markets & economy  |  April 9, 2021

Global Markets Weekly Update


Stocks hit new highs on strong data

Most of the major benchmarks moved steadily higher to record highs, although the small-cap Russell 2000 Index recorded a modest loss. The technology-heavy Nasdaq Composite Index outperformed the broad market S&P 500 Index but stayed below its February peak. Tech shares also regained the lead within the S&P 500 during the week, helped by solid gains in Apple and Microsoft—which together account for roughly 40% of the sector’s market capitalization. Casino and cruise line shares were also especially strong, while energy stocks lagged as oil prices pulled back early in the week. Growth stocks handily outperformed value shares, narrowing the performance gap for the year to date.

Payrolls surge the most since August as economy reopens

Trading got off to a strong start thanks to the previous week’s monthly payrolls data, which was released when the market was closed for the Good Friday holiday. The Labor Department reported that employers added 916,000 jobs in March, well above consensus estimates of around 650,000, and the most since last August. The reopening of bars and restaurants and the rebound in travel were clearly at work, with 280,000 jobs added in leisure and hospitality industries. February job openings, reported Wednesday, hit almost 7.4 million, the highest since January 2019. Many observers were therefore surprised by Thursday’s report that initial jobless claims had hit their highest level (744,000) in three weeks, although T. Rowe Price traders noted that the report seemed to have little impact on sentiment.

Much of the rest of the week’s economic data also surprised on the upside. The Institute for Supply Management’s (ISM) gauge of service sector activity jumped to its highest level on record, mirroring the ISM’s earlier report that factory activity had reached its highest level in four decades. Details in the ISM report were also strong, with broad-based strength in employment, new orders, and business activity easily offsetting weakness in inventories and export orders. 

Producer prices see largest jump in nearly a decade

If there was a worrisome element in the data, it may have been reports of higher prices for production inputs. On Friday, the Bureau of Labor Statistics reported that producer prices rose by 1% in March, roughly twice consensus estimates. The jump pushed the year-over-year increase to 4.2%, the largest in nearly a decade. Investors seemed to be keeping an eye on supply chain pressures, particularly delays at U.S. ports and the global semiconductor shortage, which has led to temporary shutdowns in automotive production lines.

President Joe Biden’s announcement the previous week of a USD 2.25 trillion infrastructure plan also seemed to boost growth hopes. Prospects that the plan would actually become law seemed to increase following a procedural ruling that appeared to suggest it could be passed by Democrats on a party-line vote in the Senate. Investors may also have been encouraged that President Biden stated he was willing to negotiate how much corporate taxes would be raised to pay for the bill. 

Powell sees recovery as “uneven and incomplete”

The yield on the benchmark 10-year U.S. Treasury note increased somewhat on Friday morning in response to the producer price inflation data but moved slightly lower for the week as a whole. (Bond prices and yields move in opposite directions.) The firm’s traders noted that the Federal Reserve’s commitment to continued low rates seemed to keep a lid on yields. Speaking Thursday before the International Monetary Fund (IMF), Fed Chair Jerome Powell stressed that the global economy would remain fragile until the pandemic is brought under firm control and that the U.S. recovery remained “uneven and incomplete.”

T. Rowe Price municipal traders reported strong demand for new deals across credit qualities. Higher-yielding bellwether names, such as the Puerto Rico Sales Tax Corporation and Buckeye Tobacco Settlement Authority, fared well in secondary trading as credit spreads—the yield differential between higher- and lower-quality bonds of similar maturity—continued to tighten.

Our traders observed decent performance in the investment-grade corporate bond market, although on relatively light trading volumes. Macroeconomic news was supportive as rates stabilized and the IMF revised its global growth forecast upward to a level not seen since the 1970s. In the primary market, new deals were met with strong demand. Stable rates contributed to favorable technical conditions in the high yield market, and positive flows and manageable issuance also helped.

U.S. Stocks

Index Thursday's Close Week's Change % Change YTD
DJIA 33,800.60 647.39 10.44%
S&P 500 4,128.80 108.93 9.92%
Nasdaq Composite 13,900.19 420.08 7.85%
S&P MidCap 400 2,663.99 16.28 15.49%
Russell 2000 2,243.29 -10.61 13.42%

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 growing hopes that injections of fiscal stimulus and dovish central bank policies would spur a global economic rebound. In local currency terms, the pan-European STOXX Europe 600 Index ended the week 1.16% higher. Major stock indexes were mixed. France’s CAC 40 gained 1.09%, Germany’s Xetra DAX Index added 0.84%, and Italy’s FTSE MIB fell 1.14%. The UK’s FTSE 100 Index advanced 2.65%, partly owing to a weaker UK pound, which fell on concerns about vaccine supply issues and profit taking after a strong quarter. UK stocks tend to gain when the pound falls because many companies in the FTSE 100 Index generate a meaningful proportion of their revenues internationally.

