Market Review

Global Markets Weekly Update

July 23 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 rebound from sharp sell-off

Stocks ended the week higher, rebounding from a sell-off on Monday. The advance was somewhat narrow, however, with much of the gains concentrated in technology and internet-related giants—the so-called FANG+ stocks. Relatedly, growth shares handily outperformed value stocks for the fifth consecutive week, leaving them ahead for the year to date, according to Russell benchmarks. Trading volumes were also especially light, with the number of shares trading hands on Thursday at their second-lowest level of the year. Early Monday, the Russell 2000 Index was down 10% from its closing high on March 15, marking its first correction in more than one year.

Delta variant and “peak” concerns weigh on sentiment

Many observers attributed the steep declines at the start of the week to growing fears about the spread of the delta variant of the coronavirus. Cases and hospitalizations rose in many parts of the country, particularly in states with low vaccination levels. Stocks tied to the reopening of the economy, such as cruise operators and airlines, fared particularly poorly. Energy stocks were also especially weak, as oil prices suffered their biggest daily decline since April 2020 after OPEC and other major oil exporters struck a deal to increase output. T. Rowe Price traders noted that other factors were also at work in Monday’s declines, however, with discussion of "peak" themes around growth, profits, and stimulus policies seeming to be an overhang on sentiment.

The major benchmarks recouped almost all their losses on Tuesday, although our traders noted that a particular catalyst for the move higher was hard to identify. Positive news on the housing sector may have been partly responsible, with U.S. housing starts increasing by more than forecast in June, suggesting residential construction is stabilizing despite lingering supply chain constraints and labor shortages. Existing home sales in June, reported Thursday, also rose for the first time in five months. The week’s labor market data were less encouraging, with weekly jobless claims hitting their highest level (419,000) in two months.

Second-busiest week of earnings season

Prominent second-quarter corporate earnings reports also appeared to play a role in the rebound. Earnings beats at midweek from Verizon Communications, Coca-Cola, Johnson & Johnson, and United Airlines seemed to provide a general boost to sentiment, according to our traders, and upside surprises from Twitter and Snap on Friday helped drive gains in communication services stocks. Netflix shares fell sharply on Tuesday, however, after the company reported a larger-than-consensus decline in subscriber gains. It was the second-busiest week of earnings reporting season, with 81 of the S&P 500 Index companies scheduled to report results, according to Refinitiv.

U.S. Treasury yields followed a similar pattern to the equity benchmarks. Growing fears surrounding the delta variant spurred a steep decline in the benchmark 10-year Treasury note yield at the start of the week, which was exacerbated by technical trading factors that pushed long-term yields on Tuesday morning to their lowest levels since early February. (Bond prices and yields move in opposite directions.) However, yields quickly retraced earlier moves as worries over potential lockdowns in the U.S. eased and demand for new issuance of investment-grade corporate bonds and mortgage-backed securities appeared to pull some investors away from Treasuries.

The broad municipal bond market registered modest gains through most of the week but failed to keep pace with Treasuries. Our traders reported that the front end of the municipal yield curve remained well bid, while demand for longer-dated bonds exhibited some softness. Buying activity was supported by reinvestments of seasonal coupon payments that amplified already strong cash flows into municipal bond portfolios.

Earnings reports support high yield bonds

Investment-grade corporate bond spreads—the extra yield offered over Treasuries and an inverse measure of the sector’s relative appeal—moved wider early in the week on light flows, as concerns regarding the delta variant and inflation weakened sentiment. However, spreads retraced throughout the week, aided by the rebound in equities and a steepening Treasury yield curve. New issuance was relatively limited, but the deals that reached the market were met with strong demand. Likewise, the high yield market experienced some weakness due to delta variant concerns, but sentiment improved as the market’s focus shifted to corporate earnings reports later in 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 rose on optimism about the upcoming corporate earnings season and the European Central Bank’s (ECB) reaffirmation of its dovish monetary policies. These tailwinds helped to reverse early weakness stemming from fears that the spread of the delta variant of the coronavirus could delay a global economic recovery. In local currency terms, the pan-European STOXX Europe 600 Index ended 1.49% higher. The main European stock indexes also gained, with France’s CAC 40 Index up 1.68%, Italy’s FTSE MIB Index advancing 1.34%, and Germany’s Xetra DAX Index adding 0.83%. The UK’s FTSE 100 Index ticked up 0.28%.

