It has been another volatile week in markets, as more positive economic data released caused more inflation concerns. Improving economic data may be good news for economies, for financial markets it also points to less support from central banks. Last week Bitcoin suffered a sharp selloff from its record high in mid-April, taking other markets down with it. By Friday, an air of calm was returning, as the release of purchasing managers indices (PMI), a well-respected lead indicator as to the health of the manufacturing and services sectors, pointed to an improving Europe which has been a relative laggard versus the US, due to being one to two quarters behind in their rollout of Covid vaccines.
As of noon London time on Friday, global equity markets had gained 0.3% over the week. However, at a country and sector level, it was a very mixed picture. US equities were down 0.4% over the week, whilst technology stocks, having been in negative territory mid-week, finished the week up 0.8%. European stocks rose 0.3%, whilst UK equities fell 0.3%. Japan was up 1.1% and the Australian stock market increased by 0.2%, benefitting from gold mining stocks rising by 5.0%, in contrast to industrial metal mining stocks falling just over 1.1%. Emerging markets rose 1.7%, aided by continued weakness in the US dollar.
Despite midweek volatility, government bonds finished the week close to where they started. The 10-year yield on US Treasuries is currently trading at 1.62% and for German bunds and UK gilts -0.13% and 0.84% respectively.
Gold marches on rising to just over 2%, taking it to $1,881 an ounce, its highest level since early January, having risen almost 12% since its
low for 2021 in March. Gold is benefitting from rising inflationary pressures, whilst short term interest rates remain anchored at very low levels.
Crude oil finishes the week down, having touched $70 earlier however industrial commodities fared less well. Copper fell almost 3% over the week, whilst iron ore dropped almost 5%. Brent crude oil prices were down by just over 4%, trading at $65.9, having broken through $70 a barrel earlier on in the week.
Minutes from the US Federal Reserve’s (Fed) latest meeting were released on Wednesday, pointing towards officials discussing when they might discuss tapering of asset purchases if the economic recovery continues at such a fast pace. This momentarily sent bond yields sharply higher, before dropping back to levels seen at the beginning of the week by Friday, and contributed towards the intra week sell-off in technology stocks.
Bitcoin collapses to $30,000
Bitcoin collapsed by over 35% on Wednesday, triggered by China signalling a potential crackdown on the digital currency. Having started the week trading around $47,000 a coin, it briefly touched just over $30,000, before recovering to $41,400 by Friday. In recent weeks it has traded up to $65,000 a coin, pushed higher by Tesla, the electric car manufacturer, initially accepting the coin as payment for a car, only to change its mind on environmental concerns over Bitcoin mining a few weeks later.
