Global stocks rallied as President Biden managed to secure his $1.9 trillion stimulus plan and said he aimed to make vaccinations available to every adult US citizen by the start of May. Global bonds sold off on the news, although eurozone bond yields received support from news that the European Central Bank would step up its asset purchases.

UK

The FTSE 100 rallied 2.0% over the week.

The UK economy shrank by 2.9% in January as the UK entered its third lockdown. While the data represented the largest contraction in UK output in nine months, it was better than the 4.9% contraction that economists had predicted.

UK exports to the EU fell 40.7% in January, while imports tumbled 28.8% as the new trading arrangements with the EU came into force. The drop in both measures was the largest since records began in 1997. The UK government also delayed by six months post-Brexit checks between mainland UK and Northern Ireland on some EU goods to give businesses more time to prepare.

UK retail sales rose 1.0% year on year in February, helped by spending on homes and in expectation of the re-opening of schools.

US

The S&P 500 rose 2.2% over the week, while the tech-heavy Nasdaq gained 2.5%.

Joe Biden signed the $1.9 trillion US stimulus package bill after it was ratified by Congress, despite not gaining a single Republican vote. The bill includes $1,400 direct payments to most Americans, an extension of jobless benefits and a child tax credit.

Headline US inflation, as measured by the consumer prices index, rose 1.7% in February from the same month in 2020, compared to a rise of 1.4% in January. However, the underlying gauge of inflation, which strips out food and energy, rose 1.3% year on year, down 0.1% from January’s reading.

Europe

The FTSEurofirst 300 surged 3.5% over the week.

The European Central Bank pledged to speed up its asset purchases to counter the sell-off in global bonds. Additionally, ECB president Christine Lagarde said eurozone inflation was expected to reach 1.5% in 2021, up from the bank’s earlier projection of 1.0% due to “transitory factors”, such as higher energy prices.

Japan

The Nikkei 225 rallied 3.0% over the week.

Pacific Basin

Chinese stocks started the week on a negative footing, with the CSI 300 Index entering correction territory, as a 3.5% fall took the decline from a recent peak to 12%.

Chinese exports rose more than 60% and imports rose 22% from a year ago in the January-February period.

Emerging Markets

As the Brazilian healthcare system comes close to collapsing, the Brazilian government approved an $8bn emergency aid package. While the package which is considerably smaller than the $50bn stimulus passed at the beginning of last year, it was welcomed across the political spectrum, with economists and investors praising its limited impact on Brazil’s growing debt pile.

Bonds

US bond yields rose after President Biden said COVID-19 vaccines will be available to every US adult citizen by the start of May. The yield on the 10-year Treasury bond closed the week at 1.62%. The US breakeven curve has inverted, with short-term rates trading above long-term ones, suggesting investors think any pick-up in inflation will rapidly fade. The two-year break-even rate is now trading around 2.7%, while the five-year gauge recently hit 2.5% and the 10-year rate 2.3%.

Eurozone government bonds rallied after the European Central Bank pledged to speed up its asset purchases to counter the sell-off in global bonds. The pace of the ECB’s bond buying has slowed recently, and the yield on Germany’s 10-year government bond closed the week at -0.31% following the news.

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