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The recent bond yield spike has been blamed for pressuring tech stocks as they are seen as vulnerable to rising rates. BlackRock believe this view is too simplistic: tech is a diverse sector and the driver of higher yields matters more than the rise itself. Their new nominal theme implies central banks will be slower to raise rates to curb inflation than in the past, supporting their pro-risk stance and preference for tech.

The COVID-19 situation in Europe remains precariously balanced, which weighed on reopening hopes. The grounded tanker in the Suez Canal also continues to attract attention, with media reports suggesting nearly 200 ships carrying US$10 billion of goods were stalled as a result of the blockage.

Talk of a third wave of new COVID-19 cases increased across the European Union last week, wit France reimposing lockdown in Paris, and German health officials stating cases are accelerating ‘exponentially’. The picture for the UK economy looks more encouraging.

Chinese stocks have sold off on concerns that China could tighten monetary and fiscal policy more aggressively – after having led the global restart and policy normalization. This took place as rising U.S. Treasury yields have pressured global risk assets. BlackRock see moderately reduced tightening risk after China’s parliament meeting, and keep an above-benchmark strategic allocation to China exposures.

BlackRock see the path out of the Covid-19 shock as a “restart” – not a typical business cycle “recovery.” The key reasons are the distinct nature of the shock, broad-based pent-up demand and different inflation dynamics. The passage of a $1.9 trillion fiscal package and an accelerating vaccination ramp-up in the U.S. magnify these factors, and they believe the restart will likely be stronger than markets expect.

Last week saw stabilisation in European government bond yields, which in turn, led to rotation back into some of the more recent losers, and defensive stocks. Alongside this, the reopening trade was firmly in play.