With the imminent end to a dramatic week for the European and US stocks, a mixed image is being portrayed by the financial markets.
With a notable drop in the value of the pound, Britain’s FTSE climbed up 100 points showing signs of a recovering financial position post the COVID-19 lockdown while international exports experienced a dip after the country withdrew from the European Union.
In the eurozone, Frankfurt’s DAX 30, which has streaked to fresh highs repeatedly this week, gave up gains made the previous day after the European Central Bank gave sentiment a boost by promising more support for the economy if needed.
A similar financial abstract was observed on the western side of the Atlantic after a significant spike was observed in the S&P 500 and the Dow Jones average on Thursday as the much-awaited stimulus package cleared all legislative hurdles in the US after President Joe Biden signed it into law.
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A simultaneous and inverse impact was seen on the S&P and Dow Jones in the late morning as the latter pushed higher while a gradual yet upward trend was witnessed in the Asian markets.
Trading platform IG’s chief market analyst, Chris Beauchamp said, “The week is heading towards its end on a mixed note, the overall picture being one of gains and losses, although the Dow has stuck rigidly to the script and ground out another record high.”
Meanwhile, AJ Bell’s director of investments noted, “The standout market of the day was Japan where the Nikkei jumped 1.7%, a somewhat delayed reaction to the $1.9 trillion stimulus being signed and a weak yen giving support to exporters.”
After just a few weeks in the White House, US President Joe Biden officially put the American rescue plan into force, which aims to ease the financial struggles experienced by the people due to the pandemic. The package also includes a provision of delivering monetary handouts, worth $1400, which is expected to drastically increase the spending capacities of Americans.
The ECB’s decision Thursday to increase its own stimulus gave a sigh of relief to the stakeholders in the market.
Observers said the ECB move signalled to investors that central bank officials around the world were ready to step in to keep their monetary policies ultra-low for as long as needed to help the economy get back on track.
However, a rise in money market rates this year has led some economists to fear that the largesse of global central banks will cause a surge in inflation, potentially leading to an end of the cheap cash that has powered a year-long equity rally.
Those fears ramped up once again on Friday, analysts said, pointing to the rate on benchmark 10-year US government bonds raising to 1.6%.
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TD Ameritrade’s chief market strategist, JJ Kinahan said, “After some relative calm on the interest rate front, another jump in the 10-year Treasury yield seems to be pressuring stocks this morning, a day after major indices closed at record highs.”
Nasdaq, consisting of tech-based equities, experienced a steep drop of 1.3%.
“It seems that the pressure on the Nasdaq is coming amid a reallocation from tech stocks and into cyclical equities” that benefit from an increase in economic growth, said Kinahan.
“While such a shift can be unnerving, it’s nothing to panic about,” he added.
New York – Dow: UP 0.5% at 32,631.49 points
EURO STOXX 50: DOWN 0.3% at 3,833.31
London – FTSE 100: UP 0.4% at 6,761.47 (close)
Frankfurt – DAX 30: DOWN 0.5% at 14,502.39 (close)
Paris – CAC 40: UP 0.2% at 6,046.55 (close)
Tokyo – Nikkei 225: UP 1.7% at 29,717.83 (close)
Hong Kong – Hang Seng: DOWN 2.2% at 28,739.72 (close)
Shanghai – Composite: UP 0.5% at 3,453.08 (close)
Euro/dollar: DOWN at $1.1943 from $1.1982 at 2200 GMT
Pound/dollar: DOWN at $1.3901 from $1.3984
Euro/pound: UP at 85.92 pence from 85.66 pence
Dollar/yen: UP at 109.00 yen from 108.53 yen
Brent North Sea crude: DOWN 0.3% at $69.43 per barrel
West Texas Intermediate: DOWN 0.2% at $65.86 per barrel
