Market Commentary – February 9, 2021

Kevin Jock

9th February 2021

    Ever-improving economic outlook from U.S. stimulus moving closer towards a signed deal to rounding the curve in virus infection rates see’s revisions in inflation expectations. Alongside 30-year Treasury yields breaking 2% for the first time in a year, Wall Street’s bull market continues to drive benchmarks to record highs. The biggest beneficiaries being small caps whilst tech underperforms on prospects work culture returns to normalcy.

    Sentiment across Europe was buoyed by M&A activity amid Japanese chipmaker Renesas Electronic Corp buying out German equivalent Dialog Semiconductor. Meanwhile, despite investors pricing out a rate cut below zero by the BOE, the FTSE100 still ended in positive territory as the UK’s vaccine schedule is well underway.

    Heading into Asia open, Australia’s S&P200 was dragged lower 0.6% by blue-chip banks slashing first half profits. The Japanese Nikkei and Hong Kong’s Hang Seng took a pause with investors mulling increasing geo-political tension. Chinese efforts to bring Hong Kong more integrated with CCP values has resulted in UK dual nationalities no longer being recognized in the special territory.

    Bitcoin mania overwhelms January scepticism after Tesla’s public endorsement boosts the cryptocurrency to above 47,000. Yesterday, the electric vehicle company had revealed a $1.5bn investment into bitcoin, signalling their future intent to accept bitcoin as a form of payment, much like Paypal. Elon Musk had previous added #bitcoin onto his Twitter profile stirring speculation and with Monday’s announcement, cements the electronic currency closer to a mainstream asset.

    Elsewhere, the dollar depreciates against basket of majors, gold gains $16 to $1,830 as investors revise inflationary expectations and crude post 6 consecutive days of gains

Bitcoin-Feb-09-2021-06-37-53-75-AM

Figure 1 (Source: IS Prime): Bitcoin Daily : The cryptocurrency breaks 47,000 as investors speculate a shift in monetary paradigm

Headliner to Review

  • In February of this year, the Eurozone investor confidence index unexpectedly stopped rising for two consecutive months and returned to a negative value. From the previous 11-month high of 1.3, it fell to negative 0.2. The market expected to continue to rise to 1.9.
  • Australia’s NAB Business Confidence Index rebounded to 10 in January this year. The previous figure was slightly revised to 5 from a high of over two and a half years. In January, the business climate index stopped rising for four consecutive months, falling to 7 from the previous value of 16, which was a two-year high.
  • Japan’s M2 money supply in January this year accelerated to 9.4% year-on-year growth (the previous figure was slightly maintained an increase of 9.1%), a record high and higher than market expectations for a 9.2% increase. The M3 money supply accelerated year-on-year growth to 7.8% (previous figure maintained an increase of 7.6%), another record high. The year-on-year growth rate of M1 money supply accelerated again to 14.2% (previous value rose 13.8%), ending the three consecutive months of slowing growth.

Headliner to Watch

  • As ex-ECB president Maria Draghi takes hold of Italy’s parliament, the countries industrial production figures is expected to rebound from -1.4% to 2.1% in January.
  • Consumer sentiment in Australia anticipated to remain dire with the pace of vaccine roll-out one of the slowest among developed countries
  • CPI data set to remain mute at 0% from 0.2% of previous month in China as hotspot resurgence in cases see’s the government re-implementation social restrictions.

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Authors:
Antony Tan
Ben Li
Kevin Jock