Prudential Investment Managers

Prudential Investment Managers

April 2021

VIDEO: Market Snapshot March 2021

Our Market Snapshot provides an overview of key events that influenced financial markets over the course of March 2021.

Global equity markets were broadly positive in March as investors welcomed the approval of the Biden administration’s $1.9trn stimulus plan by the US House of Representatives, together with a newly proposed $2.25trn infrastructure plan to run over an eight-year period. The acceleration of vaccine rollouts across the US and the UK added to global sentiment, as did the prospect of further stimulus from the ECB to help boost the European economy. This was enough to offset concerns over spreading Coronavirus variants and rising bond yields in the US, with longer-dated government bonds selling off in anticipation of higher inflation on the back of the additional stimulus and a stronger-than-expected economic recovery. In South Africa, meanwhile, better-than-expected GDP figures and generally improved sentiment helped lift the local bourse across all sectors.

Looking at global equity market returns (all in US$), the MSCI All Country World Index returned 2.7% for the month. Developed markets outperformed emerging markets, with the MSCI World Index returning 3.4% and the MSCI Emerging Markets Index delivering -1.5%. The Bloomberg Barclays Global Aggregate Bond Index (US$) returned -1.9%, while the EPRA/NAREIT Global Property REIT Index (US$) produced 3.5%.

Turning to commodities, the spot price of Brent crude oil closed March 3.9% lower at around US$60 per barrel. The gold price was 4.8% weaker, platinum lost 5.0%, and copper was down 3.5%, while aluminium and palladium were the only outliers, returning 0.5% and 7.1% for the month.


In the US, GDP growth was revised higher to 4.3% q/q for Q4 2020, marginally outpacing the second estimate of 4.1%. The US economy is now expected to expand by 6.5% in 2021 and by 3.3% in 2022, compared to December’s forecast of 4.2% and 3.2% respectively. Sentiment was further lifted as consumers started receiving their cheques as part of President Biden’s $1.9trn stimulus package and much faster-than-expected progress in the government’s vaccination rollout. In other news, President Biden announced a $2.25trn infrastructure plan to run over an eight-year period, which will be largely funded by raising the corporate income tax to 28% from 21% and increasing taxes on companies’ foreign earnings. The second part of the stimulus plan, which deals with healthcare and childcare, is expected to be unveiled in mid-April. 

Meanwhile, the yield on the benchmark 10-year US Treasury Note (UST) continued to rise, closing the month at around 1.7% after hitting a 14-month high of around 1.78%. For the first quarter of the year, the yield soared 83 basis points, marking the biggest increase in over a decade and reflecting the market’s concerns over the increasing prospects for sharply rising inflation amid a stronger economic recovery. 

In other news, the Fed left the target range for its federal funds rate unchanged, signalling further rate hikes were unlikely through to 2023 and that it was not concerned about inflation or rising longer-dated UST yields. In other economic news, annual consumer inflation increased to 1.7% in February, in line with market expectations and marginally higher compared to the 1.4% posted in the previous month. Services PMI jumped to 63.7 in March from 55.3 in February, well above market forecasts of 59 and pointing to the strongest growth in services activity on record. 

Equities closed the month broadly higher, with the S&P 500 returning 4.4%, the Dow Jones Industrial 30 posting 6.8%, and the technology-heavy Nasdaq 100 delivering1.5% (all in US$). 

South Africa 

The SARB voted to keep its benchmark repo rate unchanged at a record low of 3.5% as widely expected, while raising its growth forecasts from 3.6% to 3.8% for 2021 and maintaining its projections for 2022 and 2023 at 2.4% and 2.5% respectively. Governor Lesetja Kganyago, however, stressed that the pace of an economic recovery would largely depend on the government’s ability to effectively roll out its vaccine programme and mitigate the onset of a third wave of infections. Investors welcomed the news that the local manufacturing of the Johnson & Johnson’s Covid-19 vaccine had commenced, with 30 million doses earmarked for use in South Africa. 

