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Global Markets Weekly Update

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.


In a volatile week of trading, the major equity indexes pulled back on news that the Federal Reserve could curtail its monthly asset purchases at a faster rate and fears that the emergence of the omicron strain of the coronavirus could weigh on global economic growth and contribute to supply chain disruptions. Large-capitalization stocks outperformed smaller- and mid-cap benchmarks. Within the S&P 500 Index, the communication services sector gave up the most ground. Utilities was the only sector to post a gain.

Concerns about the omicron variant and Fed policy likewise moved fixed income markets. The Treasury yield curve flattened over the week, with short-maturity yields rising and long-term rates decreasing. Tax-free municipal bonds generated positive returns through most of the week and performed in line with U.S. Treasuries at the broad sector level.

Powell says Fed may consider tapering bond purchases at faster pace

Fed Chair Jerome Powell acknowledged in testimony before Congress that inflationary pressures, while still expected to abate over the next year, had become broad enough and remained elevated for long enough that the central bank may consider accelerating the pace at which it tapers its monthly bond purchases. The market appeared to interpret this development as potentially moving forward the timeline for the Fed to begin increasing short-term interest rates. Powell also cited the uptick in the number of COVID-19 cases and the emergence of the omicron variant as possible catalysts for further supply chain disruptions as well as potential headwinds to the economic recovery and the labor market’s gradual rebalancing.

Weaker-than-expected job creation in November

Nonfarm payrolls increased by 210,000 sequentially in November—well below the 546,000 positions added in October and less than half of analysts’ consensus estimate. However, the Bureau of Labor Statistics also revised its estimate of the number of jobs created in October to 546,000 from 531,000 and the September increase in nonfarm payrolls to 379,000 from 194,000. The unemployment rate improved by four-tenths of a percentage point relative to October, falling from 4.6% to 4.2%. Average hours worked also ticked up. Albeit disappointing, markets seemed to view the deceleration in job creation as unlikely to shift the Fed’s plans regarding its asset purchases and monetary policy.

Index Friday's Close Week’s Change % Change YTD
DJIA 34,580.08 -319.26 12.98%
S&P 500 4,538.43 -56.19 20.83%
Nasdaq Composite 15,085.47 -406.19 17.05%
S&P MidCap 400 2,702.13 -77.28 17.15%
Russell 2000 2,159.31 -86.63 9.34%

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 posted mixed results after a volatile week of trading, highlighted by concerns about the omicron variant and further evidence of inflationary pressures. In local currency terms, the pan-European STOXX Europe 600 Index ended 0.28% lower, while Germany’s Xetra DAX Index gave up 0.57%. France’s CAC 40 Index rose 0.38%, and Italy’s FTSE MIB Index gained 0.33%. The UK’s FTSE 100 Index advanced 1.11%.

Core eurozone bond yields fell, as negative headlines concerning the omicron variant outweighed hawkish comments from Federal Reserve officials. Peripheral eurozone bond yields ended the week broadly unchanged. UK gilt yields fell, broadly tracking core markets. Furthermore, Bank of England Monetary Policy Committee member Michael Saunders indicated that he could vote against a rate hike this month given the uncertainties surrounding the omicron variant, which also applied downward pressure on yields.

Continent begins to mandate coronavirus vaccines

Cases of the omicron variant of the coronavirus were detected across Europe. A renewed surge in COVID-19 infections prompted Germany to tighten restrictions on those unvaccinated against the coronavirus. A law on mandatory vaccination could be submitted to parliament for implementation in February or March. Austria extended its lockdown until December 11. Portugal and France reintroduced tighter requirements for mask-wearing and toughened border controls. In France, from January 15, all adults will need a booster jab at least seven months after being fully vaccinated to keep their health passes. From mid-December, people over the age of 65 will need a booster to extend their health passes. Several regions in Spain imposed stricter measures for the unvaccinated ahead of the Christmas season, extending the use of the COVID-19 certificate to enter public places.

Eurozone inflation at record high; consumer sentiment weakens

Inflation in the eurozone accelerated to its highest level since the single currency was introduced in 1999. Consumer prices rose an annualized 4.9% rate in November, up from 4.1% in October, as energy costs surged. In Germany, annual inflation climbed to 6%—the highest level since 1992. Isabel Schnabel, a senior European Central Bank official, asserted in a television interview that “November will prove to be the peak” for inflation in the country and that “there is no evidence to suggest that inflation is spiraling out of control.”

Euro area retail sales rose 0.2% in October, after dropping 0.4% in September, as consumers spent more on nonfood purchases, Eurostat data showed. Meanwhile, consumer sentiment weakened for a second consecutive month in November, according to a survey by the European Commission. Households are less upbeat about the general economic situation and their intentions to make major purchases.


Japan’s stock markets registered losses for the week, with concerns about the spread of the omicron variant of the coronavirus and the country’s decision to close its borders to foreign nationals weighing on sentiment. The Nikkei 225 Index fell 2.51% and the broader TOPIX Index was down 1.37%. The yield on the 10-year Japanese government bond fell to 0.05%, from 0.07% at the end of the previous week, primarily on safe-haven demand, while the yen was broadly unchanged from the prior week at JPY 113.3 against the U.S. dollar.

Japan closes its borders to foreign nationals, citing emergence of new variant

In a major reversal of policy, Japan closed its borders to foreign nationals—except for those with special permission to enter—citing the emergence of the omicron variant of the coronavirus. (In November, Japan eased its strict coronavirus-related entry rules, letting foreigners visit the country for short business trips, study abroad, and technical training.) Prime Minister Fumio Kishida announced the border closure on November 29, and it came into effect the following day, which was when the first infection of the omicron variant was confirmed in Japan. There were indications that a blanket ban on inbound international flight bookings would come into effect, but the request by Japan’s Ministry of Transport was withdrawn amid public confusion and some criticism.

