Global stock markets became increasingly volatile as the week progressed – with retail investors using social media chat groups, such as Reddit and low-cost investment platforms, coming together to ramp up the prices of stocks that were heavily short sold by hedge funds. Video game retailer GameStop was the headline company that was among the most affected.

A row between the EU and UK-based pharmaceutical company AstraZeneca over the pace of vaccine delivery escalated, resulting in the EU requiring member companies to gain permission to export vaccines to most countries outside the bloc. To avoid vaccines getting into the UK via Northern Ireland’s open border with the Republic of Ireland, the EU invoked Article 16 of the Brexit agreement, effectively imposing a hard border between the two. The move, which was implemented with no notice to either Ireland or the UK, prompted universal condemnation as it threatened the Good Friday peace agreement, and was swiftly withdrawn by the EU within a matter of hours.

Two other COVID-19 vaccines showed high efficacy rates in phase 3 trial results. The Janssen/J&J jab, which only requires one dose, showed an overall efficacy rate of 66%, while the Novavax vaccine demonstrated 89% efficacy. Both vaccines have yet to be approved.

The global volume of goods traded rose by 2.1% month-on-month in November 2020, up 1.5% compared to the same month in 2019. This marked the first increase on an annual basis since the pandemic hit.

Companies have raised $400bn in funds (both equity and debt) in the first three weeks of 2021 to help shore up their balance sheets.

UK

The FTSE 100 declined 4.3% over the week.

The UK will formally apply to become a member of the Comprehensive and Progressive Agreement for Trans- Pacific Partnership. The CPTPP includes fast-growing economies including Mexico, Malaysia and Vietnam along with established regional economies such as Japan, Australia, New Zealand and Canada.

US

The S&P 500 lost 2.6% over the week, its worst weekly performance since October. Sector-by-sector performance suggested that the rotation out of technology and into economically-sensitive sectors, which had been sparked by the arrival of Covid-19 vaccines, had been put on hold.

85% of companies that have released quarterly results so far have beaten Wall Street forecasts, with an average earnings-per-share outperformance of 19 per cent, according to data compiled by FactSet.

The Federal Reserve said it would keep its main interest rate unchanged until the US economy reached full employment and inflation was on track to exceed 2% for some time, countering some speculation that it may soon take a more hawkish stance.

US GDP rose at an annualized rate of 4% in the fourth quarter. Over 2020 as a whole, the US economy shrank by 3.5%.

The US Treasury has delayed the implementation of a ban on Americans investing in companies with suspected ties to the Chinese military, which had been imposed by Donald Trump after he lost the presidential election.

President Biden said he had no plans to ban fracking but said he would ask Congress to eliminate fossil fuel subsidies. He also suspended any leasing by oil and gas companies on federal lands.

Boeing reported a record net loss and delayed the delivery of its wide body 777X jet into commercial service.

Europe

The FTSEurofirst 300 dropped 3.3% over the week. Companies listed on Europe’s Stoxx 600 have topped earnings estimates by 20% so far this quarter.

Germany’s economy eked out 0.1% growth in the final quarter of last year. Goods exports and construction supported the economy while a renewed lockdown at the end of last year hit private consumption. French GDP shrank 1.3% in the fourth quarter, while Spanish output grew 0.4%.

German inflation rose from -0.7% to 1.6% in January, its fastest annual growth rate in many years. The jump was driven by several one-off factors, with many shops remaining closed as well as the reversal of a temporary cut in German VAT, higher energy prices due to the country’s new carbon tax and an increase in the minimum wage.

The European Commission’s sentiment index dropped to a lower-than-expected 91.5 in January, driven by plunging optimism in retail trade and smaller declines in services and consumer confidence.

Japan

The Nikkei 225 fell 3.5% over the week.

Japan’s vaccine rollout is being delayed by the country’s requirement for Japan-specific trials. The measures mean that Japan will not start inoculating its population until the end of February.

Pacific Basin

Hong Kong’s Hang Seng index hit multi-year highs during the week. The Hong Kong-listed shares of Chinese tech groups have seen strong inflows from mainland Chinese investors via market link ups. In other news, Tencent-backed livestreaming platform and TikTok rival Kuaishou plans to raise up to $6.3bn in a Hong Kong initial public offering.

South Korea’s GDP expanded 1.1% in the final three months of 2020, according to Bank of Korea data.

Taiwan’s GDP growth outstripped that of China for the first time in three decades in 2020. The economy expanded 4.9% in the fourth quarter, boosted by strong demand for technology exports, taking Taiwan’s 2020 growth rate to 3.0$. China’s full-year growth rate was 2.3%.

Stocks across China dropped after the central bank tightened financial conditions and amid concerns that loose liquidity could inflate an asset bubble.

Bonds

The yield on the 10-year US Treasury bond closed the week at 1.08%, although rising demand for safe-haven assets sent the yield briefly below 1% for the first time since early January.

The yield on the 10-year German Bund ended the week at -0.52%.

EM governments and companies have sold $112.57 billion of international bonds in the first 26 days of 2021, just below the all-time monthly record of $112.78bn set in January 2020. During the week, Saudi Arabia announced it would sell $5bn of international bonds.

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