Global Markets Gain On Vaccination Programmes

The equity markets are merely reflecting the economic recovery and forecasting further improvement owing to the vaccination drive

The global markets inched forward even as the vaccination programmes gather momentum across the globe. The US markets were seen leading the global markets along with their European counterparts. Dow Jones was up by more than one percent while S & P 500 gained more than 2 per cent, managing to make record highs for itself in the past fortnight. Nasdaq was up by more than 1 per cent. All eyes will be on the earnings in the US markets as the key FAANG stocks are expected to share their quarterly performing soon. Netflix will be the first one to declare the results from the FAANG group of stocks.

FTSE 100 led the gains in European markets, inching up by nearly 4 per cent even as CAC40 was up by more than 3 per cent and German DAX gained by more than 1 per cent. The UK has been lauded by global observers for its rapid vaccination programme and also for its solid economic recovery post lockdowns. The equity markets are merely reflecting the economic recovery and forecasting further improvement owing to the vaccination drive. The Asian markets underperformed in the past couple of weeks with Nikkei underperforming the most amongst its Asian peers. Nikkei was down by 1.34 per cent. Hang Seng managed to remain flat with a positive bias, closing up by 0.52 per cent. Shanghai was down by 0.20 per cent while Strait Times Index was flat.

Brasilian BOVESPA was up by nearly 3 per cent during the same time in spite of rising Covid cases. Korean Kospi was amongst the best performing Asian indices – rising up by 2.50 per cent. Globally the markets are taking cues from the huge stimulus which was announced in the US markets by the newly elected president Joe Biden. The fiscal stimulus to the tune of USD 2 Trillion to be spent on infrastructure is expected to create huge impact on the economic growth of US markets and thus can keep the US markets in the positive territory. With the rise in interest rates ruled out for the remainder of 2021, the equity markets may not pay much heed to the rising bond yields, at least for now.

The bullish undertone is intact and is pushing the key benchmark indices to record highs. The US markets have also discounted the rise in tax rates that could be implemented by the new administration led by Joe Biden. There is a consensus building amongst the large investment banks and influential portfolio managers that CY21 could belong to equities as well even as fixed income is expected to underperform. There is visible under ownership of emerging equities and hence there could be incremental buying of emerging equities that are expected to generate returns in excess of 20 per cent in CY21. Earnings season, portfolio flows, reopening of economies in the western world and the progress of the vaccination programmes across the globe is what will drive the equity returns for the coming quarters.