Equities

It was a mixed week for equities. The US stock market ended lower after a volatile week, as investors weighed up rising US Treasury yields and improved economic growth forecasts. The Euro Stoxx 50 index rose 0.1% over the week, but many European markets were weighed down by concerns over a resurgence in Covid-19 infections. Most Asian and emerging markets were lower over the week, although Japan rose slightly.

Bonds

US Treasury yields continued to increase (and prices fell), with the 10-year Treasury yield touching as high as 1.75% during the week. European government bond yields ended the week slightly lower, while UK gilt yields rose. Investment grade bond prices were flat in Europe but lower in the US, while high yield bonds were lower in both regions.

Currencies

The US dollar regained some ground against the euro and sterling. Sterling was lower against the dollar but rose slightly against the euro. The euro was lower against the dollar but flat against the pound. The Japanese yen rose against the dollar, euro and sterling.

Commodities

Oil suffered its biggest weekly drop since October 2020, and Brent Crude finished the week 6.8% lower at $64 per barrel. Oil was pushed lower by the fear of new lockdowns in Europe, and signs of weakened demand in the US and China. Gold rose 1% over the week to finish at $1,745 per ounce.

Responsible investing

The preliminary results of a European Central Bank (ECB) stress test have identified climate change as a major source of systemic risk. The research suggests that, if no further action is taken, extreme weather events could greatly affect company profits while increasing the likelihood of defaults (where a company cannot pay back its debts).