Market Monitor - 28 May 2021

Market Monitor – 28 May 2021

Stock markets have made modest gains this week, shrugging off recent volatility and focusing on the post-pandemic global economic recovery.

The message from central banks that any increase in inflation is likely to be a short-lived phenomenon – one which will not require a sharp reduction in stimulus measures, or an immediate rise in interest rates – has been heard loud and clear by investors.

While some observers have accused the likes of the Federal Reserve and the Bank of England of complacency in their attitude to rising prices, the consensus at the moment is that the current approach to monetary policy is broadly correct.

Cryptocurrencies have been in the news again, with the likes of Bitcoin and Ethereum suffering new falls. At the start of the week, HSBC said it had no plans to follow in a number of its rivals’ footsteps in launching a crypto trading desk, citing the volatility and lack of transparency of the asset class as key concerns.

The US

On Wall Street, the Dow Jones Industrial Average ended Thursday’s session 0.8% up for the week so far, with the S&P 500 1.1% ahead. Technology stocks have performed particularly well over the last few days as inflation fears have subsided.

The United States continues to produce solid economic data, with another fall in unemployment levels recorded this week. It was also confirmed that the American economy grew by 6.4% on an annualised basis in the first three months of this year. Meanwhile, the US economy looks to be in line for an additional boost as President Joe Biden is set to unveil an unprecedented $6 trillion budget, with extra spending planned for transportation and combating climate change.

The UK & Europe

In the UK, the FTSE 100 ended Thursday flat for the week, with optimism around reopening tempered by the ongoing spread of the coronavirus variant first seen India. Rising infection rates in many parts of the country are jeopardising the government’s plans for a full reopening of the British economy and society on June 21. More details of the updated timeline are expected to be announced at the end of next week.

The UK economy is nevertheless recovering faster than expected, according to the Institute for Fiscal Studies, although new data has highlighted the devastating impact of Brexit on international trade. British Land reported a full-year loss of £1 billion on Wednesday: the firm has suffered from the mass shift to homeworking and the rise of e-commerce since the start of the pandemic.

But there was good news for engine maker Rolls-Royce, with Airbus, one of its biggest customers, announcing plans to ramp up production in the coming years.

In Frankfurt, the DAX index ended Thursday’s down 0.2% for the week despite having risen to a new high on Tuesday. The German economy contracted faster than expected between January and March, but researchers at the IFO said that business confidence was continuing to rise.

In France, the CAC 40 gained 0.8%, benefiting from the bullish Airbus statement on Thursday.

May 21
May 27
Change (%)
FTSE 100
FTSE All-share
S&P 500
Dow Jones
CAC 40

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 27/5/2021.

28 May 2021
Mark King
Head of Investment Content
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Market Monitor – 28 May 2021

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