Market Commentary – January 26, 2021

Kevin Jock

26th January 2021

    Choppy start to the week on Wall Street as investors were whipsawed following comments from Senate Majority Leader Schumer cautioning a relief bill may not pass till March. This, despite previous reports that Democrats intend to push through the stimulus plan before Trump’s impeachment trial in February. A change in tone by President Biden, calling for open dialogue with Republicans to head off concerns that $1.9tn is too expensive further left markets anxious. U.S benchmarks tumbled as much as 2.75% intra-day before regaining ground by sessions end.

    COVID-19 woes continue to persist across Europe as indices tumble on Tuesday with technology the only sector outperforming. The slow pace of vaccination remains a cause for concern alongside the new variant of which Moderna’s existing vaccine results illustrate, is only one sixth as effective as against the original strain.

    Whilst Australian’s celebrates Australia Day, overnight risk-off sentiment seeped into the Hang Seng and Nikkei. Thus far, the former has fallen 560 index points and the latter 225 points intra-day. Assurance for Japanese investors though, as members of the BOJ explore more flexible options in prolonging the centrals bank’s massive stimulus program. One member has brought forth the idea of expanding ETF purchases.

    The U.S. dollar gained against a basket of majors as stimulus jitters leaves risk appetite afar. Meanwhile, level headedness offsets irrational exuberance with bitcoin continuing its slide lower hitting 31,500. Crude oil oscillates between $51 – $53 ahead of Wednesday’s inventory data. Likewise, gold stalls at the $1,855.

NASDAQ-3

Figure 1 (Source: IS Prime): Nasdaq 1 minute U.S. session : Tech stocks shrug off stimulus tumble as a prolonged pandemic benefits stay-at-home firms.

Headliner to Review

  • The German Business Climate Index fell to 90.1, which was worse than the market’s expectation of 91.8 and the previous value of 92.2.
  • The current status of business index in Germany fell to 89.2 from the previous value of 91.3, which was lower than market expectations of 90.6.
  • In addition, the German business expectations index fell to 91.1 in January this year, which was worse than the market’s expectation of 93.2. The previous value was 93.
  • The Chicago National Activity Index in the United States unexpectedly rebounded from 0.31 to 0.52 while the market’s original expectation fell to 0.1. During the period, 53 of the 85 sub-indices made positive contributions compared with the previous quarter. If the above index is lower than zero, it means that economic growth is lower than the long-term trend value. A positive number means it is higher than the historical trend level.

Headliner to Watch

  • Headline CPI data out of Australia anticipated to fall from 1.6% to 0.7% with core inflation set to remain at 0.4%. The QoQ rise in prices is expected to come from child-care, home improvement and restaurants.

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Authors:
Antony Tan
Ben Li
Kevin Jock