Please see below this week’s Markets in a Minute update from Brewin Dolphin – received late yesterday afternoon – 16/02/2021
Equities reach record highs as vaccine roll out accelerates
After a volatile few days, global equities reached record highs last week as the vaccine roll out gathered pace and data revealed a decline in coronavirus cases.
The S&P 500 ended the week up 1.23%, with the communication services sector outperforming following strong gains in Twitter and video gaming shares. Energy stocks climbed higher after front-month Brent futures prices reached more than $60 per barrel, up from less than $20 last April.
The STOXX Europe 600 gained 1.09% last week, although performance was mixed in Europe with Germany’s Dax largely flat, France’s CAC 40 up 0.78%, and the UK’s FTSE 100 gaining 1.55%. Hopes of a large US economic stimulus package drove gains, but these were hampered by poor GDP data from the UK and eurozone.
In Asia, markets in China and Hong Kong rallied ahead of the Lunar New Year holiday, with the Shanghai Composite surging 4.54% and the Hang Seng gaining 3.02%.
Last week’s markets performance*
- FTSE 100: +1.55%
- S&P 500: +1.23%
- Dow: +1.00%
- Nasdaq: +1.73%
- Dax: -0.05%
- Hang Seng: +3.02%
- Shanghai Composite: +4.54%
- Nikkei: +2.57%
*Data from close on Friday 5 February to close of business on Friday 12 February.
FTSE surges higher as oil price nears $65 per barrel
The FTSE 100 enjoyed its best day in more than a month on Monday, ending the day up 2.5% to 6,756.11 following positive news on the vaccine front. More than 15m people in the UK have had their first jab, and it is now being offered to the over-65s and clinically vulnerable.
Oil majors BP and Royal Dutch Shell surged 6.5% and 6.1%, respectively, on Monday after oil prices were further boosted by supply concerns. The oil price is now nearing $65 per barrel.
Positive sentiment led to a sell-off in UK government debt. The yield on the 10-year gilt rose to 0.57%, its highest level since March 2020.
After a shaky start, countries in Europe are also starting to ramp up inoculations. The STOXX Europe 600 finished Monday 1.3% higher, while Germany’s Dax gained 0.4%.
Elsewhere, Japan’s Nikkei 225 surged past 30,000 for the first time since 1990, after data showed its economy grew 3% in the fourth quarter, far higher than analysts had predicted. The US stock market was closed on Monday for Presidents Day.
Rising commodity prices and coronavirus optimism continued to boost UK stocks on Tuesday morning, with the FTSE 100 up 40 points in early trading to 6796 – its highest level since 15 January. HSBC topped the leader board with a 3.2% gain.
After closing for the Lunar New Year holiday, Hong Kong’s Hang Seng surged 1.8% in its first session in the Year of the Ox.
Sharp drop in coronavirus cases
A drop in new Covid-19 cases and hospitalisations helped to drive global equities to new highs last week.
In the US, the seven-day average of new coronavirus cases has fallen by nearly 64% since its January peak, while the number of hospitalisations has fallen from 130,000 to 67,023. UK data shows the R number is below one for the first time since July, with the number of cases down 18% week-on-week.
According to the World Health Organization, there has been a 17% decline in new Covid-19 cases worldwide, although it warned data from smaller countries may be incomplete. Experts said the emergence of more contagious variants poses continued risks, and that ongoing travel bans and lockdowns in many countries show the disruption is far from over.
Economic woes continue
Although there is more optimism about the end of the pandemic, US consumer sentiment fell unexpectedly in February, demonstrating that households are still worried about the economy. The University of Michigan’s preliminary Consumer Sentiment Index declined from 79 to 76.2, while the measure of what consumers expect in the next six months dropped to 69.8, the weakest reading in half a year.
A Reuters poll showed the US economy is expected to reach pre-Covid-19 levels within a year as the proposed $1.9trn fiscal bill helps to boost economic activity. However, employment will likely take more than a year to fully recover.
Meanwhile, figures from the Office for National Statistics showed the UK economy contracted by 9.9% in 2020 – the largest drop since 1709 – although it avoided a double-dip recession with 1% growth in the fourth quarter. The fall in output was more than twice as deep as during the global financial crisis of 2009.
The third lockdown is expected to cause the UK economy to shrink further in the first quarter of 2021, but the Bank of England forecasts a rebound in the spring as restrictions start to be lifted. In the eurozone, the economy is expected to grow by 3.8% in 2021 and 2022. Although the forecast for 2021 is lower than the previous projection of 5% growth, the European Commission expects the economy to return to pre-pandemic levels in 2022, earlier than previously anticipated.
Gold price holding up
Last week saw softer-than-expected inflation data from the US, with the core consumer price index unchanged in January – below estimates of a 0.2% increase. This pushed down Treasury yields in the middle of the week, but they increased again on Friday to the highest levels seen since March.
The price of gold is holding up fairly well against a backdrop of rising bond yields and a surging stock market. This is because real bond yields, the most important macro variable for the gold price, have moved a bit lower.
Another quick update from Brewin Dolphin, these updates are a good way of keeping up to speed with developments in the markets.
Please continue to check back for our latest updates and blog posts.
Charlotte Ennis
17/02/2021