Market Review

Global Markets Weekly Update

December 31 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.


Santa Claus rally ends year on a strong note

Most of the major indexes recorded gains for the week, as a “Santa Claus rally” lifted the S&P 500 Index to record highs. The technology-heavy Nasdaq Composite lagged and finished flat. T. Rowe Price traders noted that trading activity was exceptionally light, with S&P 500 volumes staying well under half of recent averages for much of the week. The real estate, utilities, and materials sectors outperformed within the S&P 500, while the larger communication services and information technology sectors—which together account for over one-third of the index—lagged. 

Despite daily coronavirus cases rising to record highs, waning fears over the omicron variant appeared to deserve much of the credit for the gains, according to our traders. Hospitalization rates remained contained, and, on Wednesday, the Centers for Disease Control and Prevention (CDC) reduced the recommended quarantine period for asymptomatic people who have tested positive from 10 days to five days. Investors also seemed encouraged by a study out of South Africa, which showed that omicron appeared to strengthen immunity against the more severe delta strain of the virus. Crew shortages caused by the virus led to flight cancellations and declines in airline stocks, however.

Consumers prove resilient in the face of omicron

Evidence arrived that the latest wave of the virus was also having a milder effect on economic activity. Weekly jobless claims fell back to near five-decade lows, and continuing claims fell much more than expected and hit their lowest level since the onset of the pandemic. An index of manufacturing activity in the Mid-Atlantic region also showed accelerating growth. Pending home sales were an outlier, surprising on the downside, as high prices and limited inventory seemed to be dissuading buyers.

Americans seemed ready to spend on goods, however. According to data compiled by MasterCard, holiday sales rose 8.5% in December versus a year earlier, the biggest gain in 17 years. Sales were also 10.7% higher than pre-pandemic levels in 2019. The data suggested that supply and labor challenges might be easing for retailers while also allowing them to pass on higher costs to customers. Retail stocks generally fared well on the news, but declines in and casino and cruise ship operators weighed on the consumer discretionary sector as a whole. On Thursday, the CDC recommended against cruise ship travel, even for those who are fully vaccinated.

Yields rise on technical factors

U.S. Treasury yields were generally steady against a backdrop of light trading volumes and few key economic data releases. According to our traders, technical factors supported a modest rise in rates through the middle of the week, with the 10-year U.S. Treasury note yield reaching an intramonth high of 1.55% on Wednesday. The 10-year yield retreated to roughly 1.50% by Friday morning, as rates generally retraced their early-week increases.

According to our traders, investment-grade corporate bond spreads—the extra yield offered over Treasuries and an inverse measure of the sector’s relative appeal—tightened at the start of the week, though trading activity was relatively muted. Volumes stayed well below daily averages, and thin market participation persisted throughout the week. Demand from Asia was focused on the long end of the yield curve, but total overnight activity from the region remained light.

High yield bonds posted modest gains amid very light trade volumes. They noted that weakness in travel-related stocks due to rising coronavirus infection rates generally did not seem to impact the below investment-grade bond market. No new deals were announced during 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.


European shares rose in holiday-thinned trade as omicron fears eased and investor optimism about the economic recovery strengthened. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.09% higher, rebounding more than 22.0% on the year. The main indexes also posted gains, with France, Italy, and the UK closing near their highest levels for the year. Germany’s Xetra DAX Index added 0.82% over the week, France’s CAC 40 increased 0.94%, Italy’s FTSE MIB advanced 1.22%, while the UK’s FTSE 100 Index was little changed.

Coronavirus infections jump; France, Italy, Portugal tighten controls

Coronavirus infections surged to record levels over Christmas in France, the UK, Italy, and Spain, among other countries, boosted by the omicron variant. France, Italy, Portugal, Denmark, and Greece tightened measures to prevent the virus from spreading during New Year’s celebrations. In Portugal, where omicron is now the dominant strain, working from home will become mandatory in January, while France ordered people to work from home for three days a week. The UK decided to wait until early January to assess the impact on hospitals before making a move.

Italy and Spain approve budgets

The Spanish and Italian parliaments approved 2022 budgets that include funds disbursed under the European Union’s recovery program. In Spain, spending plans total EUR 240 billion—the largest in the country’s history—made possible by an agreement to reform the labor market. Italy’s EUR 32 billion budget includes income and business tax cuts and the creation of a climate fund. 


In a holiday-shortened week, Japan’s stock market returns were muted, with the Nikkei 225 Index up 0.03% and the broader TOPIX Index gaining 0.28%. Investor sentiment was dampened by the spread of the omicron variant through community transmission in the country; suspending the entry of foreign nationals alone has not appeared to contain the spread of the virus. However, the overall number of cases remained relatively small compared with the fifth wave, which prompted the government to implement states of emergency. Against this backdrop, the yield on the 10-year Japanese government bond rose to 0.07% from 0.06% at the end of the prior week, while the yen weakened to around JPY 115.1 against the U.S. dollar from the previous week’s 114.4.

