on the benchmark 10-year U.S. Treasury note stayed near one-year highs. Bond yields retreated over the following days, which seemed to provide a lift to sentiment. On Wednesday, the Labor Department reported that core (excluding food and energy) consumer prices had increased only 0.1% in February, slightly below expectations. Core producer prices, reported Friday, rose 0.2%, in line with expectations and well below January’s 1.2% jump.

Initial weekly jobless claims fell to 712,000, the lowest level since November. The gradually healing labor market seemed to be reflected in the University of Michigan’s preliminary gauge of consumer sentiment in March, which rose more than expected. That helped markets to rise for the week.

EU

Shares in Europe rose as the U.S. prepared to inject a massive amount of fiscal stimulus into the economy and the European Central Bank (ECB) pledged to buy more bonds to counter rising borrowing costs. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 3.52% higher. Germany’s Xetra DAX Index climbed 4.18%, France’s CAC 40 advanced 4.56%, and Italy’s FTSE MIB gained 5.00%. The UK’s FTSE 100 Index added 1.97%.

Core eurozone government bond yields fell. The ECB announced it would accelerate bond purchases in the second quarter to curb the recent rise in yields, pushing bond prices up. Fourth-quarter gross domestic product (GDP) for the region was also revised down slightly, further suppressing yields.

The ECB’s latest estimates call for EU GDP growth at 4% in 2021, an increase from the 3.9%. The ECB also revised its inflation outlook to 1.5% from 1% for 2021 and adjusted its 2022 estimate to 1.2% from 1.1%.

 

Japan

Japan’s stock markets advanced over the week, with the Nikkei 225 Stock Average gaining 2.96% and the broader TOPIX Index up 2.89%. Japanese value stocks continued their strong outperformance relative to their growth peers, amid increased global interest in companies whose fortunes are closely tied to the economic cycle: The TOPIX Value Index has surged so far this year. The yen weakened to near a nine-month low, closing above JPY 109 versus the U.S. dollar. The yield of the 10-year Japanese government bond finished the week at 0.11%.