Market Review

Global Markets Weekly Update

January 15 2021

Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.


Late declines leave stocks mixed for week

The major benchmarks finished the week mixed, but not before all but the S&P 500 Index hit record intraday highs on Thursday. Energy stocks pulled back sharply at the end of the week but led gains within the S&P 500, helped by a surprisingly large drawdown in domestic oil inventories. Communication services shares underperformed after social media companies Twitter and Facebook announced bans of President Donald Trump and others on their platforms, citing concerns over the incitement of violence. Information technology shares were also weak, due, in part, to poor performance by payments processors. Small-caps outpaced large-caps, and value shares outperformed growth stocks, helping both building on their leads to start 2021.

The tense political situation seemed to remain a major driver of sentiment during the week. Investors kept a close eye on efforts to quickly remove Trump from the White House, including Democrats’ call to invoke the 25th Amendment and the House of Representatives’ unprecedented second impeachment of the president on Wednesday. Safety concerns surrounding the upcoming inauguration of President-elect Joe Biden on January 20 and the resulting deployment of thousands of National Guard troops to Washington, D.C., also dominated headlines.

Biden proposes USD 1.9 trillion stimulus package

On Thursday evening, the incoming president announced his plans for USD 1.9 trillion of stimulus, although it appeared to contain few market-moving surprises. Questions also remained about how quickly the incoming administration could move on the plan and how much Republican opposition would slow or reduce the package. Without sufficient Republican support in the Senate, Democrats will have to rely on the so-called reconciliation process, which places limits on the types of spending that can be increased.

Meanwhile, the week brought the unofficial start of earnings season, with banking giants JPMorgan Chase, Citigroup, and Wells Fargo reporting fourth-quarter results before the start of trading on Friday. Despite upside earnings surprises, shares in all three fell as trading began, with Wells Fargo leading the declines on a revenue miss. By the end of the week, analysts polled by FactSet were expecting overall earnings for the S&P 500 to have declined 6.8% (on a year-over-year basis) in the final quarter, the fourth-worst showing over the past decade. For 2020 as a whole, analysts were anticipating that earnings fell 13%.

Retail sales fall sharply

A bigger factor in Friday’s pullback may have been the morning’s news of a 0.7% drop in retail sales in December—more than expected and the third straight monthly decline, according to revised data. The broad-based drop—sales fell 1.4%, excluding the volatile auto segment—was not apparently due to COVID-19 restrictions, with the decline concentrated in online sales. Weekly jobless claims, reported Thursday, hit 965,000, the highest level since mid-August. The manufacturing sector remained in much better shape, with industrial production surging 1.6% in December, roughly three times consensus estimates. Colder December weather and a snapback in utility demand drove part of the gains, however.

Powell sees no rate hikes until inflation stays above 2%

The retail sales data seemed to push Treasury yields lower on Friday, but long-term yields increased modestly through most of the week, supported by stimulus plans and dovish comments from Federal Reserve Chair Jerome Powell. (Bond prices and yields move in opposite directions.) The Fed Chair affirmed that the central bank has no plans to raise interest rates anytime soon and would first need to see inflation remain above 2% for some time. The municipal market was supported by low issuance, reinvestment of January coupon payments, and the prospect of more federal aid to state and local governments under a Biden administration.

According to our traders, the investment-grade corporate bond market experienced balanced flows and healthy trading volumes. Credit spreads—the additional yield offered over Treasuries and an inverse measure of the sector’s relative appeal—started off mixed but tightened marginally in anticipation of details regarding President-elect Biden's fiscal stimulus plan. Primary issuance levels fell in line with expectations.

Risk-on sentiment due to the announcement of the pandemic-relief plan, along with Powell’s dovish comments, supported high yield bond performance. Our traders reported that investors were mostly focused on new deals, and the market saw steady issuance throughout the week.

U.S. Stocks1

Friday’s Close

Week’s Change

% Change YTD





S&P 500




Nasdaq Composite




S&P MidCap 400




Russell 2000




This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.
Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price Associates’ presentation thereof.


Shares in Europe fell as the resurgence in coronavirus infections dented optimism surrounding plans for further fiscal stimulus in the U.S. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 0.81% lower, while Germany’s Xetra DAX Index declined 1.86%, France’s CAC 40 lost 1.67%, and Italy’s FTSE MIB slipped 1.81%. The UK’s FTSE 100 Index slid 2.00%, pulled down by data showing that the economy shrank in November due to the imposition of a stricter lockdown.

Core eurozone government bond yields largely fell as political uncertainty erupted in Italy after a political party pulled out of the coalition government. Expectations for additional U.S. fiscal stimulus triggered reflation hopes, moderating the fall in core eurozone yields. Instability in Italy pushed peripheral eurozone bond yields higher. UK gilt yields advanced midweek before ending down overall, following a similar pattern to core markets. 

