Please see below this week’s Market Commentary from Brooks Macdonald, received late yesterday afternoon – 22/03/2021
Weekly Market Commentary | EU leaders to meet this week as concerns continue over vaccination pace
- Weekly Market Commentary
- COVID-19 updates
By Edward Park
- Bond yields remain the primary driver of risk assets as central bank meetings conclude
- Purchasing Managers’ Index (PMI) data to be released on Wednesday will highlight the relative successes between Europe and the US
- Thursday’s European summit is likely to focus on the vaccine rollout and COVID-19 cases
Bond yields remain the primary driver of risk assets as central bank meetings conclude
Bond yields continued to climb last week with the effect that the US index closed marginally down but the European market, with a greater weighting to cyclicals, eked out a small gain for the week.
Purchasing Managers’ Index (PMI) data to be released on Wednesday will highlight the relative successes between Europe and the US
With a week of major central bank meetings behind us (though Powell and Yellen are speaking to Congress on Tuesday and Wednesday), markets are likely to start taking their direction from economic data. On Wednesday, flash PMI (economic survey) data will be released from around the world. Of note will be the headline differential between the US and European PMI data. US data is expected to be helped along by imminent stimulus cheques and loosening COVID-19 restrictions. By contrast, European countries are moving the other way with their COVID-19 cases and lockdowns are being announced across the continent.
Thursday’s European summit is likely to focus on the vaccine rollout and COVID-19 cases
On Thursday, EU leaders are holding their latest European Council summit in Brussels and, more than likely, COVID-19 and the vaccine rollout will feature heavily on the agenda. Having previously been held as a beacon of European solidarity during the COVID-19 pandemic in 2020, the European Commission’s strategy of joint vaccine procurement and delivery continues to be judged by many as being too slow and bureaucratic. The shortfall of pace of immunisation among the EU member countries versus the likes of the US and UK remains stark. Risking a rise in vaccine nationalism, the European Commission President von der Leyen has refused to rule out using Article 122 of the EU treaty. Article 122 would, in theory, allow the EU to take control of the production and distribution of vaccines, potentially placing export controls on vaccines that had been destined elsewhere, such as the UK.
While ultimately our expectation is that the vaccine lag for the EU will last maybe one or two quarters at most, it risks keeping EU member countries’ economies in various degrees of more stringent lockdown. At the same time, the length of time it is taking to effect fiscal spending disbursements from the EU’s Recovery Fund, which was agreed in July 2020, is also risking a later recovery path than what is currently expected in some other countries globally.
A good update from Brooks Macdonald on recent economic data and market news.
Please continue to check back for our latest updates and blog posts.
Charlotte Ennis
23/03/2021