Market Monitor - 26 March 2021
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Market Monitor – 26 March 2021

Pessimism about the economic recovery from Covid-19 has held stock markets back during another week of lacklustre performance. While the focus over most of March has been on the potential for a rapid post-pandemic bounce to drive inflation higher, new waves of infections in the European Union in particular are giving investors pause for thought.
A number of EU governments have recently introduced new lockdowns – or are considering doing so – in response to a threat of a third wave. The situation has not been helped by the fact Europe’s vaccine roll-out has been problematic.
As markets closed last night, EU leaders were meeting to debate the introduction of new export controls on vaccines manufactured within the bloc – a move that has already attracted considerable criticism, not just from other nations but also from the likes of Jean-Claude Juncker, the former president of the European Commission.
There have been some reasons to be cheerful, however. Gloom in the stock markets has helped to drive bond yields lower: as more investors buy bonds in lieu of shares, their price rises and yield falls. Higher yields in recent weeks have contributed to concerns about rising interest rates in future, which has helped to depress share values.

The economic data published this week has largely been positive: on Thursday, for example, the United States reported its lowest rate of new unemployment claims since the start of the pandemic¹, while US GDP was revised upwards, from 4.1% to 4.3%, for the last three months of 2020².

In the eurozone, meanwhile, new figures showed a strong uptick in business activity so far in March – but investors appear to be more concerned about the coronavirus-related challenges that could emerge as we move into the spring.

The US

On Wall Street, the Dow Jones Industrial Average ended trading on Thursday level for the week so far, with the S&P 500 down fractionally.

Declining bond yields later in the week helped technology stocks to regain some ground, but there are growing concerns that trade tensions between the US and China on human-rights grounds could hamper global growth this year.

The UK and Europe

In the UK, the FTSE 100 ended Thursday 0.5% down for the week, with investors nervous about the potential impact of an EU export ban on Britain’s hitherto successful vaccination programme.

The declining oil price has also affected the energy companies listed in London: crude values have slumped as a result of global economic growth concerns – and despite the disruption to international oil supplies caused by the ongoing blockage of the Suez Canal by the beached Ever Given container ship.

In Frankfurt, the DAX index ended Thursday’s session level for the week, while France’s CAC 40 lost 0.8%. In Germany, there was some relief as Chancellor Angela Merkel’s plans for a “short, sharp” lockdown over Easter in response to the latest upswing in infection rates were shelved. But European investors are hoping that an acceleration of the bloc’s vaccination programme in the coming weeks can start to bring the pandemic under control.

Mar 19
Mar 25
Change (%)
FTSE 100
6708.7
6674.8
-0.5
FTSE All-share
3824.9
3804.8
-0.5
S&P 500
3913.1
3909.5
-0.1
Dow Jones
32628.0
32619.5
0.0
DAX
14621.0
14621.4
0.0
CAC 40
5998.0
5952.4
-0.8
ACWI
671.4
663.8
-1.1

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 25/3/2021.

¹ Unemployment insurance weekly claims, US Department of Labor, 25,3,2021.

² GDP (Third estimate), Bureau of Economic Analysis, US Department of Commerce, 25/3/2021.

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

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