Volatility remained elevated across financial markets last week as concerns regarding the latest variant of coronavirus gathered momentum. New cases rose sharply across Europe and the US with health officials across both regions bracing themselves for record infection levels. The Netherlands has re-entered strict lockdown measures with the likes of Denmark, France and Germany all mulling over further restrictions. Most equity markets ended the week in negative territory as a result.
In the US, the S&P500 retreated by -1.9% with growth stocks, in particular companies within the technology sector facing heavy selling pressure. Defensive names such as those in healthcare and consumer discretionary were amongst the few areas to enjoy a positive week. Both large and mid-cap names closed the week lower in the UK, the FTSE100 falling by -0.3% and the FTSE250 by -0.6%. Meanwhile on the Continent, the German DAX and French CAC40 declined by -0.6% and -0.9% respectively. One market to buck the negative trend was the Nikkei 225 in Japan which rose by -0.4%.
Moving to sovereign bonds, domestic gilt yields edged higher after the Bank of England pushed through a modest rate rise on Wednesday. The Bank of England’s Monetary Policy Committee meeting voted to lift the base rate by 15 basis points to 0.25% which pushed both Sterling and the 10-year gilt yield higher (2bps to 0.76%). Across the Atlantic, the 10-year treasury yield declined by 7bps to 1.40% despite the Fed signalling an acceleration of the tapering of its QE programme and three rate rises in 2022. Deteriorating investor sentiment amid the rise of omicron was a likely cause of the retreat.
In the commodity markets, oil prices also came under pressure as traders reassessed their future demand expectations. Brent crude finished the week at $73.59 a barrel, a -2.3% decline over the prior week. Gold was one beneficiary of the increase in uncertainty with the precious metal recording a weekly rise of +1.0% to $1,803 an ounce.
Final Q3’21 GDP readings are due from both the UK and the US this week with no change expected to either figure from their previous calculation. Tomorrow, the ONS publishes its final UK government borrowing figure of the year it what is unsurprisingly a quiet week for domestic data releases. Also, in the US this week, durable goods and new home sales figures are published on Thursday, the latter of which is expected to show an acceleration in activity during November. There are no major figures due from the Eurozone, Japan, and China on this occasion.
 T. Rowe Price, 20/12/2021
 Refinitiv, 20/12/2021
 Forex Factory, 20/12/2021
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