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Monthly markets review - January 2021

February 5th, 2021 Back To News & Insights


  • Wall Street hurt by battle between retail traders and brokers
  • European equity markets fall in a highly volatile start to the year
  • The row between the EU and the UK over vaccine supplies put pressure on markets
  • Large tech companies lifted sentiment in China
  • A positive start to 2021 for global emerging equity markets

Please note any past performance mentioned is not a guide to future performance and may not be repeated. The sectors, securities, regions and countries shown are for illustrative purposes only and are not to be considered a recommendation to buy or sell.


After hitting new record highs, US equity markets fell lower following an intensifying battle between retail traders and brokers over a small number of stocks, which left Wall Street nursing its worst week since October.

The mayhem caused a spike in market volatility and prompted the US Securities and Exchange Commission to review the trading restrictions imposed on Robinhood Markets, a popular venue favoured by retail investors to buy stocks that have been targeted by short sellers. The latter gain when a company’s share price falls.

The flux added to worries about the strength of the US economic recovery, although, for now, the country is having more success in rolling out Covid vaccines than Europe. Despite the Covid-related shutdowns, the US economy expanded by 4% in Q4 2020, slightly below the 4.2% rate economists had predicted.

The growth rate is expected to accelerate in the months ahead, thanks to the vaccines and fiscal stimulus, and wage growth data was higher than expected. However, there was no hint from Federal Reserve Chairman Powell, following the Federal Open Market Committee meeting, that US interest rates are poised to go higher anytime soon.


uropean bourses started the year in a positive manner with the broad market rising throughout most of the month. However, in the final week of trading, markets across the globe sold off and gave back their gains on what appeared to be technical reasons.

The VIX – a measure of market volatility – shot up to levels not seen since October, fueled by a surge in retail trading activity and subsequent de-risking by financial institutions.

From a sector perspective, information technology and health care were the best performing sectors – the only positively returning areas of the broad market. Meanwhile, real estate, consumer staples and financials detracted most.

It was also a very volatile month in terms of politics for the region as both the Dutch and Italian governments resigned.

In Netherlands, Mark Rutte (Prime Minister) and other ministers resigned following publication of a report on the past policy of recovering alleged child benefit overpayments. However, PM Rutte and most ministers will stay on in a caretaker function until the March 17 elections.


The UK equity market started the year on a high but ended January in negative territory along with most other global markets. The UK equity market rallied at the start of the year amid optimism stemming from the rollout of the Covid-19 vaccine and relief that the years of Brexit uncertainty were over.

However, both UK and European equity markets dipped towards the end of the month as stalled vaccine rollouts in the EU led to a row between the EU and the UK over vaccine supplies. A new lockdown in the UK and elsewhere around the world further tempered gains.

Figures released during the month showed consumer spending has fallen to 35% below its pre-crisis level, according to the Office for National Statistics. The decline is being driven by a sharp fall in social consumption, which includes spending in restaurants, bars and pubs. Social consumption is 55% below its level in February last year, before the first lockdown was introduced.

In January, it was announced that the UK economy approached a double-dip recession in November as output shrank, however the impact on the economy was significantly smaller in November than it was during the first lockdown.


Asian equity market performance was positive as investors continued to favour risk assets. The roll-out of the Covid-19 vaccine programmes and hopes for additional US fiscal stimulus boosted investor sentiment. However, towards month-end we saw a sharp sell-off as the pandemic continued to wreak havoc and there were delays in vaccine delivery.

Within the region, the Chinese equity markets were driven higher by some of the large technology companies and stable domestic economic data, which was ahead of consensus forecasts.

In particular, we saw Chinese industrial production and exports increase by 7.3% and 18.1% respectively (December, year-on-year). Furthermore, investors’ concerns about monetary tightening were found to be overdone as the People’s Bank of China reiterated that monetary policy would maintain stable.

Regarding US / China relations, the Biden administration announced a delay to the introduction of US investment restrictions on Chinese companies to May 27. Elsewhere, Taiwan was driven higher by the robust outlook of some of the technology companies, such as Taiwan Semiconductor Manufacturing (TSMC) and Mediatek.

Emerging Markets

Emerging equity markets started the year strongly, rising in value unlike their peers in the developed world. However, performance was dispersed at both a regional and sector level. Asia was the best performing region, followed by EMEA (Europe, Middle East and Africa). By contrast, Latin America lost ground despite early signs of promise.

There was significant variation in sector returns with internet stocks linked to communication services and technology performing well at the expense of old economy stocks found in utilities and financials.

Equity gains in Asia were led by China and Taiwan although it wasn’t a clean sweep with the Philippines, India and Indonesia closing the month in negative territory. Sentiment towards China was boosted by favourable news on the economy – GDP grew by 6.5% year-on-year in Q4 20. Taiwan also saw an acceleration in growth between October and December, buoyed by strong export momentum in the technology space.

Country performance also varied significantly within the EMEA region. The strongest performer was United Arab Emirates, one of the world’s leaders in administrating Covid vaccines. Other Gulf states such as Kuwait and Saudi Arabia also displayed equity strength.

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