Coronavirus lockdowns extended again

European governments continued to toughen and extend lockdowns amid the emergence of new, highly infectious variants of the coronavirus and increasing hospitalizations of patients with COVID-19, the disease that the virus causes. Italy will prolong its state of emergency to the end of April, Health Minister Roberto Speranza said. Switzerland, which announced tighter measures, and the Netherlands both said they would extend lockdowns into February. German Health Minister Jens Spahn said Germany was likely to do the same. France said it would tighten entry restrictions for travelers and impose an evening curfew nationwide. The UK toughened entry restrictions for travelers from Brazil, where a new variant that appears to be resistant to vaccines has been detected.

Renzi’s Italia Viva quits Italian government; Dutch government resigns

Italy’s coalition government lost its parliamentary majority when three ministers from former Premier Matteo Renzi’s Italia Viva party resigned. Renzi has been a vocal critic of Prime Minister Giuseppe Conte’s leadership style and his management of the country’s worst recession since World War II. Political analysts said that if Conte cannot form a new majority coalition, a general election would ensue, barely five months after the government took office.

The Dutch coalition government, led by Prime Minister Mark Rutte, resigned en masse over a child-care subsidies scandal. National elections are expected to be held in March.

German economy shrinks less than expected UK GDP falls

German gross domestic product (GDP) contracted by a smaller-than-forecast 5.0% in 2020 as coronavirus restrictions curtailed activity, preliminary data showed. A wave of recovery and stimulus measures during the year helped support the economy. Growth probably stagnated in the fourth quarter, the statistics office said.

In November, the UK economy suffered a monthly decline of 2.6%—the first such contraction since a slump in April 2020. The smaller-than-expected decline was led by the services sector, as a new lockdown hit pubs, restaurants, nonessential shops, and other consumer services businesses. The UK’s official data agency said businesses were adjusting better to the lockdown rules and schools had remained open that month. Bank of England Governor Andrew Bailey said it was too soon to say if more stimulus would be needed in the UK after the central bank increased its bond-buying program to almost GBP 900 billion in November.


Japanese stocks generated mixed performance for the week. The Nikkei 225 Stock Average advanced 1.4% (380 points) and closed at 28,519.18 recording another multidecade weekly closing high. The large-cap TOPIX Index was about flat, however, and the TOPIX Small Index declined. The yen was little changed for the week and closed near JPY 104 versus the U.S. dollar.

Kuroda says Japan’s economy still growing

In his opening remarks to the Bank of Japan’s (BoJ) quarterly meeting, Governor Haruhiko Kuroda asserted that Japan’s economy was improving at a moderate pace despite the recent resurgence of the coronavirus. He said the economy was showing signs of recovery and the financial system remained stable. However, he believes that the impact of the coronavirus inside and outside of Japan demands caution. The central bank’s Regional Economic Report showed that the majority of the nine regions maintained their prior economic assessments or were improving and, as expected, that the services industry has been hardest hit by the impact of the coronavirus. Kuroda said that he expects the central bank’s interest rate targets to remain at their current levels and that the BoJ will continue to expand policy until the consumer price index (excluding fresh food) exceeds 2%. He also affirmed that the central bank would closely monitor the effects of the pandemic and would not hesitate to implement additional easing as warranted.

Government assistance lends to a falloff in bankruptcies

Loosened government lending policies and financial support during the pandemic contributed to the lowest number of Japanese corporate bankruptcies in 31 years, according to Tokyo Shoko Research, a credit research company. Business failures of companies with at least JPY 10 billion of debt declined to 7,772 in 2020, marking the lowest number of bankruptcies since 1989. However, the number of small- and medium-sized business (debt below JPY 10 billion) bankruptcies increased markedly, especially in the dining and tourism segments. The research firm notes that sales have not recovered to pre-pandemic levels, and it expects the number of business failures to increase in 2021.

State of emergency broadened, adding seven more prefectures

The Japanese government widened its state of emergency status to 11 prefectures on Thursday as the spread of the coronavirus continued to grow. Since November, the number of confirmed cases in the country has exceeded 300,000, with approximately 6,000 new cases recorded on Thursday, including 66 deaths. At a House of Councillors committee session, Shigeru Omi, the head of the government's subcommittee on the pandemic, suggested that stronger measures would be necessary if the infection rate does not slow significantly. Others urged for a nationwide state of emergency and mandatory business closures. In meetings with Prime Minister Yoshihide Suga, the government’s top medical officials asked for support in acquiring more hospital beds for the coronavirus patients. Some hospitals are at maximum capacity and have been forced to turn away patients. Although there are no immediate plans to do so, it is widely believed that the state of emergency will need to be extended beyond the current February 7 target.


