North America
The Democrat-controlled House moved to pass the expansive U.S. Stimulus Bill over the weekend with support of most Democratic lawmakers. The package includes $1,400 in direct payments to individuals, an extension of federal top-ups to unemployment insurance as well as another $350 billion for state and local governments. The bill also calls for a gradual increase of the minimum wage from $7.25 an hour to $15 an hour across a 5-year period. However, this has been halted by the Senate, stating that it could not be pushed through via budget reconciliation. Across the week, all three major averages posted losses as fears higher interest rates and inflation deepened. The S&P 500 slid 2.45% this week for its second negative week in a row. The Dow fell 1.78% marking its first negative week of the month, while the Nasdaq became largest of the underperformers, closing 4.9% lower on Friday. The drops across the indices came as the Personal Consumption Expenditures (PCE) price index showed subdued inflation across January – rising 0.3% (ahead of expectations of 0.2%). The week’s strong economic signals also seemed to feed inflation worries. Weekly jobless claims hit their lowest level (730,000) in three months and recorded their biggest decline since August. The 10-year treasury yield fell 10 basis points to 1.42% on Friday after having surged to 1.60% on Thursday. Treasury yields had initially fallen after the PCE information release, they then rebounded to a higher level – triggering the indices slumps. The 10-year rate has increased by more than 50 basis points since the beginning of the year – a sharp rise for a benchmark for mortgage rates and auto loans. Despite the poor performance across the week all three indices concluded the month with modest gains: where the S&P finished with gains of 2.61% across February, while the Dow and Nasdaq climbed 3.17% and 0.93% respectively.

Europe and UK
The losses were not limited to the U.S. markets, as the Eurostoxx 600 posted its first negative week for the month of February at a 2.38% loss for the week as tech stocks plunged lower, retreating from their 20-year highs. Despite the disappointing week, the STOXX 600 saw a gain in February as energy, banking and strong travel/leisure sectors rallied with expectations of future economic reopening and vaccine rollouts. Core and peripheral Eurozone government bond yields rose as they tracked movements in U.S. Treasury yields. Despite recording its 3rd consecutive week of losses, dropping 1.48%, the Dax concludes the February with an increase of 2.63%. This comes as Q4 German gross domestic product (GDP) was revised upwards unexpectedly to a growth rate of 0.3% from an initial estimate of 0.1% on strong exports and solid construction activity. The full-year figure was increased to -4.9% from -5.0%. UK Prime Minister Boris Johnson unveiled a plan to gradually and irreversibly lifting lockdown restrictions in England from March 8th until June 21st most sectors of the economy and many social activities to be reopened by the 17th of May. British finance minister Rishi Sunak is expected to extend the jobs support program until at least May, along with a £5 Billion ‘Restart’ grant scheme to aid ailing businesses. The UK’s FTSE 100 Index came under pressure from a stronger British pound. The currency rose to its highest level in almost three years, reaching USD 1.42 before pulling back from this peak. Across the period, the FTSE 100 saw its first negative week of February, falling 2.12%, however, finishing the month with a gain of 1.19%. UK Gilt yields also rose in line with other developed markets.

Japan
Japan’s stock markets saw a decline on February’s last trading day, ending sharply lower across the holiday-shortened trading week, where markets were closed on Tuesday in celebration of the Emperor’s Birthday. For the week, the Nikkei 225 Stock Average declined 3.50%. Despite this drop, the Nikkei still managed to end the month with a gain of 4.71%. The broader TOPIX Index saw similar losses, receding by 3.34%, as the yen weakened, closing at JPY 106 against the dollar.