Weekly Market Wrap 22-March to 26-March 2021

Marius Paun | London, UK | Senior dealer | Friday 26th March 2021

The Fed holds its ground

The US Fed Chair Jerome Powell testified in front of Congress this week and reiterated the central bank will continue to support the economy ‘for as long as it takes. He added that ‘indicators of economic activity and employment have turned up recently’. There is now confident that the recovery seems to be strengthening. Importantly, the 6.2% unemployment rate underestimates the labour market shortfall. The rather positive note did not stop the stock markets from plunging, but at least we saw yields on US Treasuries coming down slightly.

The New York Times reported that White House advisors are ready to show President Biden a $3 trillion infrastructure package on top of the $1.9 billion coronavirus relief plan. In reaction, the White House said the spending report is premature…. Give it a few weeks/months? Or maybe days now since it’s already out.

We also heard from China’s Premier Li Keqiang saying economic growth could be at least 6% this year. He emphasized his country needs growth in both employment and income. There was also a very important goal in boosting domestic demand and consumption (presumably to rely less on exports for economic growth).

In Europe, the German Chancellor is trying hard to tackle the new rise in coronavirus infections. She said the new British variant means ‘effectively we’re in a new pandemic’ as it is more infectious, deadly. The official figures show the variant is now the dominant strain in Germany.

Elsewhere, European Central Bank chief economist Philip Lane said PEPP purchases will show a substantial increase over the next few weeks. He wanted to point out the importance of support through a resurgent pandemic. The Eurozone economy is expected to have a tough second quarter as infections are creeping up across the board.

AstraZeneca’s ongoing saga with its vaccine recognition just got a boost. Its Phase 3 trial in the US has confirmed efficacy. The data shows 76% efficacy against symptomatic Covid cases, 100% efficacy against severe and critical disease and 85% for those aged 85+.

There is a developing row between the UK and the EU regarding access to vaccines. Brussels have already made threats of banning exports. However, UK Prime Minister Boris Johnson said he was ‘reassured’ the EU does not want vaccine blockades and that vaccine efforts require international cooperation…. Really? How will they justify falling behind the UK and the US?

The US Oil dropped by nearly 4% midweek on a firmer US dollar, to a low of $57.23. Nonetheless it was back above $61 going into the weekend. Gold prices spent most of the week in red, trading around $1733 on Friday afternoon. It’s not the fear of inflation (which usually supports the precious metal) but the fear of higher rates that keeps any rally in check (gold does not pay interest).

Bitcoin tried to cross above the $60,000 mark but failed to do so. As a result, it plunged to $50,456 before bouncing to $53,000. As the cryptocurrencies season is underway, these significant pullbacks are ‘quite normal’ and many say give strength to potential future rallies.