Asian equity markets were mixed heading into the week as the region traded tepidly ahead of what is set to be a busy week of Central bank announcements with the Fed, BoE and BoJ all set to take centre stage. Last week saw the greenback trade indecisively as the DXY traded above the 92.00 handle briefly, before finishing the week with a strong Doji. The Canadian dollar was the top performer for the week as the commodity currency benefited from a strong labour market report which saw the unemployment rate trend lower to 8.2%. In addition to this, market participants digested comments from Governor Macklem as the central bank hosted its second-rate statement for the year. CAD/JPY traded to its best levels since 2018 as the cross eclipsed the 87.00 handle. Optimism continued to cycle across markets as US President Biden signed the Covid-19 relief bill into law marking a significant turning point in the nations battle against the virus which has killed more than 500,000 Americans.
Going into the week ahead, the US will host China in what is set to be their first significant meeting since President Biden took office. The meeting will see US Secretary of State Blinken and National Security Adviser Sullivan meet with Foreign Minister Wang Yi and other officials. The meeting will most likely be an opportunity for either side to size each other up in what could potentially set the tone for any talks or developments moving forward. As of now, it has been reported that President Biden will not be looking to remove the tariffs imposed on the nation by the former presidential administration.
Markets in Asia traded mostly lower as the underperformance within the tech space sapped the initial momentum from stimulus progress after the US Senate passed the $1.9tln Covid-19 relief bill which is also set to include $1,400 of stimulus checks and with the House set to vote on the bill on Tuesday.
The week ahead will see two monetary policy meetings with Canada leading the way midweek followed by the ECB on Thursday. Market participants will be keen to gauge the rhetoric from both Central Banks given the broad-based dovish tone recently observed by a number of ECB officials as they tackle an economic recovery amidst a slower than expected vaccination rollout. On the other hand, the Canadian dollar has experienced strength as it remains underpinned by lifted commodity prices. EUR/CAD traded to May lows last week to close almost 2% down.
In the UK, Public Health official Hopkins provided signs of optimism after outlining that new virus variants are unlikely to hamper the nations efforts to ease the current restrictions over the next 3-5 weeks. This comes as the first phase of PM Johnson’s easing blueprint takes effect today with schools set to resume. Gains in the pound have slowed somewhat over the past two weeks since its initial rally year to date. Last week, UK Chancellor Sunak provided the budget for the nation which is set to see 95% mortgages resurface under a mortgage guarantee scheme as well as an abundance of support in the form of loans and grants for businesses that have been impacted by the pandemic.
Asian markets moved higher as bourses picked themselves up from the Friday lull as the bond market rebounded from last week’s turmoil. Sentiment was also encouraged by an improving Covid-19 situation after Johnson & Johnson’s vaccine approval and a slower pace of infections over the weekend. The ASX 200 was up around 1.7% after a positive performance in tech whilst the Nikkei 225 closed 2.2% in the green after PM Suga announced the removal of a state of emergency in 6 prefectures. The week ahead will see a monetary policy meeting in Australia as well as the all-important NFP Jobs report which will be released on Friday where an additional 133K are set to have been added in the past month. In addition to this ISM Manufacturing PMI’s and OPEC-JMMC meetings will also feature in the week ahead.
UK Chancellor Sunak is set to release the annual budget on Wednesday and is said to be looking to provide more support for businesses that have been impacted by the pandemic. Reports suggest that a new £5bln grant scheme will be launched to aid shops, pubs, hotels and many other businesses. In addition to this Sunak is set to layout plans to increase income tax by around £6bln as he looks to plug a hole into the nation’s finances. The UK have currently surpassed the 20mln mark in inoculations as they continue their vaccination rollout.
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Asian markets traded cautiously as market participants continued to digest the increase in US yields early last week which underpinned some of the initial strength seen for the greenback and triggered US equities to meander away from all-time highs. Economic data was somewhat strong with better-than-expected retail sales and PMI’s released in line with expectations in the US. The week ahead will see a monetary policy meeting in New Zealand as well as speeches from FED Chair Jerome Powell who is set to testify on the semi-annual monetary policy report before the House Financial Services Committee.
Going into the week ahead, Japan’s economy expanded by more than expected in the fourth quarter, further extending the recovery from its worst recession post war. As a result, the Nikkei 225 finished the session up close to 2% breaking through the 30,000 handle; marking the first breach of the level in more than three decades. Company shares have continued to report positive earnings and with the nation also set to start vaccinations later on this week, it bodes well for market participants and investors. Conversely the Japanese Yen was amongst the weaker currencies starting the session this week as an upbeat risk tone swept across markets on growing optimism surrounding the Pandemic. Flows into safe havens were capped as Gold also remained subdued on lack of haven demand; prices have since retreated from the $1,850/oz level which was tested last week.
Last week saw the Dollar rally and press to multi month highs against a basket of currencies as a positive upbeat risk tone took centre stage. US equity markets continued to trade at all-time highs as market participants continued to digest positive earnings, progress in stimulus talks and positive economic data. As the week drew to a close, a weaker than expected Jobs report led to dollar strength cooling off as EUR/USD reclaimed the 1.2000 handle.
Last week saw the FED leave rates unchanged as expected whilst maintaining its asset purchases at the current rate. Fed Chair Powell concluded that household spending on goods has moderated whilst the labour market participation continues to remain below pandemic levels weighing on economic activity and job creation. The Fed also outlined that monetary policy is expected to remain accommodative until employment and inflation objectives have been achieved. Market participants will look ahead to the NFP jobs data to provide further insight on the state of the labour market as an additional 55,000 jobs are forecasted to have been added in the past month.
Going into the week ahead, markets in Asia started the week slightly positive whilst equity futures in the US experienced gains following on from Friday’s losses. A lack of significant bullish catalysts meant that Covid-19 headlines took centre stage as cases continued to surge around the globe.
In the UK, PM Johnson is set to announce a tightening of border restrictions with a potential announcement banning entry into the nation for nationals of Covid-19 hotspots. There were also reports circulating that those arriving in the UK will need to isolate in hotels at their own expense. This comes after Johnson announced that evidence suggests that the new variant may be more deadly than otherwise perceived. Nonetheless records shows that both vaccines are still being used and are effective against both new and old strains.
Going into the week ahead, Asian equity markets traded on edge following Friday’s losses on Wall St as participants sold the news on President-elect Biden’s stimulus announcement. Last week saw the President – elect outline his $1.9tln rescue and recovery plan which is set to include $2,000 check payments and a vaccination goal of 100mln shots during his first 100 days in office. Weaker than expected data stateside and a noticeably slower than expected vaccine rollout weighed on markets and led to riskier assets losing ground as the USD held firm and closed the week above 90.50.
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