Core eurozone government bond yields fell. Concerns about the spread of the coronavirus and the ECB reiterating its view that inflationary pressures should prove transitory contributed to demand for high-quality government bonds. Peripheral eurozone bond yields largely tracked core markets. UK gilt yields fluctuated, as surging coronavirus cases spurred flows into bonds midway through the week.

Europe continues to reopen even as infections surge

European economies continued to reopen despite a sharp rise in coronavirus infections. New cases climbed by 40% over the past week in the UK, where labor shortages have been exacerbated by a government-backed smartphone app that pings people who may have crossed paths with an infected person and advises a period of self-isolation. After the UK lifted all remaining restrictions on July 19, both Prime Minister Boris Johnson and leader of the opposition Labor Party, Sir Keir Starmer, had to quarantine. Meanwhile, travel companies and airlines reported a surge in bookings for holidays abroad.

Meanwhile, the French government said that it could not rule out the reimposition of curfew measures if infections continue to climb at such a fast rate. In Spain, several regions requested the reintroduction of some restrictions. The country’s top court ruled that last year’s lockdown was unconstitutional.

ECB signals it may keep rates lower for even longer

The ECB kept it key policy measures unchanged but revised its forward guidance, indicating that it would keep interest rates “at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term." The ECB indicated that this process could involve a short period in which inflation goes moderately above this target.

Eurozone business activity accelerates; coronavirus infections weigh on UK growth

IHS Markit’s flash eurozone composite Purchasing Managers’ Index (PMI), which covers activity in the services and manufacturing sectors, climbed to 60.6 in July—its highest reading since July 2000. (PMI readings greater than 50 indicate an expansion in business activity.) Activity in the services sector accelerated, while the expansion in manufacturing activity slowed because of supply chain constraints. Meanwhile, the IHS Markit/CIPS UK composite PMI fell to its lowest level since March 2021, as labor shortages caused by the surge in coronavirus infections crimped output. 


Japan’s stock markets closed in negative territory on Wednesday, ahead of a long weekend that marked the start of the Tokyo Olympics. The Nikkei 225 Index was down 1.63%, and the broader TOPIX Index fell 1.44%. Concerns that the Olympic games would worsen the country’s COVID-19 outbreak weighed on markets. News that support for Prime Minister Yoshihide Suga’s cabinet slid to its lowest level since he took office in September of last year also dampened sentiment. The yield on the 10-year Japanese government bond fell to 0.016%, while the yen depreciated slightly to 110.45 against the U.S. dollar.

Rise in core consumer prices driven largely by higher energy costs

Japan’s core consumer price index (CPI) rose 0.2% from a year earlier in June, the fastest increase since March 2020. The increase was driven largely by higher energy costs, which rose 4.6%. However, the increase in the CPI was much smaller than that of other major economies due to weak consumption. With inflation far below the Bank of Japan’s 2% target, the central bank is likely to lag its counterparts in scaling back the massive monetary stimulus it has deployed to support a fragile economic recovery.

Japanese exports buoyed by strong demand from the U.S. and China

Exports rose by 48.6% in June from a year earlier, the fourth straight month of double-digit gains and an encouraging sign for Japan’s trade-dependent economy. While the magnitude of the rise was partly attributable to base effects following last year’s coronavirus plunge, U.S. demand for cars and China-bound shipments of chipmaking equipment were notably strong.

New plan outlines country’s renewable energy push

Japan’s government updated its basic energy plan, with the draft expected to be approved by the cabinet later this year. It outlines ambitions to drastically increase the country’s renewable energy use and reduce fossil fuel consumption over the next decade to meet carbon emissions reduction targets. Suga has pledged that Japan will strive to achieve carbon neutrality by 2050. The plan also states that Japan will aim to reduce its reliance on nuclear power as much as possible, but that it remains an important energy source. The country’s nuclear industry has struggled since the 2011 Fukushima power plant disaster, and anti-nuclear sentiment is strong among the public.


Chinese stocks recorded a mixed week. The Shanghai Composite Index rose 0.3% and outpaced the large-cap CSI 300 Index, which declined 0.1%, according to Reuters.