Core eurozone government bond yields ended slightly higher. They initially rose on the better-than-expected U.S. jobs data released the previous week, before falling on concerns about the slow progress in Europe’s vaccination program. Yields climbed again after minutes from the European Central Bank’s March meeting suggested it was willing to slow bond purchases once conditions become favorable. Peripheral eurozone yields were mixed. Italian yields rose as investors sold existing bonds to make room for the country’s unexpected sovereign bond offering. Spanish and Portuguese bond yields fell on vaccine concerns and tighter coronavirus restrictions. UK gilt yields followed U.S. Treasury yields lower. 

UK reopening continues; Germany to hold vaccine talks with Russia

Prime Minister Boris Johnson said that England would move to the second phase of its “road map” for lifting the lockdown on April 12, when outdoor pubs, nonessential shops, hairdressers, indoor gyms, and other facilities will be allowed to reopen. The UK government also announced a framework for the resumption of international travel, which could begin to take effect on May 17, at the earliest. Germany is beginning bilateral negotiations with Russia to purchase the Sputnik V vaccine, Jens Spahn told fellow European Union (EU) health ministers in a video call, according to the news website Politico. EU Health Commissioner Stella Kyriakides declined to open talks with Russia on behalf of the bloc when pressed by other ministers. 

French, German industrial output drops; UK construction activity surges

Industrial production in Germany and France fell sequentially in February, raising concerns about the pace of economic growth. In France, total output fell 4.7%, while industrial production in Germany contracted 1.6%, according to official data.

UK construction activity last month grew at the fastest pace since September 2014, according to the IHS Markit/CIPS Purchasing Managers’ Index (PMI). This report and recent strong PMI surveys for services and manufacturing could suggest that the economy contracted at a slower pace in the first quarter.


After a strong start, Japanese equities drift lower

Japanese stock markets started the week positively, with the widely followed Nikkei 225 Stock Average breaking through the 30,000 mark early in the period. The rest of the week made for a more mixed picture, however, and the Nikkei 225 ultimately finished slightly lower than it began. The broader TOPIX was also marginally lower. The yen strengthened a little against the U.S. dollar, closing in the high JPY 109 range. Meanwhile, benchmark 10-year government bond yields were a little lower at just above 0.10%. 

Household spending data sharply lower

Economic news weighed on stocks after the week got off to a strong start. Investors were dealt a blow on Tuesday with the release of data showing that household spending plunged 6.6% in February, year on year, worse than the anticipated 5.3% decline. This came on the heels of a similarly precipitous 6.1% annual decline in January. On a monthly basis, household spending was up 2.4% in February, but this too proved disappointing as expectations were for a 2.8% increase.

However, consumer confidence trended upward as a COVID-19 vaccination campaign got underway and the economy remained supported by record fiscal and monetary stimulus. The monthly consumer confidence index jumped to a pre-pandemic high in March, rising to a seasonally adjusted 36.1 from 33.8 the previous month on a scale where 50 marks the threshold between optimism and pessimism, according to preliminary data from the Cabinet Office.

A spike in coronavirus cases raises fears of possible restrictions

Midweek news from the IMF, forecasting the strongest global expansion in at least four decades for 2021, provided some encouragement for export-heavy Japanese markets. However, this outlook was soon undermined by a spike in domestic coronavirus infections and fears of possible restrictions on economic activity. The governor of Tokyo asked the national government to designate the capital as an emergency area, while the western city of Osaka also looks set to declare a medical emergency after infections spiked to a record high.


Chinese stocks recorded a weekly loss, extending several weeks of underperformance against other major global markets. The large-cap CSI 300 Index fell 2.4% and the benchmark Shanghai Composite Index shed 1.0%. Data indicating higher inflation and elevated U.S.-Sino tensions weighed on sentiment and outweighed positive corporate earnings. According to Citi Research, about 67% of the 33 Chinese industrial companies it covers recorded earnings that either beat or met consensus forecasts, with about half of that number reporting better-than-expected earnings—far exceeding the typical one-third ratio, the bank noted. In fixed income markets, the yield on China’s 10-year bond rose slightly to close at 3.21% amid signs of continued economic recovery. Global funds reduced their holdings of Chinese government bonds in March for the first time since February 2019, Bloomberg reported. In currency markets, the renminbi was broadly stable for the week, closing at 6.558 against the U.S. dollar.

