Market Review

Global Markets Weekly Update

January 22 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.


Stocks continue to new highs on stimulus hopes

The major indexes moved higher for the week, hitting new intraday highs on Thursday before a pullback on Friday. Communication services shares led the gains in the S&P 500 Index, boosted by a sharp gain in Netflix shares following its report of surprisingly large subscriber gains in the fourth quarter. Facebook and Google’s parent company, Alphabet, were also strong, as were video-gaming stocks, while energy shares lagged as oil prices fell back on a surprising rise in U.S. inventories. As fast-growing technology-related stocks led the gains, the market’s recent rotation into small-caps and value stocks reversed, at least temporarily. Trading volumes remained exceptionally high, reflecting, in part, heavy participation by individual investors. The market was closed on Monday in observation of Martin Luther King Jr. Day.

Hopes for substantial new stimulus under the Biden administration appeared to drive much of the gains early in the week. On Tuesday, former Federal Reserve Chair and Treasury Secretary nominee Janet Yellen told the Senate Finance Committee that it was necessary to “act big” to help the economy deal with lockdowns and high unemployment. Investors may have been further encouraged by her statement that President-elect Joe Biden was focused on supporting the economy rather than raising taxes. Biden’s inauguration on Wednesday took place without any significant protests or violence, which also seemed to calm nerves on Wall Street.

Coronavirus news appeared to be another driver of sentiment. President Biden repeated his goal of 1 million vaccinations a day for the first 100 days of his presidency, although there was some confusion about whether this meant 50 million Americans getting the recommended two doses of the Pfizer/BioNTech and Moderna vaccines, or 100 million first doses. Among his first acts in office, Biden also reversed the Trump administration’s decision to withdraw from the World Health Organization, while the nation’s leading infectious disease official, Dr. Anthony Fauci, said that additional vaccines should be on their way soon. Daily deaths from the virus in the U.S. hit the second-highest level on record on Wednesday, but daily cases and hospitalizations showed signs of moderating. Some health experts warned that the reprieve might be temporary given the arrival of more infectious strains of the virus, however.

Housing inventories at lowest level on record

The week’s relatively light economic calendar did not appear to play a major role in driving markets. Weekly jobless claims fell back from a multi-month high but remained elevated, at 900,000, while IHS Markit’s preliminary gauges of both manufacturing and service sector activity in January surprised on the upside. The housing sector remained in outstanding shape, with existing home sales and housing starts at their highest levels since 2006. The exceptionally tight market posed a challenge for new buyers, however. The supply of unsold single-family homes would be exhausted in 1.9 months at the current sales pace—the lowest supply level on record going back to 1982.

Treasury yields remained generally steady over the week. (Bond prices and yields move in opposite directions.) The firm’s fixed income traders reported that the generally positive economic data helped to offset downward pressure on yields from the Fed’s Treasury purchases and news of an extended lockdown in Germany (see below). The broad municipal debt market outpaced Treasuries for much of the week. The muni market’s technical environment continued to receive support from steady cash flows, strong demand for new deals, and muted supply of tax-exempt bonds.

Healthy demand meets new issuance in corporate bond market

Our traders noted that modest buying from Asia weighed slightly on the investment-grade corporate bond market, although demand for primary issuance was strong. The primary calendar was active with various banks coming to market, and the new deals were well subscribed. Meanwhile, hopes for additional stimulus and positive corporate earnings reports bolstered the performance of high yield bonds. High yield investors were also mostly focused on new deals, and the market saw steady issuance throughout the week. Below investment-grade funds reported negative flows, however.

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.


The STOXX Europe 600 Index finished the week roughly flat, as U.S. economic stimulus doubts and renewed coronavirus concerns held back gains. Germany’s Xetra DAX Index rose 0.63%, France’s CAC 40 fell 0.93%, and Italy’s FTSE MIB slid 1.31%. The UK’s FTSE 100 Index fell 0.60%, partly held back by the British pound’s strength relative to the dollar and fears that the strict coronavirus lockdown would not end anytime soon.

Core eurozone government bond yields rose after the European Central Bank (ECB) indicated that it may not use the entire amount available in the pandemic emergency bond-purchasing program—news that the market interpreted as somewhat hawkish. Growing expectations for additional U.S. fiscal stimulus under President Joe Biden also sent yields higher. Peripheral eurozone bond yields largely tracked core markets, although they eased before the ECB’s statement, when Italian Prime Minister Giuseppe Conte won a confidence vote in Parliament. Gilt yields rose on optimistic comments about an economic recovery from Bank of England (BoE) Governor Andrew Bailey and the encouraging pace of inoculations in the UK.

