Weekly Market Wrap 11-January to 15-January 2021 (Welcome to 2021!)

Marius Paun | London, UK | Senior dealer | Friday 15th January 2021

US President Donald Trump Impeached For The Second Time

The US House of Representatives has impeached the incumbent President Donald Trump for the second time – the first time in history after he incited a mob to storm the US Capitol earlier this week. The reaction in the stock markets was pretty muted. The Dow, S&P and Nasdaq had posted mixed results until today when disappointing retail sales figures sparked a selloff.

Meanwhile, the President-elect Joe Biden unveiled a $1.9 trillion package that will include more unemployment help, a $15 per hour minimum wage, a vaccination plan, aid for local and state governments.  It also includes $1,400 direct payments which added to the $600 checks that went out with the latest bill would mean they equal the much talked about $2,000 payments.

We also had China’s inflation data for December, CPI came in at +0.2% year on year versus expectations for a flat figure while PPI -0.4%. vs -0.7% consensus. So a tepid increase at consumer level but negative at the business level. Beijing was not happy when US Trade Representative Robert Lighthizer called on Biden to keep the current tariffs on China to maintain the political pressure.

At the same time, on the European front, German chancellor Angela Merkel said she sees the lockdown lasting until early April. She added the country ‘needs 8 to 10 weeks of hard lockdown measures otherwise will have 10 times the number of cases by Easter’. Germany reported the deadliest day of Covid-19 yesterday with 1244 deaths. Its economy contracted 5% in 2020.

Back in the UK, it seems the number of coronavirus infections are starting to trend lower. Last Wednesday there were 62,556 cases but a week later they dropped to 47,525 which might suggest the lockdown measures could be starting to have an effect. However, the deaths hit a daily record of 1564. Encouragingly though, the officials said 2,639,000 have received their first dose of the vaccine.

Bank of England expressed doubts about the need for future stimulus saying it’s too soon to reach a conclusion on the subject. The central bank is expected to keep interest rates unchanged until 2024. Governor Andrew Bailey said BoE needs to see how the economy reacts after Brexit and the lockdown before taking any decision.

Gold prices moved lower this week trading around $1830 Friday afternoon as a rebound in the US dollar took its toll on the precious metals. The US crude prices were also slightly down at $52.20 after making a new recent high at $53.92. Bitcoin had a bit of a wild ride this week. After it collapsed to a low of $ 30,400 it recovered to above $40,000. Despite these extreme moves, Goldman Sachs said the crypto currency is ‘starting to mature but institutional money is still a tiny fraction of the market’.