Data for Qingming Festival is encouraging

Economic data over China’s Qingming holiday weekend (April 3 to 5) showed a recovery in domestic tourism close to pre-pandemic levels. Box office and cinema admissions also rebounded strongly from 2019 levels to set new records. However, tourism revenue over the long weekend slumped from 2019, a drop that analysts attributed to shorter visits and price discounts. The data suggested that China’s vaccination drive is encouraging domestic consumption, including services. This year, “consumption catch-up” is expected to be a major growth driver for the country. China’s vaccination rate is about 5 million per day, a rate that puts it on track to meet Beijing’s goal of inoculating 40% of the population by the end of June. 

Caixin Services PMI shows broad services recovery

On the economic data front, the private Caixin Services PMI jumped to 54.3, its fastest expansion pace since December 2020 and reinforcing the strong official PMI readings at the end of March. Analysts attributed the improvement to the lifting of travel restrictions after the Lunar New Year in February and said it signaled a broad-based improvement in China’s services sector, which has lagged the country’s recovery. The Caixin Services PMI also revealed that business expectations rose to the highest level since February 2011 while a services employment index rebounded after three monthly declines.

Among other economic readings, China reported that its consumer price index (CPI) rose to a five-month high in March, while the producer price index (PPI) accelerated 4.4% year over year after rising 1.7% in February. The March PPI surge, its largest increase since July 2018, fueled worries about global inflation, which appears to be on the rise as the pandemic recedes and economies recover. Liu He, China’s top economic adviser, said that he is “watching closely commodity prices.” However, falling pork prices—a key part of the CPI basket—should help dampen food prices and restrain headline CPI inflation this year, according to analysts.

Other Key Markets


Mexican stocks, as measured by the IPC Index, returned about 0.8%.

On Thursday, the government reported that inflation in March increased 0.8% month over month and 4.7% year over year. While the data were in line with expectations, the consumer price index is now at a two-year high and well above the central bank’s 2% to 4% target range for inflation. T. Rowe Price emerging markets sovereign analyst Aaron Gifford notes, however, that much of the recent inflation pressure can be attributed to well-known base effects, particularly energy costs, as well as Easter-related spending. Nevertheless, policymakers could be concerned that core prices (up 4.1% year over year) are now above the inflation target range.

Also on Thursday, the central bank published the minutes from its March 25 monetary policy meeting. According to Gifford, policymakers had a downbeat assessment of the domestic economy largely due to near-term dynamics, but they expected a rebound in economic activity in the second half of the year. While there was a considerable debate regarding inflation, Gifford notes that central bank officials were generally concerned that core inflation has not come down as expected. Although the decision to keep the overnight interbank interest rate at 4.00% was unanimous, Gifford sees a divergence in terms of comfort level among the board members, with some highlighting no more room to lower interest rates and others signaling only a temporary pause in the easing cycle. Still, given upward pressures on inflation and more financial volatility, Gifford expects the central bank to be cautious going forward.


Chilean stocks, as measured by the IPSA Index, returned about 1.2%.

On Tuesday, the legislature voted—as proposed by President Sebastián Piñera—to officially push back the constitutional convention and regional elections by over a month due to the recent surge in coronavirus cases and new lockdowns. This decision was not unexpected, and it is unlikely to generate much controversy given that most Chileans seem to be in favor of the move.

Still, according to Gifford, there is plenty of uncertainty around the drafting of the new constitution, including a push for more social rights. A two-thirds voting threshold won’t allow a single ideology to dominate, but even members of right-wing parties have been supporting populist measures, such as pension withdrawals and a mining sales tax. Gifford notes that almost all new constitutions end up with more text than less, as drafters try to offer something for everyone. He believes that Chile is likely to be no different.

New rights could be introduced in the areas of pensions, wages, health care, and education, all of which imply more fiscal outlays. While the new constitution will likely not upend Chile’s open market economy and institutional framework, Gifford would not be surprised if there are attempts to intervene in certain institutions, industries, or regulations. Examples could include giving the central bank a dual growth and inflation mandate, creating a separate public pension fund, and requiring mining companies to implement environmental safeguards.


Next Steps