Market Commentary – February 11, 2021

Kevin Jock

11th February 2021

    Lacklustre inflationary pressure saw Wall Street tumble intra-day upon release only to regain some ground by sessions end. For the past days, investors have been positioning exposure in favour of upward revisions to inflation expectations. Despite Thursday’s reality check, U.S. Treasury continue to illustrate bullish signals over the medium-term as yields remain above 1%. Meanwhile, arguments by Democrat prosecutors begin today, following Trumps defence team yesterday. Chance of impeachment for the former President remains unlikely but odds are ever increasing after Senate Minority Leader McConnell surprisingly told Republicans, their votes should be a matter of conscience and not party.

    European benchmarks tracked Wall Street’s decline but failed to follow suit on the subsequent recovery. This despite news from the World Health Organization recommending use of AstraZeneca’s vaccine for all adults, increasing the pace of inoculations across the Euro Area. Previously, medical experts in France and Sweden restricted its use to young adults only, concerned of insufficient clinical data.

    Ahead of Lunar New Year, marking the year of the Ox, investors push Hong Kong’s Hang Seng beyond 30,000 before the indices close for the long weekend. Hong Kong is anticipated to relax social restriction following celebrations on the 17th February, in hope spur consumer spending. Elsewhere Australia’s S&P200 rallied on open whilst Japan’s Nikkei remained relatively unchanged.

    The U.S. dollar index stagnated as investors contemplate softer inflation alongside the impact of an inevitable $1.9tn spending package in the coming weeks. Following Tesla’s euphoria, bitcoin settles back down at $45,000, gold rises higher by $4 to $1,843 and crude finally halts its momentous 7-day consecutive rally to settle at $58.34

Hang Seng-2

Figure 1 (Source: IS Prime): Hang Seng Daily : Hang Seng settles above 30,000 as China’s investors flood into Hong Kong’s capital market. Approximately $50bn USD has flowed in.

Headliner to Review

  • US Federal Reserve Chairman Powell said that although the unemployment rate has fallen to 6.3%. The job market still has a long way to go for a full recovery. He believes that the current actual unemployment rate may be close to 10%, and it is necessary to continue to introduce active loosening monetary policies. Low interest rates will continue for some time to support the labor market.
  • Driven by the monthly increase in gasoline prices to 7.4%, the US consumer price index (CPI) continued to rise by 0.3% month-on-month after the seasonal adjustment in January this year (the previous figure was a 0.2% increase) ), in line with market expectations.
  • In the United States in January this year, the average weekly real wage of private non-farm employees further increased to 0.8% per month. The year-on-year increase increased from 5.3% to 6.1%. The actual average hourly wage increased by 4% year-on-year.

Headliner to Watch

  • Unemployment claims out of U.S. expected to a paint an improving picture with figures set to decline from 779k to 755k.
  • Investors keens on the EU’s Economic Forecast for 2021, especially as the pace of vaccine roll-out increases and America buoying economic activity via a hefty stimulus boost.
  • Celebrations for Lunar New Year begin with Hong Kong markets closed till the 16th whilst China’s golden see’s banks open back up on the 18th.

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Antony Tan
Ben Li
Kevin Jock