Chinese stocks fell as the U.S. added another nine Chinese companies to its investment blacklist on Thursday, taking the total to 44 names that the Trump administration claims have ties to China’s military. For the week, the country’s large-cap CSI 300 Index declined 1.4% and the Shanghai Stock Exchange Composite Index shed 0.6%, according to Reuters. Shares of Chinese internet leaders Alibaba and Tencent were volatile on reports that they too would be added to the U.S. blacklist, though this had yet to happen by Friday. Shares of Xiaomi, a well-known domestic consumer electronics and smartphone maker, fell sharply on its unexpected addition to the list. Banks, however, rose following strong fourth-quarter earnings. The yield on China’s 10-year sovereign bond yield declined and ended the week at 3.15% despite further signs of economic recovery. The yuan currency ended the week flat against the U.S. dollar at 6.47 per dollar.

Coronavirus reappears in China

Small clusters of the coronavirus infections have appeared in China in recent weeks, as well as the country’s first COVID-19 death since May. More recently, a larger outbreak in the northern coastal province of Hebei, near Beijing, has raised alarm among public health experts that the virus could surge once more in China, the first major economy to contain the pandemic. The outbreak has also raised the possibility that China’s government may impose restrictions on the public ahead of next month’s weeklong Lunar New Year holiday.

Disappointing news regarding CoronaVac, a coronavirus vaccine produced by private company Sinovac, surfaced during the week after Brazilian scientists reported that the vaccine’s efficacy rate was just over 50%, far below previously reported levels. News of the vaccine’s reduced efficacy dealt a setback to China’s biotech ambitions and Beijing’s campaign to win allies through global health diplomacy, since it will take longer to attain herd immunity in the countries that have ordered CoronaVac for their populations.

China's exports surge

China’s December exports climbed a better-than-expected 18.1% year-on-year in U.S. dollar terms. For all of 2020, exports grew 3.6% year over year to a record USD 2.6 trillion, while imports declined 1.1%. The latest trade data showed that China continues to record the strongest export growth in Asia and underscored the country’s economic strength as most major economies are struggling to control the pandemic. In other economic news, China’s consumer price index (CPI) edged higher in December, driven by recently rising food prices that have spurred inflation concerns. However, stripping out food and energy prices, the CPI declined. Total social financing, China’s broadest measure of credit, declined more than expected in December to CNY 1.7 trillion. Bank loan growth was broadly flat, reflecting Chinese companies’ reluctance to borrow in the uncertain economic environment. 

Other Key Markets


Brazilian stocks, as measured by the Bovespa Index, returned about -3.7%. News that Brazilian inflation finished 2020 at 4.5%—a four-year high, as reported by Reuters—weighed on Brazilian assets. Equities fell sharply on Friday amid news of an unexpected drop in retail sales in November 2020.

T. Rowe Price sovereign analyst Richard Hall has taken a closer look at the country’s recent rapid increases in inflation and calculated its possible trajectory in the next few months in order to determine how policymakers may respond when the Brazilian central bank meets on January 19–20. According to his projections, Hall believes that average core inflation, currently around 3%, could increase to almost 5% in June due, in part, to recent price shocks involving food and electricity. While that outcome could be a bit extreme, Hall does believe that some of the data, such as services inflation and household durable goods prices, are raising concerns.

Hall believes that next week, the central bank may decide to stop providing forward guidance with regard to how long policymakers anticipate keeping the Selic rate—currently at 2%—very low. While he believes that a rate increase would normally be appropriate with such inflationary pressures, Hall notes that policymakers have been trying to assure investors that the end of forward guidance does not mean an interest rate increase is imminent.


Turkish stocks, as measured by the BIST-100 Index, returned about -1.0%. T. Rowe Price sovereign analyst Peter Botoucharov has been reviewing the latest macroeconomic data from Turkey and notes that the country’s external account situation remains weak. For example, Turkey had a current account deficit of USD 35 billion for the period from January through November 2020. Botoucharov projects that the full-year 2020 deficit will be about 4.5% to 5.0% of the country’s GDP, which is comparable to what it was in the 2017–2018 timeframe.

With reduced foreign direct investment as well as a decline in foreign exchange (FX) reserves (year-end gross reserves were USD 93 billion while net reserves were only USD 13.7 billion), Botoucharov believes these unsustainable trends are making it crucial for Turkey to implement fiscal adjustment plans fairly soon. A reduction in government spending would complement the tighter monetary policy of the last six months in order to reduce the external imbalances and attract capital inflows. He also believes that the central bank will need to sustain its monetary tightening in order to stabilize and start replenishing its FX reserves.

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