Market Commentary – January 25, 2021

Kevin Jock

25th January 2021

    Australia and Japan’s benchmarks pointed higher Monday open following reports on Sunday that the Democrats using their newly elected Senate majority power, intend to push through the 1.9tn stimulus plan before Donald Trump’s impeachment trial on February 8th. The Hang Seng outperformed rallying 2% as Hong Kong lifts it’s 48-hour lockdown in the city of Kowloon amid a spike in daily cases in the area in question. Over 10,000 residents were affected, with 7,000 tested during the weekend and 13 found positive.

    Wall Street slipped last Friday hampered by continuing coronavirus concerns especially as retail sales drag and joblessness remains elevated. With vaccine distribution being key to a return to normalcy, Biden’ Chief of Staff conveyed, since taking office, the administration was surprised that no formal roll-out plan had been devised by Trump and his advisors.

    Europe followed suit, ending the session lower. A double-dip recession is anticipated for the Euro area and UK as restrictions curb economic activity. New measures by the EU focus on hotspot area’s labelled dark red zones. Travelers to and from these areas will be required to partake a COVID-19 test and quarantine.

    Pandemic gloom alongside a halt in risk appetite saw the U.S. dollar hold its’ ground among its peers. Crude oil fell a dollar closing just below $52, gold at $1,855 and bitcoin recovers back to 33,000.

    For the week ahead, all eyes will be on the FOMC press conference on Wednesday. Investors are expecting further assurance from Fed Chair Powell on top of Biden’s stimulus plan. Meanwhile. the World Economic Forum begins today, with China President Xi Jinping headlining the day’s opener. Biden’s administration has taken a softer tone as the U.S. state department urged for dialogue between China and Taiwan following Chinese military planes entering Taiwanese airspace on Saturday.

Sp200

Figure 1 (Source: IS Prime): SP200 Daily : Aussie benchmark breaks out of a 3 month consolidation optimistic on vaccine roll-out.

Headliner to Review

  • Canada’s retail sales rose for seven consecutive months in November last year, and the month-on-month unexpected increase accelerated to 1.3% to C$55.193 billion, which was mainly driven by food and beverage store sales and e-commerce sales. The market expected to slow to zero growth. The core retail rales rose from -0.2% to 2.1%, which was better than the expectation of 0.l3%.
  • The manufacturing purchasing managers’ index (PMI) in UK in January this year slowed to a seven-month low, from the previous value of 57.5 to 52.9, which was below market expectations of 53.6. During the period, the growth rate of manufacturing output slowed to an eight-month low, from the previous value of 55.9 to 50.3.
  • The Markit Manufacturing Purchasing Manager Index (PMI) in US rose to 59.1 in January, a multi-year high, beating the expected 56.5. The new order sub-index rose to 59.5, a new high since September 2014.
  • The crude oil inventories rose by 4.4 million barrels, exceeding expectations. The market was originally estimated to decrease by 1.2 million barrels.

Headliner to Watch

  • UK labour markets anticipated to worsen amid tiered lockdown system implemented by government. Early market indications suggest joblessness to increase from 4.9% to 5.1% with claimant count change to stay at 5 digits.

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Authors:
Antony Tan
Ben Li
Kevin Jock