Market Commentary – February 8, 2021

Kevin Jock

8th February 2021

    Beyond volatility of recent weeks, Treasury Secretary Janet Yellen sought to reinvigorate investor sentiment on Sunday, quashing criticism the 1.9tn stimulus package would trigger above-norm inflation. Ex-Treasury Secretary and Economic advisor, Larry Summers warned the plan brought forth by Democrats entails the risk of severe dollar debasement and in turn financial instability. In response, Yellen emphasize the most concerning risk right now is failing to address existing economic impacts from COVID-19.

    Monday open saw global indices and futures welcoming Yellen’s reassurance. Australia’s S&P200 rallied as high as 66 index points, Japan’s Nikkei gained 560 points and the Hang Seng gapped 0.6% higher. Nevertheless, headwinds on the horizon for Hong Kong’s asset markets. Since the start of 2021, the Hang Seng has enjoyed an appreciation as high as 10% in January. However, come Lunar New Year, the resilience of risk-on appetite will be put to the test as the China – Hong Kong trading links are halted till the end of holidays on February 17th.

    Amid a relatively docile Friday despite conflicting jobs data, Wall Street still etch consecutive days of gains with both the Nasdaq and S&P500 recording new highs, again. Growth stocks remained mute, leading to Dow’s laggard underperformance.

    Mixed results across European benchmarks as Draghi-led market euphoria extends gains in some whilst disappointing economic figures weigh down others. The STOXX50 managed to settle at a 1-year high, France’s CAC higher by 0.8% and likewise Spain’s indices also. Germany’s DAX was unchanged on unexpected factory orders contracting, whilst BOE Governor Bailey’s remarks during the Monetary Policy Report National Agency Briefing failed to buoy UK’s FTSE100.

    Not all roses and sunshine as the American greenback returns to its risk-off dollar debasement roll following disappointing employment gains. Gold rallies $20 to 1,814 whilst twitter-fueled momentum has bitcoin back up above 38,000. Elsewhere crude above $57 posting 5 days of consecutive gains as investors increase bets on global demand recovery for 2021.

Plat

Figure 1 (Source: IS Prime): Platinum Daily : Platinum on a run, reaching levels unseen since 2016. A major material in niche car components, the metal has gained 15% in the past 12 months.

Headliner to Review

  • The United States added 49,000 non-farm employment in January, which is far below the market’s expected 105,000. At the same time, the job data for December last year was revised from a drop of 140,000 to 227,000.
  • The unemployment rate in January this year was 6.3%, which was better than the 6.7% expectations. The main reason was that the labour participation rate dropped to 61.4%, reflecting that fewer people were looking for jobs in the labour market.
  • Canada announced that it reduced 213,000 jobs in January, which was far better than market expectations of 47,500. The unemployment rate increased to 9.4%, also higher than the expected 8.9. The number of local jobs decreased by 858,000 from before the outbreak in February last year. Considering those who have not looked for work, the unemployment rate is as high as 12%.
  • Canada’s Ivey Purchasing Managers Index (PMI) contraction rate improved in January this year. It contracted 46.7 for the first time in seven months from the previous value and rebounded to 48.4, but it was still much lower than 57.3 in the same period last year.

Headliner to Watch

  • ECB President Christine Lagarde is expected to discuss the banks annual report infront of the European Parliament, reiterating the need to ensure stimulus funds is not pulled too quickly.
  • German industrial productions expected to decrease from 0.9% to 0.1% following on from last week’s weak factory order’s data.
  • Business confidence in Australia is anticipated to remained above 0 on a knife-edge. Government subsidies for businesses will end in March and unless vaccination programs result in a significant boost in consumer demand, consequence will be dire.

Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice.

Authors:
Antony Tan
Ben Li
Kevin Jock