Stock markets have moved broadly higher overnight after a strong close on Wall Street, which was supported by indications that the labour market is recovering, positive forecast for upcoming earnings and ongoing hope of stimulus as markets buy into the expected recovery in the world economy later in the year, when vaccination programs have helped to re-open economies. Strength was also broadbased though paced by tech, financials, and energy. The USA100 climbed to 13,777 while the USA500 rose to 3871. The USA30 firmed to 31,055 but fell shy of its January 20 historic high of 31,188. Bond markets steadied and the 10-year Treasury yield is down -0.5 bp at 1.1%, while the JGB rate has dropped -0.4 bp to 0.05%. GER30 and UK100 futures are up 0.3% and 0.1% respectively, alongside broad gains in US futures.
That left sentiment upbeat ahead of the US payroll numbers today. Also helping has been the improving outlook on the pandemic as vaccine jabs increase and virus cases slow.
Headlines:
- Strong earnings and improving fundamentals (jobless claims and factory orders today) supported, as did expectations for the $1.9 tln stimulus bill after the Democrats moved to fast-track the bill.
- The RBA’s quarterly statement on monetary policy stuck to the script and repeated that the bank can still extend asset purchases if needed.
- BoE not in the mood for negative rates! The BoE left policy settings unchanged, as widely expected. Lingering hopes that the central bank would join the negative rate club were dashed, and yields moved sharply higher while the Pound strengthened. – UK100 is still outperforming as the GBP remains supported following the BoE statement yesterday.
- The global stock rally also paused briefly and despite cautious words from central bankers highlighting ongoing risks, investors are increasingly buying into the recovery story.
- Earnings remain in focus with Ebay Inc and PayPal Holdings supported by positive forecasts.
- GameStop closed under $55, its lowest for two weeks – Robinhood lifted restrictions on buying Gamestop and AMC.
- Global bond funds led inflows in the seven days to Feb. 3, on the back of a rise in US yields, while money market funds witnessed the highest outflows in eight weeks.
- Investors purchased $27.2 billion in bond funds last week, the biggest in eight months, and sold $32 billion worth of money market funds, Refinitiv Lipper data showed.
Forex Market
EUR – down for a second day below 1.2000.
GBP – supported at 1.3680. Gilts selling off yesterday and weighed on the UK100.
JPY – retests the 200-DMA and 3-month Resistance at 105.60.
AUD – ranging between PP and S1 (0.7600-0.7665).
CAD – stacked at 1.28 lows.
GOLD – breaks 1800.
USOil – remains supported and the front end WTI future is trading at USD 56.61 per barrel.
Today: Markets will be waiting for the non-farm payroll report out of the US but for what it is worth today’s local calendar includes German manufacturing orders data for December.
Biggest (FX) Mover – USOIL (-0.80% as of 08:50 GMT) – It clocked a fresh 1-year high at $56.84, breaking the 200-week SMA, with a strong weekly bullish candle, ignoring the 3-week doji candles posted so far. Data this week showing a drawdown in US crude inventories, along with demand-bolstering colder than usual winter weather in large parts of the northern hemisphere, have been underpinning oil.
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Andria Pichidi
Market Analyst
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