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January 20, 2021

Australian Dollar was up 1/4%. Nikkei 225: +1.39%

Earnings season in America begins in earnest

Earnings season in America begins in earnest

Earnings season in the United States began in earnest during the trading session on Tuesday as traders came back from the Martin Luther King Jr. holiday. One of the most widely followed earnings reports was Goldman Sachs, which has seen its profit more than double due to underwriting and its trading profits. Its fourth-quarter profit was helped by investment banking revenue that jumped 27% to $2.61 billion during the quarter.

On the other side of the coin was Bank of America, which has released a less than stellar report, although it was a “smaller than expected drop in profit.” It stated that it was hopeful of achieving loan growth this year as the economy recovers. This shows just how fractured the US banking system has become as far as profitability.

Another major player during the trading session was Halliburton, as its profit beat estimates on cost cuts and demand recovery when it comes to oilfield equipment and services. The free cash flow of the company is at $1.15 billion in 2020, above the estimated $1 billion previously.

German investor sentiment rises

German investor sentiment rises

Investor sentiment in Germany rose by more than expected in January as hopes of exports improving outweighed concern of the impact of the lockdown measures taking place currently. This does show resilience in Europe’s largest economy, which should continue to help the overall risk appetite across the continent. The ZEW economic research Institute said that sentiment increased to the reading of 61.8, from 55.0 during the previous month.

Virus resurgence could hurt oil demand

Virus resurgence could hurt oil demand

On Tuesday, the International Energy Agency said that oil demand recovery should take a hit from new coronavirus cases before the vaccine rolls out. Stimulus measures could help in the second half of the year according to the group, but at this point in time, it looks as if the short term outlook for oil demand is going to be somewhat hampered. That being said, oil markets have run quite high over the last several months in trying to “front-run” the demand. Oil markets could perhaps see a bit of volatility ahead as traders will be paying attention to the vaccine rollouts more than anything else as an indicator of where demand could be heading once we get closer to Q3 or even Q4.

The EU Urges Member Countries to Get Serious About Vaccinations

The EU Urges Member Countries to Get Serious About Vaccinations

The European Union plans to vaccinate a minimum of 70% by the summertime as the region is dealing with new variants that could cause further restrictive measures which could further damage the economy. The European Commission’s has stressed that national governments inside the bloc should vaccinate 80% or more of health workers and those over the age of 80 by March.

“Meeting these two targets would, in a first instance, reduce death and hospitalisation rates, relieve pressure on healthcare systems and then put Europe on track for herd immunity, helping to protect those who cannot be vaccinated and providing a bulwark against the spread of the virus,” the EU commission said.

In a note on Tuesday Goldman Sachs said “Our simulations deliver four results. First, we estimate that vaccinations so far have lowered US and UK hospitalisations by around 2% and 7%, respectively. Second, we estimate that through April, vaccinations should reduce hospitalisations by nearly one-half in the US and three-quarters in the UK relative to counterfactuals assuming no vaccinations. Third, hospitalisations have likely peaked in both the US and the UK.

Netflix Earnings

Netflix Earnings

Netflix reported its earnings after the closing bell, which sent its stock price climbing 12% in aftermarket trading. Netflix added 8.5 million vs 6.47 million expected and their revenue was higher than expected at $6.64 billion vs $6.626 billion beating estimates. Netflix stock could face high volatility during the trading day today.

Global Equity Markets

Global Equity Markets

Equities were somewhat mixed around the world, as the FTSE 100 lost 27 basis points, perhaps in reaction to the continuing lockdowns. The DAX was down 18 basis points, while France was down one-third of a per cent. The Nikkei 225 was up 1.39% in Asian trading, and at midday in the United States, the S&P 500 has gained almost half a per cent. The market continues to be very tenuous, waiting to see whether or not more stimulus comes.

Index Change
FTSE100

FTSE100

-0.27

DAX

DAX

-0.18

CAC40

CAC40

-0.35

Nikkei 225

Nikkei 225

1.39

S&P 500

S&P 500

0.46

Currencies

Currencies

Currency markets sold the greenback in general, with the exception of the Japanese yen as the US dollar gained one-third of a per cent against the currency. The Euro gained 4/10 of a per cent, while the British pound gained 18 basis points. The Australian dollar was up ¼ of a per cent, showing strength yet again as people are betting on the “reflation trade”. That being said, the markets will continue to look at stimulus as a major driver.

Index Change
EUR/USD

EUR/USD

0.3999

GBP/USD

GBP/USD

0.1884

USD/JPY

USD/JPY

0.3201

AUD/USD

AUD/USD

0.2715

Commodities

Commodities

Commodity traders were positive in general during the trading session on Tuesday, but just slightly so. The gold market was up one quarter of a per cent, and of course, silver was up over 1%. Furthermore, the Brent market was up 1%, and the only loser that we follow for the day was platinum, dropping 38 basis points. Copper was up 9/10 of a per cent as we continue to look at the idea of stimulus driving demand into both construction and industrial production.

Index Change
Gold

Gold

0.26

Silver

Silver

1.14

Brent

Brent

1.02

Platinum

Platinum

-0.38

Copper

Copper

0.90

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