Global update: Concerns grow over inflation

Although most major equity indices ended February in positive territory, the month finished on a question-mark. A sharp sell-off across bond markets pushed up bond yields and drove down demand for growth stocks as investors assessed the probability of rising inflationary pressures…


  • UK economy set to reopen
  • Fed pledges continued support
  • Nikkei 225 Index reaches 30-year high

To view the series of market updates through February, click here


Although most major equity indices ended February in positive territory, the month finished on a question-mark. A sharp sell-off across bond markets pushed up bond yields and drove down demand for growth stocks as investors assessed the probability of rising inflationary pressures that could lead to higher interest rates and the withdrawal of support from governments and central banks.

“The greater risk at present is of central bank complacency” (BoE chief economist Andy Haldane)

Bank of England (BoE) chief economist Andy Haldane warned: “People are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. But, for me, the greater risk at present is of central bank complacency”. Elsewhere, as the UK’s vaccination programme continued to expand and infection rates eased, UK Prime Minister Boris Johnson set out the “roadmap” for the reopening of the economy in England, beginning on 8 March with a return to school. Over February, the FTSE 100 Index rose by 1.2%.

Investors’ concerns were alleviated to some degree by reassurance from Federal Reserve (Fed) Chair Jerome Powell, who maintained that the US economic recovery remained “far from complete” and would need central bank support for “some time”. Nevertheless, the yield on the benchmark US Treasury bond rose to its highest level in more than a year. Meanwhile, President Joe Biden’s US$1.9 trillion “American Rescue Plan” was approved by the House of Representatives, and former President Donald Trump was acquitted in his second impeachment trial. The Dow Jones Industrial Average Index increased by 3.2% over February.

Sentiment in Europe was dampened during February by a slower-than-hoped rollout of the Covid-19 vaccine. Despite this, economic confidence in the eurozone improved slightly over the month, underpinned by signs of optimism in the industry and services sectors, and amongst consumers. The eurozone’s economy shrank by 0.6% during the fourth quarter of 2020 and contracted by 6.8% over the year as a whole. The Dax Index rose by 2.6% in February.

Having grown by 5.3% during the third quarter of 2020, Japan’s economy expanded at an annualised rate of 3% during the final three months of the year, boosted by stronger consumption and export activity. Over 2020, the country’s economy shrank by 4.8%, posting its first calendar contraction since 2009. During February, the Nikkei 225 Index rose by 4.7% and closed above 30,000 points for the first time in more than 30 years.


A version of these market briefings are available to use in our newsletter builder feature. Click here