Global stock markets retreated while bonds rallied as investor sentiment swung from cheering strong economic data to concern over the worsening global coronavirus situation. India continued to see a surge in Covid-19 infections, recording more than 1 million new cases in just three days; Japan declared a state of emergency across major cities; Germany looks likely to extend restrictions until at least June; and, in North America, the state of Michigan grappled with a rise in infections while the Canadian province of Halifax announced a four-week lockdown.

UK

The FTSE 100 fell 1.2% over the week.

The flask UK composite purchasing managers’ index surged to a stronger-than-expected 60.0 in April, up from 56.4 in March and the highest level since November 2013. Services sector activity jumped to 60.1, the highest level since August 2014, amid advance bookings for hotels and restaurants, while manufacturing activity rose to a near-record high of 60.7, compared to 58.9 in March. Hiring is also picking up.

UK consumer confidence rose one point to minus 15 in April. The reading is based on data collected between April 1 and April 13, largely before the re-opening began in England on April 12, and was the highest level since February 2020.

UK inflation, as measured by the consumer prices index, accelerated in March to an annual rate of 0.7%, compared to 0.4% in February.

Retail sales rose 5.4% in March, even though non-essential shops remained shut, taking them to 1.6% above pre-pandemic levels.

US

The S&P 500 slipped 0.3% over the week. Share prices were undermined by reports that the Biden administration was considering raising taxes for wealthy individuals.

The flash estimate of the IHS Markit purchasing managers’ index of US manufacturing activity jumped to an all-time high of 60.6 in April. New orders were the highest on record, while manufacturing input prices were the second highest on record, with the highest reached in March. Services sector activity also reached a new record high of 63.1.

Canada has become the first G7 country to scale back the monetary policy support measures. The Bank of Canada cut its monthly bond-buying by a quarter and brought forward its projections for when it will meet its inflation target, citing a brightening economic outlook despite the “temporary” setback from an upsurge in Covid-19 infections.

Netflix added just 4 million subscribers in the first quarter of 2021, compared to 16 million in the same quarter in 2020, and predicted that the growth would be even slower in the second quarter.

Europe

The FTSEurofirst 300 lost 0.8% over the week.

ECB president Christine Lagarde dismissed talk of tapering the central bank’s bond-buying activity, saying “We still have a long way to go for the economy to become sustainable… we have to cross the bridge of the pandemic and be able to walk on solid ground”.

The flash estimate of the eurozone composite purchasing managers’ index rose to 53.7 in April. This is the first time since last summer that the composite index is above the 50 level that separates expansion from contraction.

Italian prime minister Mario Draghi is expected to unveil a radical restructuring of Italy’s economy, including investments in high-speed rail and green energy, as well as fully digitalising the country’s public administration. The plan, which is expected to cost more than €220 billion, will draw on the EU’s pandemic recovery fund.

Japan

The Nikkei 225 retreated 2.2% over the week.

Bonds

The yield on the 10-year US Treasury bond closed the week at 1.56%, a fall of almost 20 basis points over the week. The 10-year German Bund yield closed at -0.26%, unchanged from its level at the end of the previous week.

Currencies

The Indian rupee tumbled as a surge in Covid-19 cases overwhelmed India’s health systems. The crisis will likely compound corporate India’s financial woes and complicate the central bank’s plans to use monetary stimulus to soften the economic blow.

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Image by Gerd Altmann from Pixabay