Weekly Market Wrap 05-April to 09-April 2021

Marius Paun | London, UK | Senior dealer |Friday 09th April 2021

The Fed Meeting Minutes Show Cautiously Optimistic Approach

The major US indices ended near record highs yesterday with S&P closing to a fresh high and Dow just 24 points from all-time record. The focus this week was on the infrastructure bill and President Biden’s plan to pay for it by hiking the corporate tax rate from 21% currently to 28%. But already a Democrat Senator Joe Manchin broke ranks and said he won’t support the 28% rate and the highest he could accept is 25%…? That was fast.

Meanwhile, the US vaccination is making progress as more than 75% of over 65s has their first shot. The country as a whole is on track to hit 200 million in Biden’s first 100 days in office. On the other hand, new variants are spreading quickly and becoming a cause of concern.

We also had the Fed meeting minutes coming out and showing the economy is still far from the Fed’s goals. The Labor market improved in January and February but remained well below the level seen at the start of last year. Consumer spending seems to be picking up at a faster pace than the last quarter of 2020. Inflation is anticipated to increase this year, albeit temporarily, due to supply constraints.

China released its Caixin Markit PMI for March showing Services at 54.3 versus expectations at 52.1 and 51.5 previously. It’s been reported that business activity and sales rose quicker than the estimated rates and that employment returned to a state of growth. Business confidence has reached the highest level in over a decade with work backlogs now on a rise again after 5 months of stagnation.

Elsewhere, the European Central Bank President Christine Lagarde said the risks associated with the euro area growth are now more balanced and that inflation is likely to go up in the short term. She also acknowledged that early 2022 inflation is expected to fade out. At the same time, the monetary stimulus can be ‘recalibrated to maintain favourable financing conditions.

Back in the UK, a government-backed loan scheme was launched on Tuesday to help companies recover. Specifically, loans ranged from 25,000 to 10 million pounds with the government providing an 80% guarantee. Additionally, there is a grant scheme to help companies restart trading, replacing Covid-19 packages.

The US Oil prices continued to drop reaching a low of $57.64 before rebounding back above $59 as the OPEC decision to increase output continues to take its toll. Gold prices posted a slight rally from a low of $1721.2 to $1742 going into the weekend as a result of renewed weakness in the US dollar. Bitcoin also posted an advance after dropping to within a touching distance of 55,000 marks. It seems another attempt to cross above 60,000 might be on the cards.