Market Commentary – February 5, 2021

Kevin Jock

5th February 2021

    A streak of positive news propelled the Nasdaq and S&P500 to record highs, whilst the Dow lagged. Restrictions across States are easing, the Democrats intend to ram through President Biden’s 1.9tn stimulus package and Thursday employment data painted an upbeat economic outlook.

    Elsewhere, additional relief measures taken by Germany buoyed European markets. Investors were further hopeful the pace of vaccinations will improve in coming weeks. Across the channel, remarks by the BOE weighed down UK’s FTSE100 half a percent. According to feedback from commercial lenders, negative rates were not well received deterring the central bank from considering such measures for another 6 months.

    Overnight U.S. sentiment boosted Australia’s S&P200 and Japan’s Nikkei higher. An exuberant IPO market saw the Hang Seng gain as much as 400 index points intra-day. Video-sharing platform Kuaishou Technology, seen as an alternative to Tik-Tok, saw their debut price almost triple after a $5.3bn IPO.

    Following on from OPEC+, crude oil notches higher five consecutive days to 56.43 amid reassurance from producers to restrain global supply. Saudi Arabia has shown despite unanimous agreement amongst members, they are willing to step in and offset supply increases from other oil nations. In turn, supporting market prices until a full-fledged global recovery eventuates this year.

    With 10-year Treasury yields firmly situating itself above 1%, the U.S. dollar begins to shed its role as the world’s risk-off asset. Alongside an equity bull run, from 2021 January lows the American greenback has appreciated 2.6% amongst a basket of major counterparts. Meanwhile, gold crumbles below 1,800 and bitcoin closes above 37,500.

    Ahead of China’s Lunar New Year holiday, selling pressure from corporates halted the yuan’s advance back above 6.47, much to the PBOC’s relief. Beijing would much prefer a stabile currency however recent international inflows from yield seekers saw the currency advance 10% in the past year.

Crude Oil-Feb-05-2021-07-58-45-97-AM

Figure 1 (Source: IS Prime): Crude Oil Daily : Saudi Arabia shouldering crude oil prices anticipating a full-fledged economic recovery in 2021.

Headliner to Review

  • The number of people claiming unemployment benefits for the first time in the United States for the week ended January 30 fell for three consecutive weeks, but the weekly decline narrowed to 33,000 (previous value down 63,000). The total fell to 779,000 (previous value) The total is revised down to only 812,000), which is the lowest since November 28 last year, far less than the market expected total of 830,000.
  • The US factory orders rose for eight consecutive months in December last year. It continued to rise by 1.1% month-on-month (the previous value was revised up by 1.3%), which was better than market expectations and only rose by 0.7%. During the period, if the unexpected monthly increase in factory orders excluding transportation accelerated again to 1.4% (previous value was revised up by 1.1%). It had risen for eight consecutive months, the market had expected a rise of only 0.8%.
  • The volume of retail sales in the Eurozone rose by 2% month-on-month in December last year, beating market expectations and rising 1.6%, while the previous value fell 5.7%.

Headliner to Watch

  • Employment data out of Canada and the U.S. today. Whilst U.S. labour markets are anticipated to improve, Canada set to suffer from continue month on month contractions.
    • U.S. employment change to increase 85K from -140K with unemployment stabilising at 6.7%
    • Canadian’s expected to lose another 43.5k in jobs and joblessness to increase from 8.6% to 8.9%.

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Authors:
Antony Tan
Ben Li
Kevin Jock