Market Commentary 30th March 2021 from Charlie Hancock

Posted by melaniebond

Market Commentary 30^th March 2021

Equity Indices

The FTSE 100 rose by 0.48% last week and the mid-cap FTSE 250 index gained 0.31%. Mixed investor sentiment resulted in no clear direction for equity markets across the week, with the FTSE 100 down by 0.50% at close of play on Thursday, before rallying on Friday.

Economic data from the UK was positive last week, with Purchasing Managers’ Index (PMI) readings markedly improved from those recorded in February. The reading for the services industry moved to expansionary territory and the manufacturing sector showed signs of further improvement. Employment data was also encouraging, with the number of people on UK payrolls rising for the third consecutive month.

The UK continued to make strong progress in the vaccination programme, with news reports highlighting that 50% of UK adults have now received a first dose.

Europe

European indices saw mixed performance last week, with the broad FTSE All World Index – Europe ex UK falling by 0.28%. French equities were relatively weak, with the CAC 40 index declining by 0.43%, whilst Germany’s DAX index rose by 0.88%.

Headlines on disputes between the EU and AstraZeneca over the supply of vaccines continued to surface. France extended lockdown restrictions to more regions, whilst Germany announced they would keep restrictions in place until mid-April amidst signs of a third wave.

Eurozone PMI data was better than expected, with a composite reading for both services and manufacturing climbing to its highest level for over 2 years. At a sector level, services remained in contractionary territory, with lockdown restrictions impacting business activity, whilst the manufacturing sector expanded at its fastest pace since the late 1990s.

The major US equity indices outperformed their global counterparts last week, with the S&P 500 climbing by 1.57%, the Dow Jones Industrial Average gaining 1.36% and the NASDAQ 100 moving 0.87% higher.

With investor sentiment changing throughout the week, US equities struggled to find direction at times. The announcement of further lockdown restrictions in Europe and rising infection numbers in some states prompted cautiousness, however, investors appeared pleased by Biden stating that his administration will work to increase the speed of the vaccination programme.

Economic data was largely positive, with declining home sales being the exception. PMI readings indicated the recovery remains intact and a widely followed consumer confidence survey showed improvements during March. The number of weekly jobless claims was also much better than expected.

Asia

Asian equity indices were mixed last week, resulting in the broad FTSE All World Index – Asia Pacific falling by 1.73%. The weakness was mainly attributable to Japan, with the Nikkei 225 index falling by 2.07%. China’s Shanghai Composite Index rose by 0.43% across the week, although Chinese internet giants Alibaba and Tencent experienced weakness.

Sentiment on Japanese equities, which are typically sensitive to global trade, was impacted by disruption to one of the world’s busiest shipping routes. A stuck cargo ship blocked the Suez Canal for 6 days, halting the movement of $400 million worth of goods every hour. German insurer Allianz estimates that the disruption could reduce global trade growth by up to 0.4% this year.

Bond Yields

The 10-Year Gilt yield declined last week, moving from 0.84% to 0.76%. The cautious sentiment amongst investors seemingly drove up demand for UK government bonds.

Europe

The 10-Year German Bund yield moved 5 basis points lower to -0.35%, with concerns around continued lockdowns and rising coronavirus cases prompting investors to seek increased exposure to Bunds.

The 10-Year US Treasury yield saw a smaller decline, falling from 1.72% to 1.68%.

A stronger US Dollar reduced the downward pressure on Treasury yields, whilst dovish remarks from Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen tempered expectations for interest rate rises.

Currency

GBP / USD – Current 1.3789 Previous 1.3872

GBP / EUR – Current 1.1694 Previous 1.1647

The Pound lost ground against the US Dollar, moving 0.60% lower. The greenback displayed strength against most major currencies last week. Against the Euro, Sterling gained 0.40%. Currency traders appeared bearish on the Eurozone currency amidst rising coronavirus cases across the continent.

Commodities

Gold

Gold remained directionless last week and the spot price declined by 0.73% to $1,732.52 per ounce. The precious metal failed to benefit from concerns regarding COVID-19 and disruptions to global trade.

Oil

Oil prices moved around significantly during the week as traders tried to price in the impact of the Suez canal blockage. The Brent Crude spot price moved as low as $60 per barrel before finishing the week broadly unchanged at $64.57.