Market Commentary – February 18, 2021

Kevin Jock

18th February 2021

    Volatile session across Wall Street, tumbling on open but subsequently recovering as investors juggle between exceptional retail sales figures, prospect of runaway inflation and an economic fallout from subzero snap freezes. Among the lot, Nasdaq again underperforms slipping 0.5% intra-day.

    Sentiments across Europe fared no better as indices pulled back for two consecutive days. Yesterday, the European Commission announced a deal to triple its orders equivalent to another 150m doses of Moderna’s shot. However, a shortage of giant sterile liners, necessary in producing the COVID-19 jabs threw a wrench in the Euro zones mass vaccine distribution campaign.

    Business as usual for China, re-opening following Lunar New Year Holidays. Mixed start across Asia though with Australia’s S&P200 holding steady, the Hang Seng declining 311 index points and the Nikkei following suit, down 136 points.

    Crude extends momentum further briefly touching $62 as the U.S. oil industry buckles under continuing arctic weather. Temperatures worsened again on Wednesday in Texas, considered the largest U.S. oil producer by far. Whilst much of oil producing States shield their operation amid extreme weather conditions, Texas had failed to make sufficient investment in weatherproofing facilities knocking out half of production. Meanwhile gold capitalizes another day of losses ending the session lower at $1,776. Despite the precious metal’s duality as both an inflation hedge and risk haven asset, the latter characteristics has thus far outweighed the former. Continuing signs of economic recovery has left gold out of favour after hitting $2,072 back in August 2020.

    The U.S. dollar becomes an ever-enticing opportunity broadly gaining against majors on Wednesday. Long dated Treasury yields still a main driver of this risk appetite. Elsewhere, bitcoin defies nay-sayers, breaking past $50,000 and settling at above 52,000 by session end. Reflecting an almost inevitable future whereby the cryptocurrency is adopted by corporations.


Figure 1 (Source: IS Prime) Bitcoin Daily : A missed opportunity for many as bitcoin breaks 52,000 thus far proving skeptics wrong.

Headliner to Review

  • Australia’s unemployment rate continued to drop by 0.2% month-on-month to 6.4% in January this year, which was lower than market expectations by 6.5%. The month-on-month in the number of unemployed after seasonal adjustment increased again to 34,300 or 3.8%. The total number fell to 877,600. The year-on-year growth rate decreased to 156,000.
  • Retail sales in the United States ended its three-month consecutive decline in January this year. It rebounded by 5.3% month-on-month, the best in seven months, far exceeding market expectations and rebounding by 1%.
  • The U.S. Producer Price Index (PPI) rose for nine consecutive months in January this year. The monthly increase further from 0.3% to 1.3%, which was the largest increase since December 2009 on record. The market is expected to rise 0.4%.
  • The US mortgage loan application index fell for two consecutive weeks, and the weekly decline expanded to 5.1% to 892.6. The refinancing activity index continued to drop by 4.7% on a weekly basis to 4,337.

Headliner to Watch

  • Unemployment claims in the U.S. expected to drift lower from 793k to 775k on an increasingly hopeful recovery.
  • Crude oil inventories set to remain in deficit at -2.1M. Figures are expected to rise in coming weeks resulting from severe weather inflicted production cuts.
  • Philly manufacturing data out of the U.S. expected to decline from 26.5 to 20.3.

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Antony Tan
Ben Li
Kevin Jock