Sovereign bond yields continued to fall last week as rising covid levels left investors nervous about the outlook for global growth. The highly transmissible delta variant of the virus has led to surging cases in the UK and across Continental Europe with some countries reimposing restrictive measures. Monthly GDP data in the UK and services PMI in the US also missed economist expectations which may also have contributed to the decline in yields. 10-year yields in the UK and the US fell by 5 and 8 basis points respectively to close out Friday at 0.66% and 1.36%. At one point on Wednesday, the 10-year US treasury yield dropped as low as 1.25% before retracing those moves later in the week.
Equity market moves were much more mixed. In the US, the S&P500 added +0.4% with growth stocks maintaining their recent resurgence whilst in the UK, the FTSE100 was flat. Looking at Europe, the German DAX30 rose by +0.2% with the French CAC40 declining by -0.4%. It was a tough week for Japanese equities where the Nikkei 225 slumped by -2.9%. The Japanese government has placed Tokyo under a fourth state of emergency due to the recent rise in covid cases in the prefecture.
In the commodity markets, oil recorded a weekly decline with Brent crude finishing the week -0.9% lower at $75.64 a barrel. That was despite recent discussions from OPEC regarding a potential cut in supply stalling without reaching a conclusion. Elsewhere, copper rose by +1.4% to $9,482 a tonne despite the Chinese government announcing its intention to release more of the metal from its reserves to combat spiralling raw material prices. Gold also increased by +1.4% to $1,808 an ounce with the precious metal benefitting from some weakness in the US Dollar.
It’s a busy week for UK macro data releases with CPI and PPI inflation and unemployment amongst the standout figures due. The British Retail Consortium also releases its retail sales monitor covering June. Inflation and retail sales numbers are also published in the US this week alongside industrial production. Meanwhile on Wednesday, the Federal Reserve publishes its bimonthly Beige Book which covers various economic figures and projections from across the Fed’s 12 districts. Friday’s University of Michigan consumer sentiment index draws the US week to a close. In the Eurozone, CPI inflation and industrial production are the headline numbers released this week with the former forecasted to be 1.9%.
It’s a particularly busy week in China where Q2’21 GDP is the standout figure due with the economy expected to have grown by +8.0% versus the same quarter in 2020. Other Chinese figures to keep an eye on include fixed asset investment, industrial production, retail sales and unemployment. In Japan, the Bank of Japan hosts its monthly monetary policy meeting although no changes are expected to be made to interest rates. Headline macro data from the country is in short supply on this occasion. 
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