Market Commentary – January 27, 2021

Kevin Jock

27th January 2021

    Wall Street’s Dow and S&P500 remain steady ahead of Wednesday’s FOMC announcement. With COVID-19 still headlining main street news as global cases surpass 100m and Biden’s administration contemplating travel bans, Nasdaq outperformed up 0.7%. Corporate earning announcements from tech firms yesterday reveal stay-at-home companies continue to profit heavily from an otherwise dire situation.

    Across the Atlantic, European benchmarks snap a 3-day decline. Though lockdown extensions still weigh heavily across investor minds, the IMF yesterday has raised their global economy growth forecast by 0.3% for 2021 to 5.5% on the basis the vaccine roll-out will promote economic recovery. Elsewhere, the FTSE100 was relatively unchanged despite the U.K. becoming the first nation to hit 100,000 deaths compared to European counterparts.

    Australia’s S&P200 slips as much as 0.6% intraday on concern’s China may be cooling off. For the past months, metal prices have surged, especially iron ore to multiyear highs on the back of Chinese construction activity. However, signs are emerging Beijing will rein in on government expenditure this year considering the V-shape recovery amid 2020. Likewise, Hong Kong and Japan pointed lower during Asia session.

    The U.S. dollar retreated against majors anticipating a dovish tone from Fed Chair Powell today. Crude oil hovers below $53 whilst gold closes lower at 1,850 and bitcoin finds support at 31,000.

NASDAQ-Jan-27-2021-07-16-18-78-AM

Figure 1 (Source: IS Prime): Nasdaq Daily : Nasdaq continues to break records regardless of stalling U.S. stimulus and coronavirus

Headliner to Review

  • Australia’s consumer price index (CPI) narrowed to 0.9% quarter-on-quarter (previous value rebounded 1.6%), which was still higher than market expectations of 0.7%.
  • The International Monetary Fund (IMF) raised its forecast for global economic growth this year by 0.3 percentage points to 5.5%. The coronavirus vaccines promote economic recovery, and large economies such as the United States and Japan increase fiscal policies to support economic growth.
  • The consumer confidence index in the United States ended its sharp decline for two consecutive months. After being revised down from the previous value of 87.1 (a four-month low), it rebounded to 89.3, slightly higher than market expectations of 89.
  • The Richmond Manufacturing Index in the United States once again fell to a six-month low, from the previous value of 19 to 14, which fell short of market expectations at 17, reflecting that the expansion of manufacturing activities in the fifth region of the United States has slowed again.

Headliner to Watch

  • Despite no changes are expected from the Federal Reserve today. Investors will keep a keen ear over the tone of Fed Chair Powell and his commitment in keeping these super accommodative monetary policies even if inflation is set to rise this year.
  • Crude oil inventories are expected to remain in surplus but decline from previous week from 4.4m to 1.6m.
  • Consensus see’s Japanese retail sales to contract last month at -0.4%. A spike in coronavirus infection in recent months have stoke household fears to spend less and save more.

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Authors:
Antony Tan
Ben Li
Kevin Jock