Investors continued to trade in a low volatility environment as comments from policy makers reiterated their intention to support economic growth. In particular, Janet Yellen, US Treasury Secretary, urged the main economies to adopt an expansionary fiscal stance to secure a robust recovery.
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Markets started the week in a cautious mood as investors pondered over pandemic dynamics and the economic outlook. Stock markets declined moderately across most advanced and emerging economies while commodities were mixed and FX markets were little changed.
Markets shrugged off a jump in U.S. inflation and the halt in Johnson & Johnson's COVID-19 vaccine rollout, and investors continued to favor risk assets in yesterday's session. Stocks and commodity prices advanced while the USD weakened moderately against the major currencies.
Investors traded in a mixed mood as the U.S. earnings season kicked off. Global stocks were mixed, the USD weakened moderately and sovereign yields nudged up across the U.S. and Europe.
Investors closed the week with an optimistic tone. Positive corporate earnings releases and Q1 activity data in China (GDP rose by 0.6% qoq and 18.3% yoy, due to base effects) contributed to the improvement in sentiment.
2020 was a tough year for the tourism industry. All the data that became available at year-end show that the impact of the pandemic on the sector has been devastating. After a total standstill during the months of March, April and May 2020, tourism demand failed to pick up appreciably during the rest of the year, even during the summer months when the infection rate seemed to be under control. Moreover, the waves of COVID-19 occurring at the end of 2020 and beginning of 2021, together with the various measures to restrict movement and businesses, have kept tourist numbers at a minimum, aggravating the losses suffered by the sector.
Investors started the week with a cautious mood as they wait for the release of this week's Q1 corporate results and the ECB monetary policy meeting.
Yesterday investors focused their attention on the ECB meeting, which delivered no surprises, and on a report that suggested that Joe Biden's Administration would increase the capital gains rate to finance social spending. In the US, this latter driver increased volatility in stock markets and the main indices declined.
Markets started the week on a positive note as investors eyed a heavy economic calendar in the days ahead. This morning the Bank of Japan left monetary policy unchanged, and today the Fed starts its two-day meeting. Corporate earnings reports and the release of GDP and inflation figures will also be under the spotlight in the next few sessions.
Markets ended yesterday's session with no major movements. Risk assets gained, with commodity prices and most stock markets advancing moderately, but U.S. equities nudged down as investors eyed Biden's presentation of the $1.8trn American Families Plan – to be financed with higher taxes on the wealthy.
Markets went through a mixed session as investors digested solid U.S. activity figures. U.S. GDP growth accelerated to +1.6% qoq in Q1 2021 (Q4 2020: +1.1%) on the back of stronger private consumption (+2.6% qoq), which found support on easing restrictions and fiscal stimulus. U.S. stocks advanced and yields on Treasuries nudged up.
Volatility edged up amid a bunch of economic releases on Friday. In the euro area, GDP contracted moderately in Q1 (-0.6% qoq) while inflation rose to 1.6% in April (+0.3pp) due to base effects in energy prices. U.S. consumer spending rose +4.2% mom in March as consumers received stimulus checks, and PCE core inflation advanced to 1.8% yoy.
Global stocks tumbled on Tuesday, with the tech sector in Europe suffering its biggest drop since October, mirroring a selloff on the Nasdaq (-1.9%, sharpest fall since March). The decline was driven by comments from U.S. Treasury Secretary Janet Yellen warning that interest rates may need to rise to prevent the economy from overheating.
During a volatile session, stocks almost wiped out their initial gains as technology shares turned lower, offsetting optimism over solid corporate earnings and positive economic data (service ISM and ADP employment surveys).
Investors traded with optimism, following upbeat corporate earnings and signs of further improvement in the labour market, with initial jobless claims in the US edging down last week to the lowest level since the start of the pandemic.
In the first session of the week, investors traded in a cautious mood amid an increase in market-based measures of inflation expectations (the U.S.' 5Y5Y inflation breakeven rate reached 2.36%, a level not seen since 2014).
Yesterday, volatility rose amid investor inflation worries. U.S. CPI inflation jumped in April to +4.2% yoy (headline index, +1.6pp) and 3.0% (core index, +1.4pp). Fed Vice Chair Richard Clarida reiterated the central bank's view that the inflation rebound is largely transitory as it is mostly driven by base effects and short-term supply bottlenecks.
During a volatile session, markets erased some of the early gains after comments by Fed VP Richard Clarida noting that the central bank could start discussing in upcoming meetings adjusting the pace of asset purchases (tapering). In addition, house prices in the U.S. continued to accelerate while consumer confidence stalled.
Financial markets recorded another day with positive results, following the release of solid economic data in the U.S.: new jobless weekly claims fell to a new pandemic-era low and core capital goods orders rose by 2.3% in April, in both cases above expectations. U.S. Treasury Secretary Yellen also reiterated that the rise in inflation should be transitory.
In the last session of the week, investors traded with a positive mood amid robust employment data in the U.S. Non-farm payrolls rose by +559k in May (consensus expected +675k on average) and the unemployment rate dropped by 0.3 p. p. to 5.8%.