The Market Week – February Week 4
The focus of attention once again this week focused on the Bond markets as Treasury prices fell, yields rose and volatility increased. This pressured the USD as commodity currencies and Sterling broke to 3-year highs and equity markets cooled.
Unemployment remains stubbornly high globally. In the US weekly claims once again disappointed, significantly missing expectations and coming in 861,000. This week they are expected to be 825,000.
The vaccine rollouts continue to gain traction globally (over 62 million in the US and over 18 million in the UK) and the signs of the pandemic easing continue, after the WHO reported a fall in cases for a sixth consecutive week. However, the positive vaccine news is tempered by increases in the new variants, and the US reporting over 500,000 deaths from a global number of over 2.4million.
This week the USDIndex moved down again to test under 90.00 from highs of over 91.00, EURUSD moved to highs at 1.2175 from under 1.2025. USDJPY peaked at 106.20 only to decline to under 105.00 once more. Cable breached the psychological 1.4000 level, moved above 1.4100 and even spiked above 1.4200, before moving lower.
Global stock markets cooled from all-time highs. The USA500 broke below 3900 from highs at 3965 to test under the 20-day moving average at 3870 as worry about valuations and a rise in inflation increased, following FED Chair Powell’s testimony on Tuesday.
Q4 Earnings Season continues to beat to the upside, with around 80% of companies reporting better than expected results. This week includes UK & European banks, US Oil companies and retails including Target, Best Buy and Lowe’s.
The Gold price sprang to life this week, playing catch up with other commodities as it recovered the $1800 handle from lows under $1760. Bitcoin post new all-time highs over $57,000 before crashing over 20% following comments from Treasury Secretary Yellen and Bill Gates, to test below $45,000.
USOil prices continued to rally; supported by extreme weather in US southern states, the price held over $60.00 and peaked at $63.00. Prices are supported by the increased positive sentiment which is likely to lift economic output, the fading of pandemic pressures and expectations of more dovishness from OPEC+ next week.
The yield on the US 10-Year Treasury Note holds over the key psychological 1.000 level and broke over 1.4200 this week to post a new 12-month high. The anticipation of the large US stimulus package, record high stock markets, and the spectre of rising inflation are combining to keep yields elevated.
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Stuart Cowell
Head Market Analyst
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