Week from 22 to 28 March 2021
Despite the increasing number of new COVID-19 cases in continental Europe, the IFO Business Climate Index rose in March, from 92.7 to 96.6 points. Furthermore, business activity in the US shows no sign of abating. The latest IHS Markit composite PMI stood at 59.1 (Q1 average). The labor report on Thursday indicated that the unemployment claims dropped to a one-year low last week. The news triggered a broad-based rally recouping some of the losses suffered earlier in the week.
Small Cap Stocks and Emerging Markets Lose Ground
The Dow Jones Industrial Average gained +1.36%, or 445 points. The S&P 500 was up +1.57%, while the Nasdaq Composite fell -0.58%. It is worth noting that small cap stocks lagged again behind their large cap counterparts (Russell 2000 down -2.89%).
Among the S&P sectors, real estate (+4.23%) and consumer staples (+3.90%) led the pack. Energy fared well too (+2.99%) even though US oil stockpiles jumped by 2.9 million barrels last week (WTI crude down -0.73%). But consumption of gasoline turned up according to the Energy Information Administration. In contrast, communication services ended lower (-1.88%) following a slump in ViacomCBS (-50%) and Discovery (-46%), due to a forced liquidation of positions held by the multibillion-dollar family office Archegos Capital Management. Fox Corp also plunged -10% as Fox News is facing a second major defamation suit filed by Dominion Voting Systems.
Most European indices finished in positive territory (MSCI EMU: +0.72%, FTSE: +0.48%). Yet many countries in the Eurozone were tightening and extending lockdown restrictions. Moreover, UK and EU vaccine dispute was deepening. APAC markets closed mixed. The Nikkei 225 was down -2.07% while the Shanghai Composite broke its four-week losing streak (+0.4%).
Emerging markets plunged again (MSCI EM down -2.2%) after the dismissal of the governor of the Turkish Central Bank by presidential decree. Most emerging market currencies indeed weakened on the news. Traders sought the safety of the greenback. So, the dollar Index, pitted against six major currencies, closed higher (+0.9% week-over-week).
Credit Markets Attempt to Rebound
Investor sentiment in credit markets improved a bit as the yield on the 10-year US Treasury fell back to +1.68%. Corporate investment grade bonds (+0.17% in Europe, +0.13% in the US) and high-yield bonds (+0.12% in Europe, +0.73% in the US) offset the losses posted last week. By contrast, emerging debt took a nosedive (-1.7% in local currencies) as Turkish financial markets went into meltdown mode.
Elsewhere, Gold lost -0.73% to $1,732.52/oz and BTC/USD broke the $55,000 level on the weekend.
Find the full report here: https://www.trackinsight.com/en/weekly-flow-report/2021-03-26/global
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