Market Monitor - 26 February 2021

Market Monitor – 26 February 2021

Global stock markets have endured another volatile week: while there are encouraging signs regarding the end of the pandemic with the vaccine roll-out continuing across Europe and North America, investors are growing more and more concerned about rising inflation and the potential winding down of central bank stimulus measures as economies recover. Federal Reserve chair Jerome Powell has done his best to allay these fears in recent days: in his Senate appearance this week, he stressed that the Fed is firmly focused on the recovery and tackling unemployment in the United States rather than on rising prices. But markets are increasingly factoring in higher inflation, with bond yields – and therefore company borrowing costs – rising sharply this week as a result. The main losers this week have been technology stocks, which many analysts feel have been due a reality check given their eyecatching performance since the start of the pandemic a year ago. With many countries set to relax lockdown restrictions and the success of coronavirus vaccines suggesting many parts of the global economy could soon return to normal, there has been a shift by investors into hitherto hard-hit sectors such as travel and hospitality over the last few days. In the tech sector, on the other hand, the threats of more expensive borrowing and rising interest rates mean that some valuations are beginning to look overly optimistic, to say the least.

US markets

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.2% down for the week so far: after hitting an all-time closing high on Wednesday, the Dow was brought sharply back down to earth by a major sell-off during the following session. The S&P 500 was down 2% over the same period while the even more tech-heavy Nasdaq index had lost more than 5% for the week by Thursday’s close, with the likes of Tesla, Apple and Google among the major fallers. Nonetheless, a fall in the US unemployment rate provided some cheer this week, while the national vaccine programme has started to bounce back from recent weather-related disruption.

The UK & Europe

In the UK, the FTSE 100 ended Thursday 0.1% ahead for the week, with gains among the likes of miners and value stocks such as airlines and hospitality firms trimmed by the strong pound. Those companies which have been affected the most by the pandemic had some grounds for optimism after Boris Johnson set out a timeline for the lifting of the ongoing lockdown measures across the economy – with the possibility that Britain could return to something resembling pre-crisis life by midsummer. In Frankfurt, the DAX index ended Thursday’s session down 0.8% for the week, despite a reported rise in business confidence and confirmation that the German economy had avoided a double-dip recession last quarter. France’s CAC 40 meanwhile gained 0.2%. Across the European Union, delays in rolling out vaccines is causing ever greater concern – and with infection rates on the rise again in France, among other member states, the road back to economic normality in the eurozone looks set to be somewhat rockier than in the UK.
Change (%)
FTSE 100
FTSE All-share
S&P 500
Dow Jones

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 25/02/2021.

26 February 2021
Mark King
Mark King
Head of Investment Content
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Market Monitor – 26 February 2021

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