In other positive news, Mineral Resources and Energy Minister Gwede Mantashe unveiled eight independent power producers to support the nation’s struggling power utility, which will consist of solar energy, wind, liquefied natural gas and battery storage, with renewable energy expected to start adding to the grid from August 2022. The project is expected to inject R45bn of private investments into the economy. Meanwhile, the South African National Treasury published its updated ‘Operation Vulindlela’ plan, detailing the government’s strategy to boost the economy in the wake of the Covid-19 pandemic. 

Turning to economic indicators, the South African economy grew by an annualised 6.3% q/q in Q4 2020, beating market expectations of a 5% increase, with eight out of ten industries reporting positive growth in the fourth quarter. Annual inflation, meanwhile, eased to 2.9% in February from 3.2% a month earlier, below market expectations of 3.1% and dropping below the SARB’s target range of 3-6%. 

The FTSE/JSE ALSI returned 1.6% in March, with Resources returning 1.2%, Listed Property (SAPY index) 1.2%, Industrials 1.9% and Financials 1.7%. The FTSE/JSE Capped SWIX All Share Index, which we use as the equity benchmark for most of our client mandates, returned 3.7%. SA bonds were negative at 2.5% (as measured by the FTSE/JSE All Bond Index), while SA inflation-linked bonds returned -0.1% and cash (as measured by the STeFI Composite) delivered 0.3%.   

Finally, the rand appreciated against all major currencies, gaining 1.7% against the US dollar and 4.7% versus the euro, and 2.7% against the pound sterling. 

UK and Europe 

In the UK, investor sentiment improved following the reopening of the economy and further headway being made in the nationwide vaccine rollout, with more than a third of the UK’s population having already been vaccinated. Meanwhile, the BoE kept its benchmark interest rate on hold at a record low of 0.1% and left its bond-buying programme unchanged, stating that the UK economy was on track to recover strongly in 2021 with inflation expected to return towards the 2% target in the spring. 

Turning to the Euro area, a new wave of Covid-19 infections and fresh lockdown measures (particularly in France and Germany) raised fears of a slowdown in economic growth, placing pressure on investor appetite for riskier currencies and stock markets. Meanwhile, the ECB kept its key interest rates unchanged, stating that it would conduct emergency bond purchases at a significantly higher pace over the next quarter in a bid to bring government bond yields down and to support an economic recovery in the region. The ECB revised its 2021 GDP forecast higher from 3.9% to 4.0%, before slowing to 4.1% in 2022, down from 4.2% previously estimated. 

For the month, the UK’s FTSE 100 returned 2.8%, the German DAX 5.4% and France’s CAC 40 3.1% (in US$). 

China and Japan 

In China, reports from the US and other G7 nations condemning moves by Beijing to reduce the people of Hong Kong’s political participation and representation weighed on investor sentiment, as did the relative slow pace of its vaccine rollout. Equally, the government’s crackdown on large tech companies like Tencent created investor worries of further curbs and tighter regulation to come on other companies, weighing heavily on the local equity market. 

On the economic front, the People’s Bank of China left its benchmark interest rates unchanged for the eleventh straight month. Investors surprisingly overlooked positive manufacturing data, with non-manufacturing and services PMI both bouncing back sharply in March to 56.3 (from 51.4) and 54.3 (from 51.5) respectively. Retail sales also had a good showing, increasing 0.56% in February after contracting 1.4% a month earlier.   

In Japan, the Bank of Japan left its key short-term interest rate unchanged at -0.1% and maintained the target for its 10-year government bond yield at around 0%. Meanwhile, GDP was revised lower from 3% to an annualised 2.8% q/q for Q4 2020, while CPI remained in deflationary territory as the pandemic continued to weigh on consumption, coming in at -0.4% for February. 

Japan’s Nikkei 225 delivered -2.3%, the MSCI China -6.3% and Hong Kong’s Hang Seng -2.0% (in US$).


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