The Market Week – January Week 4
After global stocks cheered on Joe Biden as president, anticipating a hefty dose of stimulus, many stock markets are now seeing some pressure.
The catalysts to trading remain the virus and its mutations, vaccine rollout disappointments, and worries the US stimulus package could be delayed to mid-March, with the size cut measurably.
This week’s heavy dose of global data releases, including GDP and sentiment, is likely to reveal the many negative impacts from the second wave.
The first reading for Q4 GDP will be the highlight, with the report expected to show growth slowing to a 4.1% pace in Q4 (q/q, saar) from 33.4% in Q3.
The FOMC meets and is expected to confirm its uber-accommodative stance. Even though the statement is seen to be uneventful, inside the ropes it’s likely to be an interesting debate on the outlook given the new administration in Washington and the probability for hefty fiscal action, the resurgence in virus infections and renewed lockdowns, as well as vaccine developments.
This week the global stock markets remain mixed, with European stocks in the red while US stocks are overall well supported on stimulus hopes and the so far strong earning season, with the tech-heavy US100 holding close to 13,500.
The GER30 is lower as European governments are clearly spooked by virus mutations, which means restrictions are unlikely to end soon. Border controls are being tightened and the travel and tourism industry will likely have to bury hopes that vaccinations will allow a return to normality in the coming months.
The USDIndex sustains its 90.00 floor. EURUSD recouped to the mid 1.2100s amid a risk-off backdrop in global markets. However, downside risks hold as data releases continue supporting expectations for a technical recession in Europe over Q4/Q1.
Cable lifted over the 1.3700 area, out of a one-week low at 1.3610. USDJPY steadied to the upper 103s. Overall, currencies remain lacking direction.
The reflation trade remains a valid investing thesis for the year ahead, hinged on successful Covid vaccination programs, although has weakened.
Meanwhile, according to FactSet, 89% of the earnings released last week came in better than expected. Hence the focus will remain on the Q4 Earnings with Microsoft, Apple, Tesla and Facebook reports in the spotlight as last year’s best performing stocks.
Gold steadied between the 20-day and 200-day moving average but has slipped form $1850.
Bitcoin reclaimed $32,000 as BlackRock Inc announced that it will step into investing in bitcoin futures. However downside risks remain on Grayscale demand and after Powell’s and Yellen’s comments in regards to illegal financing. $30,000 a key support level.
USOil is steady at $52-$53 as lockdowns rein in stimulus optimism. Lockdowns in the US continue to crimp demand for motor and jet fuels, while in the rest of the world, including China, a rise in Covid cases is boosting demand concerns. That said, production cuts by OPEC+ should keep prices above the key $50 mark for now.
The yield on the US 10-Year Treasury Note remains over the key psychological 1.0000 level as longer-term yields rise along with inflation expectations.
Click here to access the HotForex Economic Calendar
Stuart Cowell
Head Market Analyst
Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