Lockdowns prolonged

Governments continued to extend lockdown measures amid concerns about the spread of highly infectious mutations of the coronavirus. Germany extended its tough lockdown restrictions until February 14. The Dutch government imposed the first nationwide curfew since World War II and banned flights from the UK to stop the spread of a mutated variant of the virus. European Union (EU) leaders stepped back from imposing an EU-wide travel ban but warned that stricter lockdowns measures are likely to persist due to the new strains of the virus. Ireland will extend its lockdown, due to end February 5, to March 5. UK Prime Minister Boris Johnson told broadcasters that it is “too early” to say when the national lockdown will end, raising fears that restrictions could last until midyear.

Italy's Conte wins confidence votes but reportedly mulls elections

Prime Minister Conte comfortably won a confidence vote in the lower house of Parliament and scraped by in a Senate vote after the exit of a coalition partner last week precipitated a political crisis. He also won backing for a EUR 32 billion economic support package to deal with the coronavirus pandemic and its fallout. However, according to the Corriere della Sera newspaper, he is struggling to attract sufficient support among senators to strengthen his minority government and is considering whether to call fresh elections. 

BoE Governor Bailey said at an online event that he expected a “pronounced” economic recovery in the UK later in the year due to the rollout of vaccines. Earlier, the BoEs Chief Economist Andy Haldane said he expected the economy to begin to recover quickly in the second quarter, potentially enabling the government to end its support for furloughed workers before the recovery is complete.

Economic activity in eurozone contracts for third month

A Purchasing Managers’ Index suggested that business activity in the eurozone contracted at a faster rate in January, as renewed lockdowns weighed on services. However, factory output expanded for a seventh month, albeit at a slower rate, due to growth in new orders, exports, and backlogs.


Japan’s stock markets were relatively unchanged for the week. The Nikkei 225 Stock Average advanced 0.4% (112 points) and closed at 28,631.45 and recorded another multi-decade weekly closing high. For the year-to-date period, the widely watched market yardstick is ahead 4.3%. The large-cap TOPIX Index was about flat, however, and the TOPIX Small Index modestly declined. The yen was little changed for the week and closed near JPY 104 versus the U.S. dollar.

BoJ stands pat but lowered its GDP forecast

The Bank of Japan’s (BoJ’s) policy committee left long- and short-term policy rates unchanged. The bank’s yield curve control involves maintaining rates on current accounts held by financial institutions at -0.1%, buying Japanese government bonds so that the yield on the 10-year bond remains near 0.0%, and purchasing exchange-traded funds and Japanese real estate investment trusts annually at a pace not to exceed JPY 12 trillion and JPY 180 billion, respectively. The central bank said that it intends to continue its quantitative and qualitative monetary easing measures for as long as it takes to achieve its price stability target of 2% core inflation (all items except fresh food).

The monetary policy committee trimmed its gross domestic product (GDP) growth forecast for the current fiscal year (ending March 31, 2021) to -5.6% from -5.5%. It bumped up its growth target for fiscal 2021 to 3.9% from 3.6%, mainly due to the aggressive stimulus efforts. The central bankers conceded that the outlook was highly uncertain due to the impact of the coronavirus at home and abroad. The forecast for the core consumer price index (CPI) marginally improved to -0.5% (from -0.6%) for fiscal 2020 and is expected to rise to +0.5% in 2021. The December core CPI reading was -1.0% following November’s
-0.9% reading.

Japan’s exports increase for the first time in two years

According to customs data, exports climbed 2.0% in December versus the year-ago period and marked the first positive reading since November 2018. The export data showed significant improvement from November’s 4.0% decline and the early-2020 double-digit contractions. The gains were powered by growth in plastics, nonferrous metals, and semiconductor production equipment, although auto-related product shipments were lower. Import data were also weak, declining 11.6% versus forecasts for a 13.9% fall-off due to a reduction in crude oil, coal, and aircraft products. 

Japan’s government announced that it has agreed to buy additional vaccines for 12 million people from Pfizer. The latest agreement means the government will have enough to treat 72 million people, which is more than half of the country’s population of 126 million. The Pfizer/BioNTech vaccine is the only product under review by the Health Ministry, and it is expected to receive approval on February 15. Officials said that the vaccination efforts for Japan’s general population are expected to begin in May, after prioritizing medical staff, people 65 years and older, those with preexisting conditions, and workers caring for the elderly.


Chinese stocks rallied amid strong economic data and on hopes of warmer U.S.-China relations under President Biden. The Shanghai Composite Index advanced 1.1% to 3,606.8 and the CSI 300 large-cap index rose 2.0%, closing at 5,569.8. In an early test case for U.S.-China relations, China's three biggest telecom companies appealed the New York Stock Exchange’s recent decision to delist their U.S.-listed shares, a move that is expected to receive a response within 25 days. On the coronavirus front, China now has 22 million people under lockdown as officials try to contain a recent outbreak in Hebei Province. Case numbers remain low compared with other countries, though a high number of asymptomatic infections and the rural location of some clusters have concerned authorities. 

