The UK and International Financial Market

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Introduction

The unprecedented and quick changes occurring in the global financial markets can have significant implications for businesses, particularly on apt data collection and public policy positions. Since transnational capital movements, developments and policies in other nations increasingly impact domestic economic output. It is prudent to have systemic structures to help in gathering and reviewing such business information, which can influence organisational performance. However, the unparalleled changes taking place in the international financial markets compound the challenges in acquiring up-to-date data (The Editorial Board, 2021). As a consequence, senior managers, such as those in the rank of a Finance Director in big banks, need an accurate and latest global financial environment.

Happenings in the World Stock Markets between 22 February 2021 and 28 February 2021

Despite the continued threat from the current pandemic, the international markets have responded effectively by posting positive movements. Throughout the week, the world stock markets were up on a strong note with substantial advantage posted in the UK, Asia, and the United States. Numerous recent positive improvements and news bolstered investment desires as evident in market reactions (The Editorial Board, 2021). The markets were also motivated by remarks from some central banks globally on the need for economic resiliency, indicating continuance accommodative monetary policies.

In the UK, the markets had mixed responses across the week with some companies recording significant stock margins while others dropped to nearly four months low. For example, on 26th February 2021, the FTSE 100 index dropped 168 points, representing about 2.5 decline – the largest single-day decrease in proportion terms since October 2020 (Kollewe and Wearden, 2021). Mining stock, property firms, and energy companies were among the worst-performing industries in the UK (Kollewe and Wearden, 2021). The sectors would be immensely affected if the central bankers began shifting from reduced interest rates and constricted policy to battling inflation (Kollewe and Wearden, 2021). Compared with the regional performance, the UK stock bazaar suffered the biggest losses in Europe.

The United States market was bolstered by the economic stimulus relief bill. The performance in the market was immensely indicated by an average advancement of about 1.5 per cent by the Dow Jones industrial (Kollewe and Wearden, 2021). The S&P pushed averagely 90 points higher, representing 2.4 per cent while NASDAQ closed the trading higher with about 0.56 per cent (Kollewe and Wearden, 2021). Moreover, less than 40 stocks from the S&P 500 recorded losses on 26th February 2021, the closing trading session of the month. At the big displaying board, advancers outstripped decliners by a ratio of four-to-one. The high-growth big tech companies also outperformed as their rates stabilised with Apple popping at about 5.4 per cent and Tesla rising by 6.4 per cent (Kollewe and Wearden, 2021). Financials and energy, which are common cyclical plays, increased substantially amid prevailing optimism on vaccines usage.

In the rest of Europe, the stock market was almost akin to the situation witnessed in the U.K. For instance, France’s CAC slid by nearly 1.4 per cent, Germany’s Dax dropped by about 0.67 per cent, Spain’s Ibex shed roughly 1.7 per cent, and Italy’s FTSE fell 0.9 per cent (Kollewe and Wearden, 2021). In his views, Hewson Michael, a market analyst, attributed the average financial market performance by the likes of Anglo American, Antofagasta and BP to weaker copper and oil prices (Kollewe and Wearden, 2021). Overall, the European market was somewhat stable over the entire week.

In Japan, the main stock index maintained better levels just like the previous week, making investors cheer indicators of rebound of one of the leading economies in the world. For instance, Nikkei 225 index sustained a high of about 1.9 per cent recorded in the previous week, surpassing the 30,000 mark threshold (Toh, 2021). The sound performance signals economic recovery from the pandemic-induced deterioration. The stocks surged following a stronger GDP posted by the nation (Toh, 2021). Fears exist that the recent re-emergence in cases overseas could weigh down the domestic financial markets in a couple of weeks ahead.

In other emerging markets such as South Africa, stocks across the week showed good performance despite threats from the ongoing pandemic. For example, the Johannesburg index increased by about 5.2 per cent, closing the week high and stretching its resurgence from a pandemic-stimulated recession since slumping in March 2020 (The Editorial Board, 2021). The international enthusiasm for riskier assets propelled inflows in the emerging markets with the Johannesburg exchange benefiting from such undertakings.

Developments in Foreign Exchange Markets and Interest Rates

Across the globe, intriguing developments in the interest rates and foreign exchange markets present far-reaching economic ramifications. In the United Kingdom, the performance of the sterling dwindled following a rush away from various riskier assets (Kollewe and Wearden, 2021). For example, on 26th February 2021, the pound was reduced by about 0.5 per cent to nearly $1.4 pegged against the U.S dollar (Kollewe and Wearden, 2021). The value represents a near three-year low since it traded at approximately $1.42 in the week starting on 22nd February 2021.

From the international scene, the U.S markets suffered some substantial loss. It was the week financial bazaars encountered the realisation of reduced interest rates coupled with subdued inflation. The government bond prices reduced, pushing up the yields. As an example, five-or-ten year gilt yield shot to substantial levels, meaning borrowing charges could increase sooner than expected in the markets (Kollewe and Wearden, 2021). The U.S treasury yield also swelled on the anticipations of stronger economic developments combined with higher inflation following the $1.9 trillion stimulus package (Kollewe and Wearden, 2021). Globally, bond investors took fright with a ten-year yield perhaps becoming the most essential market price internationally. In other emerging markets like those in Africa, South Africa for example, registered a record low-interest rate and unmatched amounts of fiscal and monetary stimulus (The Editorial Board, 2021). The situation around the globe differs depending on measure instigated by governments to mitigate the harsh consequences of pandemic-triggered economic downturn.

Major News and Development in the Banking Sector

Major developments in the banking sector were largely featured throughout the week. For instance, on the global front, the Prime Minister of India reiterated the commitment of the government to strengthen the banking and financial institution sector (Tiwari, 2021). In this address, the president noted that a vivid roadmap with a budgetary allocation must be prepared to guide the expansion of the sector (Tiwari, 2021). It will help them meet their intended mandates while contributing to economic growth. He also pleaded with the financial sector to establish innovative monetary product to support those employed in the informal economy.

Conclusion

Financial markets remain a key driver in the economic situation of a country and globally. The last week of February 2021 indicates a rebounding worldwide economy despite the low performance of stock markets internationally. Some bond yields stabilised and certain stocks such as NASDAQ, Dow, and S&P 500 drifted lower. For those in senior leadership, particularly in the banking sector, having accurate and updated information on the stance and performance of financial markets remains indispensable for effective decision making.

Reference List

Kollewe, J. and Wearden, G. (2021) ‘Global stock markets drop as inflation fears prompt sell-off’, The Guardian.

The Editorial Board. (2021) ‘Markets set for a bumpy ride back to inflation’, Financial Times. Web.

Tiwari, D. (2021) ‘Government committed to strengthen banking sector: PM Narendra Modi’, The Economic Times.

Toh, M. (2021) ‘Nikkei hits 30-year high as Japan’s economy bounces back better than expected’, CNN Business.

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