The People’s Bank of China kept loan rates unchanged for one- and five-year maturities. Analysts see the central bank maintaining stable credit flows to state-owned enterprises, companies, and consumers while monitoring pressures on leveraged borrowers, such as property developers. Bond yields moved lower as the yield on the 10-year sovereign bond shed 4 basis points to end the week at 2.93%. In currency markets, the renminbi edged up 0.2% to close at 6.47 against the U.S. dollar. Most analysts believe China’s stable current account surplus and net long-term capital inflows should provide support for the country’s currency in the near term.

No major economic readings were released over the week. In corporate news, Beijing reportedly plans to exempt Chinese companies listing in Hong Kong from having to first seek approval from China's cybersecurity regulator, Bloomberg reported. The move would effectively encourage companies to have their initial public offerings in Hong Kong over the U.S., where many of the country’s largest tech companies are listed.

Nationwide home sales in the first half of 2021 rose 38% over the same period in 2019 despite tighter credit conditions, according to research from private survey firm CRR. Average selling prices continued to grind higher, rising 0.3% month on month in June, as sales managers pointed to an undersupply of land in local markets as one factor behind strong residential sales. Beijing may keep a relatively firm grip on the flow of credit to property developers in order to limit sector financial risks, according to brokerage firm CLSA.

Many of China's provinces continued to suffer heavy losses from extreme rainfall and flooding, especially the flood-prone areas of the Yangtze and Yellow River basins. In the city of Zhengzhou, Henan Province, the equivalent of an entire year's rainfall fell in just one hour. Many experts believe that climate change is only likely to worsen China's flood management problems in the years ahead. On Tuesday, China launched a national carbon emissions-trading scheme—the world's biggest—joining 45 other countries. Initially, the scheme is limited to the 2,200-plus companies in the power sector that are responsible for 40% of carbon emissions. Later, carbon trading will extend to other polluting industries, including construction materials, steel, non-ferrous metals, chemicals, and aviation.

On the social policy front, China’s State Council unveiled more details of the third-child policy announced in May. The policy would abolish so-called social maintenance fees and sever the link between family size and China’s hukou (household registration) policy, school enrollment, and employment. The policy document also pledged more help with child-care availability, education costs, and women's labor rights. Analysts said that the newly detailed policy meant that couples would suffer no significant financial or social penalties from having larger families and signaled that China was moving toward becoming a more “family friendly” society.

Other Key Markets


Mexican stocks, as measured by the IPC Index, rose about 0.2%. During the week, the government reported that inflation in the first half of July was higher than expected. Year-over-year inflation, measured at a rate of 5.75%, was also slightly greater than expected.

The good news, according to T. Rowe Price emerging markets sovereign analyst Aaron Gifford, is that headline inflation has stabilized below its recent peak of 6.1%. The bad news, however, is that core inflation continues to rise, with a 4.64% year-over-year reading the highest since December 2017.

On the core side, pressures related to goods have begun to dissipate, while services prices are swinging higher at a decent clip—led by "other" services. Meanwhile, non-core inflation pressures have eased a bit, though agricultural prices are showing some upward pressure due to poor weather conditions.

While the latest data suggest that there is a moderation in recent supply shocks even as the economic recovery gathers steam, Gifford believes that the data are unlikely to dissuade central bank officials from raising the overnight lending rate—probably from 4.25% to 4.50%—when they meet on August 12. Looking further out, Gifford believes that the central bank will probably lift the overnight rate to about 5%—the lower end of its neutral range—before pausing rate hikes and reassessing the economic and inflation situation. This seems particularly likely, as Finance Minister Arturo Herrera Gutiérrez is expected to be dovish when he becomes the new head of the central bank at the end of the year.


Early in the week—after six weeks of voting fraud claims, protests, and new criminal investigations—Peru's electoral authority, the National Jury of Elections, finally declared socialist teacher Pedro Castillo to be the winner of the presidential election. The first round of voting, which featured a wide field of candidates, was held back in April; in the runoff election, which took place on June 6, Castillo defeated right-wing politician Keiko Fujimori by less than 50,000 votes.

The most important thing that Gifford is watching is political appointments, especially for the key finance ministry and central bank leadership positions. Gifford notes that there are still a number of uncertainties in Castillo’s political platform, such as increasing health and education spending by 10% of gross domestic product and creating a new constitution via referendum. In any event, the presidential inauguration is scheduled to take place on Wednesday, July 28.

Tap to dismiss