Suez Canal blockage, Friday rebound, Weaker macro numbers and bond yields falling again - our top 10 stories of the week

Read the 10 stories to remember from the week which ended March 26th, 2021.  

 

Story #1: A mixed week for stocks
The major indexes were mixed for the week, as investors seemed to continue weighing optimism about reopening against inflation and interest rate concerns. Small-cap stocks lagged for the second consecutive week, signaling a potential pause or reversal in their recent market leadership. Similarly, communication services stocks fared worst within the S&P 500 Index, dragged down by sharp declines in shares of several traditional media companies following a stretch of strong performance.
Story #2: A strong closing on Friday
U.S. stocks climbed on Friday, finishing the volatile week on a high note. The Friday session witnessed an epic clash between forced pension selling and quant-buying into month-/quarter-end. Once Europe closed, a trend reversal took place as quant-buying pushed the market higher within the last hour of trading. The Dow Jones closed 1.4% higher and stocks benefiting from a successful economic reopening outperformed again.
Story #3: The Suez canal blockage
The massive cargo ship Ever Given has completely blocked the Suez Canal, a vital trade passageway for as much as 12% of the world’s seaborne trade. The blockage is delaying an estimated $400 million an hour in goods. More than 150 ships are currently waiting to pass through the 120 miles man-made canal. Suez Canal clearance could take ‘weeks’, says salvage company. Possible consequences: European natural gas prices might rise, some supply chain disruption, US grain shipments being impacted, etc. An overlay of the container ship and the channel's cross-sectional piece suggests the vessel is more stuck than what meets the eye via ground-based footage and satellite imagery. The news boosted oil prices and energy stocks. Consumer staples, utilities, materials, and real estate shares were also strong.
Story #4: Conflicting signals on pandemic fight
Conflicting signals about progress in fighting the coronavirus appeared to be a major driver of sentiment. On Monday, investors seemed encouraged by AstraZeneca’s release of data showing its vaccine was highly effective and safe in U.S. trials. However, AstraZeneca took the unusual step of releasing revised results on Wednesday. The new data showed that the vaccine was slightly less effective at staving off infection but still 100% effective in trials at preventing severe disease and hospitalization. Stocks also seemed to come under pressure from rising infection numbers in many states, as well as renewed lockdowns in Europe. On Thursday, however, President Joe Biden may have contributed to an afternoon rebound by stating that he now aims to vaccinate 200 million Americans in the first 100 days of his administration instead of the 100 million originally targeted. Several states also announced plans to begin opening vaccination to all residents over 16.
Story #5: February weather takes a toll on economy, while inflation remains tame
The week brought a number of downward surprises in economic data, although the severe winter weather in February seemed to deserve a large part of the blame. February existing home sales fell 6.6%, roughly twice expectations, while new home sales tumbled 18.2%, nearly triple consensus estimates. Poor weather and supply chain issues appeared to take a toll on business investment, with nondefense durable goods orders excluding aircraft falling 0.8% in February. IHS Markit’s current gauges of manufacturing and service sector activity remained elevated, however, suggesting that economic activity was bouncing back in March. The University of Michigan also revised its gauge of March consumer sentiment higher, while weekly jobless claims fell much more than expected and reached a new pandemic-era low of 684,000. Inflation data remained muted. The core (excluding food and energy) personal consumption expenditures index increased by 1.4% year over year in February, down from 1.5% in January and still well below the Federal Reserve’s 2% target.
Story #6: Bond yields fall
The US 10-year yield falls back below 1.7%. U.S. Treasury notes decreased through much of the week but appeared to rise somewhat in response to Thursday’s claims data. In Europe, Core and peripheral eurozone government bond yields fell overall. Concerns over Europe’s slow vaccine rollout amid the onset of a fresh wave of coronavirus infections drove demand for high-quality government bonds. Data showing a EUR 7.1 billion increase in the European Central Bank’s weekly bond purchases also weighed on yields. Gilt yields declined on fears that the EC might block vaccine exports to the UK, potentially slowing the country’s inoculation campaign. Weaker-than-expected inflation data, which pushed out expectations for the Bank of England to tighten its monetary policy, also pulled yields lower.
Story #7: Shares in Europe rose on hopes of an economic recovery
European stocks reversed earlier losses stemming from concerns about additional restrictions to curb the spread of the coronavirus and the European Commission’s threat to halt vaccine exports. In local currency terms, the pan-European STOXX Europe 600 Index added 0.85%. Eurozone business activity unexpectedly grew in March, a survey of purchasing managers showed. The flash composite PMI rose in March to 52.5—the highest level since late 2018—compared with 48.8 in February. Activity in the manufacturing sector expanded the most in 23 years, offsetting continued weakness in the service sector.
Story #8: Chinese stocks recorded a weekly gain
Most of the weekly gains came from a rally on Friday after the country’s central bank signaled that it was not about to tighten monetary policy. The Shanghai Stock Exchange Composite rose 0.4%, its first weekly gain after five straight weeks of losses. Since reaching a record high on February 18, the index is 8% below a 5½-year high. Hong Kong-listed China stocks also performed strongly, particularly property services and real estate management companies. After a meeting with major lenders to discuss expectations for credit growth in 2021, the People’s Bank of China (PBOC) said that monetary policy should remain “neutral” since “the recovery of the real economy is not yet solid and weak links still need to be adjusted,” according to state-run media. n other economic news, Moody’s Investors Service said that China’s conservative economic growth target and gradual policy normalization, two goals that the government revealed at its recently concluded National People’s Congress, were positive for the country’s outlook.
Story #9: Green energy investment: China's new growth driver
On the environmental front, China will need to spend USD 6.4 trillion on green power generation to meet President Xi Jinping’s goal of carbon neutrality by 2060, according to research and consultancy firm Wood Mackenzie. Transitioning to green energy is a key objective of China’s latest Five-Year Plan, which calls for the peak year for carbon emissions to occur within the next few years. Last year, China installed over 50 gigawatts of wind power—twice the amount in 2019 and around 70% of the world total, according to recent data from the Global Wind Energy Council. The country’s shift to renewables is expected to increase global demand for raw materials and minerals, such as copper, nickel, aluminum, cobalt, and lithium.
Story #10: Turkey assets tumbled
Turkish stocks, as measured by the BIST-100 Index, returned -9.6%. Turkish assets, including the lira, were rocked by news over the previous weekend that President Recep Tayyip Erdogan was replacing the central bank’s Governor Naci Agbal with Sahap Kavcioglu, an AKP Party loyalist who, like Erdogan, favors unorthodox economic policies. Kavcioglu represents Turkey’s fourth central bank governor in the last two years; his appointment took place just a couple of days after Turkey’s central bank raised its key one-week repo auction rate from 17% to 19%.

Source: T Rowe Price , The Cartoon Movement 

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