Global stock markets have endured a mixed week with the February rally appearing to slow down. Strong gains across Europe on Monday, when Wall Street was closed for Presidents’ Day, were largely reversed in the sessions that followed as a result of concern around new coronavirus variants, and also the looming spectre of inflation as economies bounce back from the pandemic.
The roll-out of Covid-19 vaccines around the world remains uneven, with the likes of the UK and Israel moving considerably faster than the European Union and, to a lesser extent, the US. Not only does this mean that it is difficult for investors to predict how quickly the global economy will recover from the pandemic, it also raises the chances of new, vaccine-resistant strains of the virus developing among infected populations.
Meanwhile, markets are also concerned about the impact of rising prices: with oil and commodities values already starting to increase in anticipation of heightened global economic activity, many central banks might have to turn their attention to inflation later in 2021. While stimulus measures remain a vital element of central bank policy for the time being, it’s possible that the taps may have to be turned off at some point. Meanwhile, the price of bitcoin burst through the $50,000 barrier this week, with one European Central Bank member saying the latest developments in cryptocurrency investment reminded him of the 17th century Dutch tulip bubble.
US markets
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 18 February just 0.1% up for the week so far, with the S&P 500 falling back 0.5%. Severe winter storms across the US have hampered the vaccine roll-out, while disappointing unemployment figures also shook investors.
However, the Democrats remain on course to pass their stimulus bill within the next few weeks – although the package has already been priced in by investors to some extent, it is likely to help keep share prices buoyant
The UK & Europe
In the UK, the FTSE 100 ended Thursday 18 February 0.4% ahead for the week. Once again, gains were limited somewhat by a resurgent pound, which is now worth almost $1.40, compared with less than $1.15 when the pandemic hit last March. Sterling has benefited from Britain’s successful vaccination programme, which has raised hopes that the current lockdown could be the country’s last. Inflation in the UK is starting to rise, however, with some analysts expecting it to hit the Bank of England’s 2% target as soon as April. This could present policymakers with some difficult decisions as they attempt to balance economic support with keeping prices under control.
In Frankfurt, the DAX index ended Thursday 18th’s session down 1.2% for the week, while France’s CAC 40 gained 0.4%. The vaccine roll-out across the eurozone remains more lacklustre and there are concerns that the EU’s major economies could get left behind later this year.
12/02/2021 | 18/02/2021 | Change (%) | |
|---|---|---|---|
FTSE 100 | 6589.8 | 6617.2 | 0.4 |
FTSE All-share | 3755.0 | 3763.8 | 0.2 |
S&P 500 | 3934.8 | 3914.0 | -0.5 |
Dow Jones | 31458.4 | 31493.3 | 0.1 |
DAX | 14049.9 | 13886.9 | -1.2 |
CAC-40 | 5703.7 | 5728.3 | 0.4 |
ACWI | 682.2 | 678.7 | -0.5 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 19/02/2021.
