This week saw President Trump universally condemned for encouraging the Capitol rioters, ‘cancelled’ on social media and impeached in the House. The social media bans strengthened the argument that these giants are publishers not merely platforms, which depressed their stock. Despite the global vaccine rollout proceeding without any issues, countries around the world are still experiencing a rising second wave of COVID cases, and this sobering thought firmly arrested the seasonal rally this week, and pushed Oil, gold and the dollar back into consolidation mode. SPX and DAX had inside weeks. Bears may well be paraphrasing St Augustine and saying ‘grant me herd immunity but not yet!’
Next week is foreshortened by the Martin Luther King holiday, but the four days are packed with events. Earnings seasons begins, although the negative reception on Friday to excellent JPM and Citi results demonstrates the clear turn in sentiment from the previous week. There is also the Biden inauguration speech and initial executive orders, which may show his priorities. If this were not enough, there are four major rate decisions, culminating in the ECB on Thursday, and plenty of other important data. Volatility is therefore likely both in equities and currencies.
Just like last week, the market worried about COVID on Monday., perhaps its digesting the weekend figures. Bitcoin also fell sharply from its new highs over the weekend. Anyway, last week’s (arguably overdone) rally was stopped in its tracks, and SPX fell 0.7%, with NDX falling further, largely because of a reaction to the social media bans on President Trump. TWTR fell 6.4% and FB 4%. This was partly due to Trump supporters showing their opinions, but mainly because there is a feeling that this editorial censorship action means accelerates the move of social media companies to being publishers rather than just platforms. Publishers suffer a much greater regulatory burden than plain tech companies. Oil fell in line.
The risk-off mood saw the safe haven dollar rise again, although of course it is still hovering around the DXY 89.00 support level. Gold and bonds fell in line with the dollar. Yen also fell, but surprisingly less than other currencies.
Tuesday January 12
The Democrats unsurprisingly introduced an impeachment article on Donald Trump today. However equity markets were flat as stimulus and vaccine hopes balanced COVID case increases. Oil did a little better, rallying and briefly touching a 10-month high on Saudi cuts this month. After dipping in early trading, bonds rallied after a GS report that 2% inflation would come sooner rather than later. The dollar was back down, continuing in the DXY 89-91 consolidation we have seen for a month now., which pushed Gold and currencies up. Bonds were up on the day, but only slightly.
Wednesday January 13
A slight rise in SPX today as indecisive markets digest the vaccination rates and Biden stimulus versus new cases, although NDX was noticeably up. US inflation came in as expected and didn’t move the market. The dollar continued to range, up slightly today. Bonds were up, but again within range. Gold fell on the weaker dollar (and equities), and Oil gave up yesterday’s gains. A weak risk-on day.
Thursday January 14
Today DJIA briefly made a new ATH of 31220 (and RUT of 2164.319) before pulling back into the close (so Europe closed up). The new jobless claims figure was a shock, at 965k the highest since August, and well above the 795k estimate. After an early rally, the dollar was down, after Fed Chair Powell reiterated that a rate rise was not on the cards. “We are not going to hike until inflation reaches 2%”, he said—and remember that’s with the new ‘averaging’ policy, in short a single month or two over 2% would not be enough. Oil and yields (inverse to bond prices) were up in line with the early rally. Gold was flat on the day.
Friday January 15
We said last week that Friday would show some volatility, and it did. Despite earnings beats from JPM, C and WFC, all three stocks fell. The JPM move after blowout EPS and revenue beats showed how sharply sentiment has turned negative, especially after the bad miss on US Retail Sales. Michigan sentiment missed also. All indices were down, and further proof of the risk-off view was that NDX fell further, and a final rally attempt failed as you can see from the chart, where LOD was EOD, always a bad sign. The collapse meant a clear move into safe-haven USD, yen, and bonds (but not Gold, see many commentaries passim) and of course a sharp drop in Oil.
Indices were all down except NKY this week, the biggest mover being NDX. Buying GBPNZD was the best forex trade, up 1.44%. Bitcoin pulled back from the ATH last week, but not by much. FANGs were down worst than NDX itself in this risk-off week.
Last time, I was right about NZD, it was the weakest currency last week, and although EURUSD was also weak, the EURNZD pair still made 0.33%, so that’s 1.12% (2/2 wins). This week I cannot resist the fifth touch of 0.8860 support on EURGBP so I am buying it.
Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.
NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
- Biden inauguration
- Earnings season starts
- China, Canada, EU and Japan rate decisions
- Germany, UK, Canada inflation
Monday January 18
Markets are closed today for Martin Luther King’s birthday, and there is no significant news from Europe or the US. There is a rate decision in Hungary.
02:00 China GDP Q4 (e3.2% p2.7%)
02:00 China Retail Sales (YoY e5.5% p5.0%)
04:30 Japan Industrial Production
Tuesday January 19
A big day on earnings today with more banks, BAC and GS before the open, and NFLX after the close. There is an EcoFin meeting on banking procedures. The main news of the day is German inflation.
07:00 Germany CPI (YoY e-0.7% p-0.7%)
09:00 ECB Bank Lending Survey
10:00 Germany ZEW Sentiment Surveys
18:00 BoE Haldane speech
Wednesday January 20
The big news event today is of course President Biden’s inauguration, the market will be listening to his speech to get a sense of his priorities. Earnings continues pre-bell with Dow stalwarts PG and top-weighted UNH, along with more banks. Rate decisions today from China, Canada and also Brazil.
01:30 PBoC Rate Decision/Statement (e3.85% hold)
07:00 UK CPI (YoY e0.5% p0.3%)
07:00 Germany PPI
10:00 Eurozone CPI
13:30 Canada BoC CPI (Core YoY e1.2% p1.5%)
15:00 BoC Rate/Decision Statement (e0.25% hold)
16:15 BoC Press Conference
23:50 Japan Imports/Exports/TB
Thursday January 21
The earnings action today moves to post-market, with tech (but not internet) gains INTC and IBM after the bell. There is an EU Leaders Summit by video to discuss COVID response. There are also rate decisions in Norway, Turkey and South Africa.
00:00 Aus Consumer Inflation Expectations
00:30 Aus NFP/UnEmp (NFP e50k p90k)
03:00 BoJ Rate Decision/Statement (e-0.1% hold)
06:00 BoJ Press Conference
12:45 ECB Rate Decision/Statement (e0% hold)
13:30 US Building Permits/Housing Starts
13:30 US Jobless Claims
13:30 Philly Fed Mfr Survey
13:30 ECB President Lagarde Presser
15:00 Eurozone Consumer Confidence
22:00 Aus Commonwealth Bank Services/Mfr PMI
23:30 Japan National CPI
Friday January 22
The week ends with a raft of PMIs. No major earnings reports today.
00:30 Aus Retail Sales (p7.1%)
07:00 UK Retail Sales
08:30 Germany Markit PMIs (Mfr e58 p58.3)
09:00 Eurozone Markit PMIs (Comp e47.8 p49.1)
09:30 UK Markit PMIs (Svcs e45.3 p49.4)
13:30 Canada Retail Sales (MoM p0.4%)
14:45 US Markit PMIs
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