Industrial production growth accelerates; unemployment rises slightly

Japan’s industrial production grew by a record, seasonally adjusted 7.2% month on month in November amid easing supply-side pressures, with the motor vehicle, plastic products, and iron, steel, and nonferrous metals industries the main contributors to the increase, according to Ministry of Economy, Trade and Industry data. The ministry upgraded its assessment and now expects production to increase through January 2022, having previously indicated that production is pausing. Separate data showed that Japan’s unemployment rate rose to 2.8% in November from the previous month’s 2.7%. The increase in the number of unemployed suggested that more people have embarked on a search for a better job amid the economic pickup.

Kishida considering bringing forward COVID-19 booster shots

Amid concern about the further spread of the omicron variant, Prime Minister Fumio Kishida said that the government is considering bringing forward COVID-19 booster shots for all people as much as possible. It has already shortened the interval between the second and the third shots from eight months to six months for health care workers and the elderly. On Japan’s border control measures, Kishida said that they will remain in place for the time being. While he hopes the outlook will be positive, he stressed the need to prepare for a worst-case scenario. The government will carefully examine the infection situation during the holiday season and then decide how to proceed.


Chinese markets ended a tumultuous year with modest losses for the week. The large-cap CSI 300 Index declined 0.2%, and the Shanghai Composite Index shed 0.1%. Positive manufacturing data and comments from Chinese officials about the country’s beleaguered property sector boosted sentiment.

For the year, the CSI 300 Index lost 5.2% in its worst annual showing in three years, according to Reuters, while the Shanghai Composite Index added 4.8%. In Hong Kong, the benchmark Hang Seng Index retreated 14%—its worst performance in a decade—and the Hang Seng China Enterprise Index lost 23% in 2021.

The yield on the 10-year Chinese government bond slid to 2.793% from the previous week’s 2.846% and fell sharply from 3.19% at the end of 2020. The yuan edged up to 6.3672 per U.S. dollar from last week’s 6.3709. The Chinese currency is on track to becoming the best performer in Asia for 2021 with a gain of over 2%, as most currencies in the region recorded losses.

In regulatory news, the country’s securities industry watchdog China Securities Regulatory Commission (CSRC) published draft rules that would require Chinese companies seeking initial public offerings (IPOs) and additional share sales overseas to register with the CSRC. Although the CSRC stopped short of banning IPOs by companies using the variable interest entities (VIE) structure, the draft rules signaled Beijing’s continued scrutiny of overseas listings under the name of data security.

For years, Chinese companies have used VIEs to sidestep domestic restrictions on foreign investment and to go public in the U.S. However, the CSRC’s proposed regulations threw new uncertainty over the ability of Chinese companies seeking to go public and sell shares overseas. The draft rules would also allow regulators to order a company to dispose of assets or businesses if its offshore listing jeopardizes national security.

In a separate development, China’s National Development and Reform Commission (NDRC) unveiled new rules requiring domestic companies in sectors off-limits to foreign direct investment, such as online news and publishing, to obtain clearances from regulators before listing abroad.

In economic news, China’s official manufacturing and nonmanufacturing Purchasing Managers’ Index (PMI) readings rose more than expected in December. The composite PMI output index was 52.2%, unchanged from November’s reading. Analysts said that restocking demand on the back of normalized raw materials prices and policy easing drove the improvement in manufacturing, while a recovery in services sector activity helped nonmanufacturing. Meanwhile, profits in industrial firms rose in November from a year ago at a much slower pace compared with October’s year-on-year increase, weighed by lower raw materials prices, the nationwide property slowdown, and weaker consumer demand.

Other Key Markets


Turkish shares, as measured by the BIST-100 Index, returned about -1.8%. The lira continued to struggle versus the U.S. dollar, though the equity market stabilized somewhat following strong gains in the first half of the month and a sharp drop in the days prior to Christmas.


Russian stocks, according to the Russian Trading System (RTS) Index, returned about 0.5% through the close of business on Thursday; Friday was a holiday. On Thursday, U.S. President Joe Biden and Russian President Vladimir Putin held a 50-minute conference call—as reported by The Wall Street Journal—in an attempt to diffuse tensions over Ukraine.

South Africa

South African shares, as measured by the FTSE/JSE All Share Index, rose about 3.0%. Late in the week, the government announced that it would ease some of its pandemic restrictions because of indications that “the country may have passed the peak of the fourth wave at a national level.” The government noted that the fourth wave “is mainly driven by the Omicron variant” that was discovered in southern Africa in November.

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