The Market Week – February Week 1
The frenzy surrounding last week’s Reddit inspired rollercoaster of heavily shorted stocks moved to Silver too this week, but they all appear to be deflating. GameStop dropped 60% and Silver fell over 10% with volatility still elevated and regulators set to meet this week to assess possible next steps.
A key week for Central Banks this week – the RBA surprised with an unexpected decision to extend its asset purchase program. This throws even more attention on the BOE meeting on Thursday; with no changes in interest rates expected for some time to come the outlook and response to the economic impact from the ongoing pandemic responses will be closely monitored.
This week is NFP week and a rebound from last month’s decline of over -140,000 is expected with consensus for 60,000 new jobs. The weekly unemployment claims numbers continue to highlight the fragility of the US jobs market. This week claims are expected to be better but to remain very elevated at 830,000.
The vaccine rollouts continue to gain traction globally, and there are signs of the pandemic easing, as the WHO reported a fall in cases for a third consecutive week. However, the positive vaccine news is tempered by increases in the new variants, which have proved to be very contagious, and on-going economic lockdowns.
This week the USDIndex rallied from a base at 90.50 to test 91.25, as the EUR cooled and short positions on the USD were trimmed. EURUSD moved below 1.2100 to test lows at 1.2010. USDJPY was a significant mover too, finally breaking away from 104.00 and breaching 105.00 on a 5-day run higher to top at 105.15. Cable once again rejected 1.3745 this week and slipped to test 1.3600, before settling around 1.3650.
Global stock markets remain elevated but slipped significantly in the wake of the Reddit volatility before recovering. The USA500 plunged to 3700, before recovering back over 3830 and within striking distance of new all-time highs once more.
Q4 Earnings Season continues to beat to the upside, driven once more by the technology stocks. Amazon & Alphabet beat expectations significantly this week, including the surprise announcement of Jeff Bezos standing down as Amazon CEO to become Executive Chairman.
The Gold price dipped again this week and tested down to $1830, while the important 200-day exponential moving average is now at $1820. Bitcoin (and all the cryptocurrency marketplace) remains very volatile. BTC moved from lows at $30,000 to once again breach $35,000.
USOil prices continued to consolidate this week, holding over the $52.00 support area, and rallied in the first day of the new month to test $55.00. Prices are supported by increased positive sentiment and stimulus which is likely to lift economic output, and the possible fading of pandemic pressures.
The yield on the US 10-Year Treasury Note holds over the key psychological 1.0000 level, but with a stronger USD they have lost some ground. They closed January at 1.093 and this week they continued to decline to test 1.0650 before settling higher around 1.1050. The anticipation of a larger US stimulus package, and record high stock markets, appear to be keeping US Treasury demand weaker.
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Stuart Cowell
Head Market Analyst
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