Kishida’s cautious stance is in contrast to that of his predecessor, Yoshihide Suga, who resigned in September, in part, due to public perceptions that his administration had been too slow to respond to the social and economic threats posed by the coronavirus.

Administering of COVID-19 booster shots begins

Health care workers were prioritized as Japan began administering COVID-19 booster shots amid the spread of the omicron variant of the coronavirus. The third doses of the vaccination will be administered free of charge to all residents aged 18 and over, and there have been requests from some regional authorities for flexibility to shorten the period between the second and third doses—from the current eight-month interval that is adopted as standard practice in Japan to six months, which would align the country more closely with some European countries and the U.S.

Economic data releases lend some support to sentiment

Industrial production rose 1.1% in October from the previous month, with the motor vehicle industry the largest contributor to the increase. The unemployment rate unexpectedly edged lower, to 2.7% in October, amid labor market tightness, while October’s 1.1% month-on-month rise in retail sales likely reflected a recovery in demand following the easing of coronavirus restrictions.


Chinese stocks recorded a weekly gain despite a resurgence of U.S.-China tensions after Chinese ride-hailing app Didi said it would delist its U.S.-listed shares from the New York Stock Exchange. The CSI 300 Index rose 0.84%, and the Shanghai Composite Index added 1.2%. News of Didi’s delisting came shortly after the U.S. Securities and Exchange Commission said that Chinese companies that list on U.S. stock exchanges must disclose whether they are owned or controlled by a government entity and provide evidence of their auditing inspections.

Yields on China’s 10-year government bonds jumped to 2.926% from 2.881% the previous week, tracking the rise in U.S. Treasury yields after Federal Reserve officials signaled that there could be a quicker end to the U.S. central bank’s monthly bond purchases. The yuan strengthened to 6.3718 per U.S. dollar from the prior week’s 6.3917 per dollar, tracking the stronger midpoint rate set by China’s central bank. The People’s Bank of China allows the exchange rate to rise or fall 2% from the midpoint rate it sets each morning. 

Mixed PMI readings

In economic news, China’s factory activity unexpectedly rose in November for the first time in three months as surging raw materials prices and power rationing eased. The official manufacturing Purchasing Managers’ Index (PMI) rose to 50.1 in November from 49.2 in October. Readings above 50 indicate growth, while those below 50 indicate contraction. However, the official gauge stood in contrast to the private Caixin/Markit Manufacturing PMI, which fell to 49.9 in November from 50.6 in October. The Caixin/Markit Services PMI fell to 52.1 in November from 53.8 in October, indicating a slowdown in service sector activity.

Turmoil in China’s property sector continued to weigh on investor sentiment 

On Friday, Kaisa Group said that it failed to receive bondholders’ approval to extend the maturity of a $400 million note due next week, making it the latest Chinese property developer to edge closer to default. T. Rowe Price’s credit analysts believe that a restructuring for Kaisa is a likely outcome and that a restructuring could result in a recovery rate higher than where its bonds are currently trading. The last restructuring for Kaisa—which gained notoriety in 2015 when it became the first Chinese developer to default on its dollar bonds—took 1.5 years, and the process could be just as slow this time around, they cautioned.

Looking ahead, T. Rowe Price credit analysts believe China’s government could issue some kind of policy response to help the ailing property sector as the effects of recent defaults start to spread from the offshore high yield bond markets into Chinese investment-grade bonds and eventually the domestic economy. Moreover, they note that some developers have started to sell off assets, repay debt, and undertake other “self-help” measures to raise liquidity. Though bond markets in Asia will likely be volatile in the near term, T. Rowe Price analysts believe that China’s property sector should emerge from the turmoil with healthier balance sheets and credit profiles in the long run.

Other Key Markets


Turkish stocks, as measured by the BIST 100 Index, returned about 7.5%. The Turkish equity market performed well in local currency terms, as various world markets were pressured by news of the new omicron variant of the coronavirus, as well as concerns that the U.S. Federal Reserve may consider tapering its asset purchases at a quicker pace. The lira, however, continued to slide, as President Recep Tayyip Erdogan removed Treasury and Finance Minister Lutfi Elvan from his post and spoke in defense of what he called Turkey’s “new economic model.” The lira weakness prompted the Turkish central bank to intervene in the currency market.

T. Rowe Price sovereign analyst Peter Botoucharov believes that the intention of this “new economic model,” while not yet clearly defined by Erdogan, may be to allow the lira to depreciate in an orderly manner so that exporting companies will be more competitive in international markets. He believes that exports could also be supported by new structural measures, such as the issuance of cheap credit, as well as central bank credit facilities. The downside of this model, however, is higher inflation and currency weakness that would likely be suppressed by the government’s close monitoring of currency speculation and by price-setting behaviors.


Chilean stocks, as measured by the S&P IPSA Index, pulled back by about 4.6%. On Tuesday, a mixed, 10-member congressional committee voted 6 to 4 to return the revised pension withdrawal legislation—the fourth since the beginning of the pandemic—to both houses of the legislature for a final vote. The Chamber of Deputies failed to pass the bill on Friday: It fell four votes short of the 93 needed to reach the required three-fifths majority. The voting session was brought forward from next week upon the government's request, a move that was criticized by the opposition since it coincided with several deputies being absent due to travel or sickness.


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