The yield on China’s sovereign 10-year bond ended broadly flat despite a raft of strong December economic data. The People’s Bank of China left the loan prime rate unchanged for the ninth straight month. In currency trading, China's renminbi was stable versus the U.S. dollar.

China's economy regains pre-COVID momentum

China’s economy officially grew by 2.3% in 2020, near forecasts and underscoring the country’s remarkable recovery from prior-year coronavirus lockdowns. Fourth-quarter real gross domestic product growth accelerated to 6.5% year-on-year, making China the only major economy to regain its pre-virus trend. For the year, China benefited from its status of  being the first large country to emerge from lockdown, a feat that allowed the production side of its economy to recover as global demand for personal computers, consumer electronics, and medical equipment drove exports. 

December economic data, including better-than-expected industrial production, showed that momentum in early 2021 remained strong. For some analysts, that has raised the risk of premature policy tightening. However, China’s National Economic Development and Reform Commission said that there will be no U-turn in policy support, even if some more aggressive measures are tapered.

Retail sales, a broad measure of consumer demand, rose 4.6% in December, lagging the overall recovery. But given Beijing’s recent focus on bolstering the domestic market as a growth driver, many analysts see a bright outlook for consumer spending. Wealthy households in China appear particularly eager to spend, with overseas travel on hold due to the virus. Consumption of luxury goods is expected to surge 48% in 2020 to RMB 346 billion, according to a recent report by the consultancy Bain. A separate report by Shanghai-based wealth tracking group Hurun found that China has 1.58 million high net worth families with more than RMB 10 million in assets. 

Other Key Markets


Turkish stocks, as measured by the BIST 100 Index, returned about 1.2%. The central bank’s monetary policy committee met during the week and, as expected, kept the one-week repo auction rate at 17.0%. However, according to T. Rowe Price sovereign analyst Peter Botoucharov, policymakers strengthened their already-hawkish forward guidance by vowing to keep monetary policy tight “for an extended period of time” and to deliver “additional monetary tightening, if needed.”

While monetary policy is not as tight as it was in 2018, when the one-week repo rate rose as high as 24%, and while real (inflation-adjusted) interest rates remain below previous highs, Botoucharov expects central bank officials to keep monetary policy tight at least through June 2021 to ensure that the lira stays relatively stable. Botoucharov remains concerned about the country’s large structural imbalances. These include large external financing needs of about USD 200 billion per year, a low level of foreign exchange reserves, and a high and uncertain inflation path through 2021. There are also lingering geopolitical risks. He is convinced that these imbalances require sustained macroeconomic adjustments and that Turkey needs to implement fiscal tightening to complement the restrictive monetary policy.


Brazilian stocks, as measured by the Bovespa Index, returned about -2.5%. Brazilian assets struggled amid uncertainty about possible changes in monetary and fiscal policy later this year that may be unwelcome by investors.

On Wednesday, the Brazilian central bank unsurprisingly decided to keep its benchmark Selic interest rate at an all-time low of 2%. As T. Rowe Price sovereign analyst Richard Hall expected, central bank officials decided to stop providing forward guidance on how long they expect monetary policy to remain stimulative.

Hall, however, notes some hawkish elements in their post-meeting statement that are prompting some to expect interest rate increases sooner rather than later—possibly as soon as March. For example, policymakers noted that the increase in commodity prices is likely to keep inflation high in coming months and has proved to be more persistent than expected. They also note that core inflation has generally moved above the target. In addition, central bank officials specified that Brazil’s economic situation “continues to prescribe, at this moment, an extraordinarily high stimulus….” The subtle implication is that, at some future point, massive stimulus efforts will no longer be needed.

Regarding fiscal policy, there are growing concerns—particularly voiced by politicians seeking leadership positions in Congress, which reconvenes in February—that the country needs additional emergency financial relief due to the continuing pandemic, which is accelerating in certain parts of the country and now features a couple of strains of the coronavirus that have mutated. Investors are concerned that the magnitude of any additional relief measures could jeopardize the government’s ability to observe the mandatory spending cap. The cap, which was created by a constitutional amendment that took effect several years ago, is intended to keep the growth rate of Brazil’s government spending from exceeding the country’s inflation rate over a 20-year period.

Tap to dismiss

Manage Subscriptions

Unsubscribe All

Change Details

Congratulations! You are now registered.

Start subscribing to receive email updates.


Sign in to view and
manage your subscriptions.



Latest Date Range
Download Cancel

This content is restricted for Institutional Investors use only. We were not able to validate your status as an Institutional Investor with the information you provided at registration.

Please contact the T. Rowe Price Team with questions or to revise your status.


You will need to accept the Terms & Conditions again.


You have updated your email address.

An activation email has been sent to your new email address from T. Rowe Price.

Please click on the activation link in order to receive email updates.


You have an existing account

Click OK to view your subscriptions.


Confirm Cancel