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January 19, 2021

MLK Day in the US! FTSE 100: -0.33%

Yellen Boosts Stocks With Positive Comments

Yellen Boosts Stocks With Positive Comments

European and US stock futures are climbing as investors begin to feel more positive generally. This comes as a result of the tone coming from Biden’s administration who are indicating that they plan to spend much more in order to gain control of the economy and bring it to a place of growth. Janet Yellen who will become the Treasury Secretary has said in the confirmation hearing that it could be “a longer, more painful recession” and there is the risk of “long-term scarring” if the US did not “act big” and quickly pump more spending into the economy. Her stance is firmly in line with President-elect Joe Biden. Biden’s vision for the next round of stimulus is considered to be in the trillions of dollars.

As investors know, the US economy has become very reliant on the monetary policy of the Government, and when they inject funds or even discuss injecting funds, the stock markets rise as a result, no matter what else is happening in the economy. The markets have become somewhat addicted to monetary and fiscal spending. So what might happen to the US stock markets if this fiscal help stops, especially as the stocks are currently massively overvalued? The bulls may not be ready to move higher.

Stay-at-Home or Fly Away

Stay-at-Home or Fly Away

Apart from the stay-at-home stocks, it has been a very hard time for the leisure sector, not least the travel stocks such as the airlines. Yesterday they saw some optimism as Trump mentioned lifting travel restrictions for both Europe and Brazil. However this is a move that Biden is not happy about, and as he is taking office tomorrow, he may well retract this order.

In the meantime, there is no business or leisure travel, and the airline industry is suffering deeply as a result. This can only see a turnaround when vaccination rollouts spread far and wide, and people start to get vaccination passports or stamps. Many countries are mentioning the majority of their vulnerable being vaccinated by Easter, so perhaps this might be the time airlines turnaround as consumers are by now more than ready to travel, and many who have held onto jobs may have disposable income as a result of less spending over the last year.

Tesla Stock Driving Up

Tesla Stock Driving Up

Tesla has now penetrated China with its Model Y electric vehicle, made in Beijing. As China is the 2nd largest global economy, there is a huge market for electric vehicles, and Tesla must move fast in order to try to get a foothold in the industry. The competition with Chinese EV makers is likely to heat up fast, and it won’t be long before local consumers look to Chinese manufacturers for a cheaper option.

Gold Price Takes a Breath

Gold Price Takes a Breath

Gold price is taking a breather after yesterday’s rally. The RSI is staying near enough to the oversold area, meaning that the bulls could really challenge the daily 50-day SMA. Meanwhile, Janet Yellen’s comments could really start to push the gold price down as investors move into ‘risk-off’ mode and the dollar index climbs.

Global Equity Markets

Global Equity Markets

Equities were mixed during the trading session on Monday, as it was Martin Luther King Jr. Day in the United States, Americans were on the sidelines. The FTSE 100 lost 1/3 of a per cent, while the CAC in Paris was essentially unchanged. The Nikkei 225 lost almost 1%, and Germany leads the pack with a 23 basis point gain in what was a relatively uneventful session.

Index Change
FTSE100

FTSE100

-0.33

DAX

DAX

0.23

CAC40

CAC40

0.01

Nikkei 225

Nikkei 225

-0.97

S&P 500

S&P 500

Currencies

Currencies

Currency markets had a slight “risk-off” tone to them, as the Euro has lost three basis points, the British pound lost 13, and the Australian dollar was down one quarter of a per cent. The US dollar did lose a little bit of strength against the Japanese yen, but only 10 basis points as the market continues to be very cautious. It should be noted that we are in the midst of a correction when it comes to the oversold US dollar, so we may continue to see choppy conditions.

Index Change
EUR/USD

EUR/USD

-0.0356

GBP/USD

GBP/USD

-0.1314

USD/JPY

USD/JPY

-0.1037

AUD/USD

AUD/USD

-0.2541

Commodities

Commodities

Commodity traders were relatively mixed in their attitudes as gold gained 28 basis points, and silver gained over one half of a per cent. Copper was up 19 basis points in the “reflation trade”, while Brent was down 31 basis points, followed by platinum that was down 21. Commodity markets continue to be a bit noisy as the Americans continue to debate the size of the next stimulus package.

Index Change
Gold

Gold

0.28

Silver

Silver

0.54

Brent

Brent

-0.31

Platinum

Platinum

-0.21

Copper

Copper

0.19

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