Weekly Market Wrap 12-April to 16-April 2021

Marius Paun | London, UK | Senior dealer |Friday 16th April 2021

The US Retail Sales Surprises On The Upside

The US retail sales for March came out this week at 9.8% versus 5.8% expected, surprising everyone and showing that the US economy is on the right path. Motor vehicle sales figures were particularly impressive, up 15.1% month on month. Mirroring the good economic data, S&P 500 and Nasdaq both closed at all-time record highs amid dropping yields.

Fed’s Jerome Powel weighed in, saying the economy ‘seems to be at an inflexion point’ ready to start growing at a faster pace with jobs creation also coming in more quickly. He acknowledged the main risk going forward is Covid spreading again. It comes after US health agencies called for an immediate pause of the Johnson & Johnson vaccine following 6 cases of blood clots (despite an impressive 6.8 million doses administered).

We also had the release of the Fed’s Beige Book, indicating growing optimism and accelerating prices. Among the main points: consumer spending increased; economic activity accelerated to a moderate pace from late February to early April; employment picked up as well over the same period.

China’s Premier Li Keqiang said his country and the US should step up communication and manage differences better than in the recent past. He made these comments to a group of US executives on Tuesday. Meanwhile, China’s trade balance for the first quarter showed exports up 38.7% y/y. The customs office said the foreign trade has been recovering, now growing at a healthy rate despite a ‘grim and complicated’ international economic landscape. They added there is plenty of ‘instability and uncertainty’ going forward.

Elsewhere, the European Central Bank’s President Christine Lagarde expressed her views that the spill over from US stimulus package will ‘mostly affect 2022’ and that eurozone growth will be boosted by 0.3% as a result. ‘Inflation in the euro area will also be increased by 0.15%’???……Really? no wonder critics say their forecast on inflation is laughable coming from an agency that has not got it right for a decade…. Whoops. On top of that, Lagarde warned of more bankruptcies ahead, but banks are ‘pretty solid’ for now.

Back in the UK, non-essential shops reopened on Monday. It was encouraging for the retail sector where the footfall is already up by 218% week on week. People queuing outside pubs for a drink or a meal also suggests spending is in for a spike. At the same time, UK February monthly GDP was +0.4% vs +0.5% forecast.

Meanwhile, US Oil rallied back this week from a low of $58.75 to $63.2 going into the weekend amid renewed weakness in the US dollar. The same driver pushed gold prices higher, now at $1780, after weeks of treading water between $1680 and $1760. The yield on the US 10-year Treasury moving down to 1.5% also helped the precious metal’s rally.

The anticipation of Coinbase (one of the big crypto exchanges) initial public offering pushed Bitcoin above the $64,000 mark this week, a fresh record high. It quickly retraced towards $60,000 on Friday afternoon on profit-taking, where it seems has found a bottom. Temporary or not, it remains to be seen.