Market Review February

Global equities made modest gains in sterling terms over February. The UK performed well as its Covid-19 vaccination campaign continued to make headway. Meanwhile, European ex UK equities modestly lagged the global average against mixed eurozone economic data and higher inflation. Meanwhile, data showed the EU’s Covid-19 vaccination campaign was sharply lagging the UK and US in terms of doses administered.

The month was marked by a rise in US Treasury bond yields as the US prepared to instigate further stimulus measures and as the ongoing US Covid-19 vaccination campaign raised hopes on the economic outlook. The House of Representatives approved a $1.9tn coronavirus relief package, including direct payments to US adults, more generous unemployment insurance and further support for state and local governments. In emerging markets, Brazil underperformed against elevated Covid-19 case levels as well as worries over government policy, with President Bolsonaro ousting the chief executive of oil giant Petrobras.

UK

The FTSE All-Share Index returned 2.0% in sterling terms during February. The UK’s Covid-19 vaccination campaign continued to make headway, raising expectations for a swift economic recovery in 2021. The UK PMI business survey gauge for February pointed to marked improvement in sentiment for the services sector against the early success of the UK’s Covid-19 vaccination programme, though the reading showed activity levels remained just inside contraction territory. A separate survey for February indicated UK consumer confidence had reached its highest level in 11 months. UK unemployment ticked up by 0.4% to reach 5.1% in the three months to December as the coronavirus crisis and fresh lockdowns took a toll. In terms of sectors, banks (14.0%) and travel & leisure (13.5%) outperformed while food & drug retailers (-10.2%) and personal goods (-9.9%) lagged.

FTSE All-Share Total Return (TR) GBP (%)*

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Europe

The FTSE World Europe ex-UK Index returned 0.3% in sterling terms, modestly lagging the global average. PMI business survey data showed activity in the eurozone manufacturing sector had reached a three-year high in February as export orders picked up. Nevertheless, PMI data showed eurozone services activity had dropped further into contraction territory in February as Covid-19 lockdowns continued to weigh. Eurozone inflation rose to 0.9% in January versus -0.3% in the prior month, led by price rises for services and non-energy industrial goods. The Ifo
Institute’s monthly German business sentiment gauge ticked up in February and exceeded estimates, with particular improvement in the expectations of industrial exporters. Data showed the EU’s Covid-19 vaccination campaign was sharply lagging the UK and US in terms of doses administered.

FTSE World Europe ex UK TR GBP (%)*

US

The FTSE All-World North America Index returned 0.9% in sterling terms over February. The House of Representatives approved a $1.9tn coronavirus relief package, including direct payments to US adults, more generous unemployment insurance and further support for state and local governments. US jobless claims fell
sharply over February, with the nation’s Covid-19 vaccination campaign continuing apace and new daily coronavirus case levels remaining well below the January peak. US retail sales rose by 5.3% in January, helped by the recent $600 in direct payments to individuals approved by the outgoing Trump administration. The month was marked by a rise in US Treasury bond yields as the US prepared to instigate further stimulus measures and as the ongoing US Covid-19 vaccination campaign raised hopes on the economic outlook.

FTSE All-World North America TR GBP (%)*

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*Source: Lipper to 26 February 2021, total return. Indices rebased to zero at 29 January 2021.

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