Global Markets Update – Monday 5 April 2021

Manufacturing

Global stocks generally rallied as surveys of manufacturing showed that activity in the sector was surging. Joe Biden’s plans for ambitious infrastructure spending also buoyed sentiment.

UK

The FTSE 100 closed the four-day week unchanged.

UK GDP growth was revised up to 1.3% in the fourth quarter of 2020 from an initial estimate of 1.0%.

The final reading of the UK’s IHS Markit/CIPS manufacturing purchasing managers’ index was revised higher to 58.9 in March 2021, from a preliminary estimate of 57.9. This was the highest reading since February 2011.

The UK household saving ratio rose to 16.1% in the final quarter of 2020, close to a record high. The data has increased hopes that the extra cash will help boost economic growth when businesses reopen.

Deliveroo’s high-profile IPO dropped by 25% on its first day of trading, dashing hopes that London will become a hub for fintech IPOs. Investors were put off by the company’s dual-class structure that made it easier for the company’s founder to control the business. In better news, DNA sequencing technology start-up Oxford Nanopore picked London for an initial public offering later this year. It is expected to be valued at between £4bn and £7bn.

US

The S&P 500 rose 1.1% over the foreshortened week, with the S&P 500 closing above 4,000 for the first time on record. The tech-heavy Nasdaq gained 2.6%.

Joe Biden announced plans for $2 trillion in infrastructure spending for scientific research and broadband as well as infrastructure and healthcare.

The US economy added 916,000 jobs in March, while data for February and January were revised upwards.

The gains were the biggest since August 2020 and helped lower the unemployment rate to 6% from 6.2% in February.

The Institute for Supply Management index of manufacturing activity jumped to 64.7 in March, from 60.8. Match’s reading is the highest level in more than 37 years and the second highest reading on record.

Europe

The FTSEurofirst 300 rallied 1.2% over the four-day week. The index rallied strongly over the first quarter, nearing a record high, as investors rotated into businesses whose fortunes are pegged to a rebound in global growth. Banks in particular surged around 20% over the first three months of 2021. German stocks closed the quarter at an all-time high.

As COVID-19 infection rates continued to soar across much of the EU, French president Emmanuel Macron announced a four-week national lockdown, while Italy extended its restrictions to the end of April, including extra measures over the Easter weekend.

Eurozone inflation rose to 1.3% in March, up from 0.9% in February and the highest rate since the start of the pandemic. The jump mostly reflects one-off factors such as the reversal of a German value added tax reduction at the start of this year, increasing energy costs, and changes to the weighting of products and services used to calculate inflation. Core inflation, which excludes energy and food prices, fell from 1.1% to 0.9%.

The final reading of the IHS Markit eurozone manufacturing purchasing managers’ index was revised higher to 62.5 in March 2021, well above February’s 57.9 and the strongest reading since August 2018.

Japan

The Nikkei 225 increased 2.3% over the week.

The Bank of Japan’s Tankan survey of Japanese business sentiment at larger manufacturers rose 15 points to a reading of plus 5, well ahead of analyst expectations. The optimistic sentiment at Japan’s industrial companies suggested that the global vaccine rollout, robust growth in China and the prospect of a large US stimulus were improving the business environment for exporters.

Pacific Basin

The Caixin purchasing managers’ index (PMI) of Chinese manufacturing activity unexpectedly fell to 50.6 in March, from 50.9 a month earlier. This was the lowest reading since April 2020. However, China’s official manufacturing PMI rose to 51.9 in March, from 50.6 in February. This was the highest reading since December 2020 and was helped by factories resuming production after being closed for the Lunar New Year holiday.

Emerging Markets

Russia’s GDP shrank 1.8% year-on-year in the fourth quarter of 2020, easing from a revised 3.5% contraction in the third quarter.

Bonds

Long-dated US Treasuries suffered their worst quarter in four decades, outpacing the steep sell-off in the final quarter of 2016 following Donald Trump unexpected presidential election victory. The yield on the 10-year benchmark bond touched 1.78%, taking it back to a level last seen in January 2020.

The yield on the 10-year German Bund closed the week at -0.33%.

Currencies

The Chinese renminbi suffered its worst month against the US dollar in more than a year and a half, amid concerns a clampdown on borrowing could slow the country’s swift economic recovery from the pandemic.

Commodities

Brent crude regained to $65 a barrel after the Ever Given, the container ship blocking the Suez Canal, was refloated.

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Image by Emir Krasnić from Pixabay