EK NAZAR WORLD MARKET ON 05/02/2021
European markets inch higher as global stocks near record highs
- Corporate earnings season continued to drive individual share price movement, with BNP Paribas, Sanofi, Intesa Sanpaolo and Thyssenkrupp all reporting before the bell on Friday.
- The MSCI ACWI, an index of the world’s 50 largest markets, rose 0.25% to 668.43 by early afternoon trading in Europe, closing in on the record high of 670.82 notched around two weeks ago.
- LONDON — European stocks were modestly higher Friday as investors look to vaccine rollouts for hopes of normalization, while global markets flirt with record highs.
The pan-European Stoxx 600 was up 0.2% during afternoon trading in Europe. Banks climbed 1.5% to lead gains while telecoms fell 0.7%.
European markets received a positive handover from Asia-Pacific. Shares broadly rose during Friday’s trade, taking their lead from Wall Street where the S&P 500 notched a record closing high on Thursday, as major U.S. indexes look to close out their strongest week since November.
Futures stateside advanced in premarket trade on Friday as the Labor Department reported that the U.S. added 49,000 jobs in January, while the unemployment rate fell to 6.3%, in the first employment report of the Biden administration.
The MSCI ACWI, an index of the world’s 50 largest markets, rose 0.25% to 668.43 during afternoon trading in Europe, closing in on the record high of 670.82 notched around two weeks ago.
Johnson & Johnson announced Thursday that it had requested authorization for emergency use of its single-dose Covid-19 vaccine from the U.S. Food and Drug Administration (FDA), and will apply to the European authorities within the next few weeks.
The EU’s drug regulator said Thursday that it was assessing data on therapeutic antibody treatments for some outpatients from U.S. drug-makers Regeneron and Eli Lilly.
In corporate news, concerns are growing about a shortage of semiconductors for the automotive industry, after Ford and Stellantis announced production cuts due to the issue, while German supplier Robert Bosch and chipmaker Infineon issued warnings.
Corporate earnings season continues to drive individual share price movement, with BNP Paribas, Sanofi, Intesa Sanpaolo and Thyssenkrupp all reporting before the bell on Friday.
BNP Paribas posted a net income of 1.59 billion euros ($1.90 billion) for the fourth quarter of 2020, beating analyst expectations of 1.2 billion euros, according to Refinitiv. The French lender’s shares added 3.1%.
Beazley shares jumped more than 15% by mid-afternoon after the British insurer voiced confidence in the outlook for 2021 despite swinging to a loss in 2020.
At the bottom of the European blue chip index, Finnish engineering firm Neste fell 7% after its fourth-quarter earnings report.
Oil prices near $60 on growth hopes and OPEC+ cuts
Oil hit its highest level in a year on Friday, closing in on $60 a barrel on economic revival hopes and supply curbs by producer group OPEC and its allies.
New orders for U.S.-made goods rose more than expected in December, pointing to continued strength in manufacturing. The U.S. Congress is also moving ahead on President Joe Biden’s COVID-19 relief plan.
Brent crude was up 64 cents, or 1.1%, at $59.48 after hitting its highest since Feb. 20 last year at $59.75. U.S. crude was up 48 cents, or 0.9%, at $56.72, after reaching $57.09, its highest since Jan. 22 last year.
“The conditions still remain supportive for oil markets,” said Jeffrey Halley, analyst at brokerage OANDA. “Oil should find plenty of willing buyers on any material dip.”
Brent is on track to rise more than 6% this week. The last time it traded at $60, the pandemic had yet to take hold, economies were open and people were free to travel, meaning demand for gasoline, diesel and jet fuel was much higher.
The rollout of COVID-19 vaccines, however, is fueling hopes of lockdowns being eased, boosting fuel demand. But even demand optimists such as OPEC do not expect oil consumption to return to pre-pandemic levels in 2021.
Oil also gained support from supply curbs by major producers. OPEC and its allies, collectively known as OPEC+, stuck to their supply tightening policy at a meeting on Wednesday. Record OPEC+ cuts have helped to lift prices from historic lows last year.
“OPEC+ discipline has been a real positive,” said Michael McCarthy, chief market strategist at CMC Markets.
Further boosting the market, a weekly supply report showed a drop in U.S. crude inventories to their lowest since March, suggesting that output cuts by OPEC+ producers are having the desired effect.
Gold set for worst week in four on strength in dollar, yields
Gold rose on Friday, but was set for its worst weekly dip in four as investors continued to bank on the dollar with U.S. Treasury yields also gaining.
