Central banks came under the spotlight last week with both the Bank of England (BoE) and US Federal Reserve hosting policy meetings. With much speculation that the BoE would vote to raise interest rates, its Monetary Policy Committee ultimately settled for the status quo as it continues to monitor the impact of the conclusion of the Government’s furlough scheme. At the equivalent meeting in the US, the Fed announced it would start its bond tapering process this month in a move that had been flagged to the market in advance. Meanwhile on the Continent, ECB President Christine Lagarde suggested that rates will not be raised until 2023 with the Bank wanting to keep financing conditions favourable as the economy emerges from the pandemic.
Eurozone equities took Lagarde’s comments positively, the DAX in Germany posted a weekly rise of +2.3% whilst the French CAC40 gained by +3.1%. UK markets also enjoyed a solid week with the FTSE100 benefiting from some weakness in Sterling. The UK’s main market added +0.9% with the mid-cap centric FTSE250 climbing by +2.1%. In the US, the S&P500 took the taper announcement in its stride with the index reaching yet another record high after a weekly gain of +2.0%. Japanese equities also enjoyed a strong week with the Nikkei 225 jumping by +2.5% after a resounding election win for new Prime Minister Fumio Kishida.
The surprise inactivity of the Bank of England led sovereign bond yields lower in the UK. Downwards momentum was seen across the curve with the 10-year gilt yield retreating by 19 basis points (bps) to 0.85%. In the US, the equivalent duration treasury yield fell by 10bps to 1.45% whilst in the Eurozone, the 10-year benchmark index yield fell by 18bps to -0.23% following the comments from the ECB President.
In the commodity markets, moves were somewhat muted compared to elevated volatility of the prior weeks. Brent crude declined by -1.7% to $82.93 a barrel with copper concluding the week -0.6% lower at $9,573 a tonne. Gold meanwhile posted a weekly gain of +1.9% which moved the precious metal to $1,810 an ounce.
The preliminary reading of Q3’21 GDP is the standout data released in the UK this week. Retail sales from the British Retail Consortium are also due on Tuesday with industrial and manufacturing production released on Thursday. In the US, the main data to keep an eye on this week include CPI and PPI inflation with the University of Michigan publishing its closely monitored consumer sentiment index on Friday.
German research group ZEW also releases a sentiment indicator this week with its indices for both Germany and the Eurozone focussed on the economy. Other Eurozone data is in short supply on this occasion. Moving to Asia, inflation data is also due from both China and Japan this week in what is a quiet week for headline data from the two countries.
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