Divergence between major central banks was the news of the week, as the Bank of Japan (BoJ) surprised markets with more easing, the Bank of England (BOE) held steady and European Central Bank (ECB) officials discussed their comfort with additional easing, if
it was required. Interestingly, in the US, the financial condition tightening over the past weeks was noted by NY Federal Reserve (Fed) President William Dudley, who was quoted as saying that conditions were “considerably tighter” than at the time of the December Fed meeting. US markets reacted negatively to a weaker-than-expected reading on the service sector of the economy, which had been seen as a driver of growth. This was emblematic of the global growth concerns that, along with oil price volatility, will continue to put pressure on markets.
Global equities fell, with the EuroStoxx, Financial Times Stock Exchange (FTSE), Nikkei, Hang Seng, S&P 500 and Bovespa, falling -5.35%, -3.57%, -2.71%, -2.54%, -1.44% and -0.55%, respectively. The Shanghai market reversed the dramatic drop seen in January, rising 1.61% after falling almost 23% in the prior month.
Oil prices bounced off lows earlier in the week and fell by roughly equal amounts, with Brent dropping -1.72% and WTI falling -1.73%.
In global bond markets, Japanese, German, US and French bond yields fell, -54.44%, -7.12%, -3.28% and -1.74% respectively, while Spain, Italy and the UK rose 8.36%, 7.29% and 0.90%.