Spot gold rose 0.8% to $1,807.10 per ounce by 1059 GMT, after falling to its lowest since Dec. 1 on Thursday. U.S. gold futures gained 0.9% to $1,807.80.
Gold’s initial dip below the $1,800 level infused some buying interest, evidenced by inflows into exchange traded funds (ETF), Commerzbank analyst Carsten Fritsch said in a note.
The SPDR Gold Trust, the largest gold-back ETF, saw its highest inflows since Jan. 15, on Feb. 4.
But for the week, gold has shed 2.2% so far, which would be its biggest decline since the week ended Jan. 8.
“Gold is getting clobbered,” said CMC Markets UK’s chief market analyst Michael Hewson, adding higher yields in U.S. Treasuries are much more attractive than holding money in gold.
The dollar was set for its best week in three months, while U.S. Treasury yields also rose.
Gold’s status as a hedge against inflation from widespread stimulus has been challenged by higher yields because they increase the opportunity cost of holding non-yielding bullion.
Gold could endure some “serious short-term pain” but its role as an inflation hedge could return as the economic recovery starts accelerating by late second-quarter, Jeffrey Halley, a senior market analyst at OANDA said.
“Silver’s fate will be similar to gold and it can retest $22 over the next two weeks, although it’ll find some support through Biden’s solar push.”
Spot silver rose 1.2% to $26.60 an ounce, but was down 1.5% this week. Prices have shed over 11% since scaling a multi-year peak of $30.03 on Monday propelled by a GameStop-style retail frenzy.
Platinum added 1.3% to $1,111.55 and palladium gained 1.5% to $2,317.68, with both metals headed for their best week in five.
Dollar set for best week in three months
- The dollar index touched a two-month high in Asian trade amid signs of resilience in the labor market, with closely watched U.S. nonfarm payroll figures due later. It retreated in European trading.
- The dollar also renewed highs versus the euro and yen during Asian trade, although the euro recouped its losses in European trade.
The dollar headed for its best weekly gain in three months on Friday, lifted by growing confidence that the U.S. economic recovery will outpace that of its global peers.
The dollar index touched a two-month high in Asian trade amid signs of resilience in the labor market, with closely watched U.S. nonfarm payroll figures due later. It retreated in European trading.
The dollar also renewed highs versus the euro and yen during Asian trade, although the euro recouped its losses in European trade.
While the dollar weakened significantly in 2020, it has strengthened since the start of this year, confounding some. Speculators still remain short dollars and consensus expects the dollar to weaken this year.
BoFA Global Research said there is a risk of upside dollar strength this year, given a more challenging outlook for risk assets.
“The recent market volatility following the GameStop saga has increased concerns that asset prices have deviated from fundamentals. In any case, starting the year with asset prices at record highs does not leave much room for further upside,” strategists at BoFA Global Research said in a note.
“With risk sentiment being the main FX market driver last year, a more challenging outlook for risk assets this year also suggests a less clear FX picture and upside USD risks.”
The dollar index touched 91.60 for the first time since Dec. 1, before drifting lower to 91.438 by 1158 GMT.
The gauge has risen every day this week and is on track for a 1.1% weekly advance, the most since Nov. 1, after a 0.3% rise the previous week.
The dollar has been supported by a rise in longer-term U.S. Treasury yields, which came as traders positioned for massive fiscal spending.
Democrats in the U.S. Senate were holding a marathon voting session aimed at overriding Republican opposition to President Joe Biden’s $1.9 trillion COVID-19 relief proposal.
Strategists at ING said a softening correlation of the dollar with equity markets was noticeable, though it was hard to account for. They noted that while U.S. Treasury yields have picked up in the past week, they have been matched by an equivalent rise in German bunds.
“And certainly, the US vaccination roll-out looks far more impressive than that in Europe, though year-to-date gains in the US S&P 500 (+3.08%) only marginally outpace those of the Eurostoxx 50 (+2.52%),” they said.
“Heavy short dollar positioning probably plays a big role here and would again seem vulnerable were any part of today’s non-farm payrolls jobs data to be greeted positively.”
Analysts and investors are weighing whether dollar strength this year is a temporary position adjustment after a 7% drop for the dollar index in 2020, or a longer-lasting shift away from dollar pessimism.
A lot of dollar shorts potentially need to be covered, particularly against the yen, where hedge funds had racked up their biggest bearish bets since 2016.
The dollar was 0.1% higher at 105.62 yen on Friday, earlier edging as high as 105.70 for the first time since Oct. 20.
The euro was 0.2% higher at $1.1980 after dipping to $1.1952, a level not seen since Dec. 1.
The Crude oil price perform hike
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