Market round-up: 11-15 January

Thomas Watts


This week

After last week saw global equites get off to the strongest of starts, much like after a bicycle ride around the Olympic Park, it was time for a breather. Having hit their highest level in more than 10 months investors took the chance to consolidate their gains as surging Coronavirus cases across the continent and mainland China looked likely to dent a global economic recovery.

It was last week’s winners, banks, natural resources and travel companies which came under the most pressure, as the export-heavy German DAX fell over 1% on Monday. Domestic markets were also hurt after a top medical adviser said the pandemic’s worst weeks were imminent as a new, more transmissible variant of the disease surges through the population.

There was some good news for the travel industry at least, as coach and UK tour operators have reported seeing an unexpected growth in bookings amongst the over 50s in the last fortnight. National Express's coach holiday businesses say bookings made by those 65 and over had increased by 185% in the last fortnight compared to last year, as optimism among the age group grows that they will be vaccinated by the summer.

Although they had faltered earlier in the week, by Thursday, global stocks had followed the pattern of recent weeks, hitting record highs. Focusing on US President-elect Joe Biden’s pandemic aid proposal, investors bet that a stimulus package proposal designed to jump-start the economy during the coronavirus pandemic should be due any day. There was also much to cheer in China as earlier in the day the Hong Kong-listed shares of Chinese tech giants Alibaba, Tencent and Baidu all rose sharply after sources told Reuters and the Wall Street Journal that plans to extend a US investment ban placed on the firms’ stocks had been scrapped.

On the economic data front, whilst investors looked toward Washington for relief, one eye must still have been on the poor jobs data figure released towards the end of the week. Employment data showed that for the week ending 9 January, the figure for seasonally adjusted initial claims was 965,000, an increase of 181,000 from the previous week's revised level and well above economists’ forecasts of 785,000.

Next week

As the Coronavirus continues to spread at an alarming rate, the coming week should see if the latest national lockdown that was imposed around two weeks ago is having any effect in slowing its transmission.

The beginning of the week should help us gauge how economies which have come through the worst of the crisis are faring as Monday sees China’s National Bureau of Statistics release the country’s GDP figures. GDP acts as the broadest gauge of how a country’s economy is performing and details the change in the inflation-adjusted value of all goods and services produced and could potentially set the tone for the coming week, especially in the commodity markets.

While the beginning of the week looks relatively quiet on the economic front, partly down to US markets being closed on Monday in observance of Martin Luther King Jr. Day, there is plenty to analyse on domestic shores. From property data in the form of Rightmove’s House Price Index to a very different kind of address, one from Andrew Bailey, Governor of the Bank of England.

Due to speak on Monday about a range of issues at a webinar hosted by the central bank, Mr. Bailey will give his views on the current state of the nation’s economy and future outlook. Investors usually scrutinise the central bank’s words for hints as to future rate policy, with the man in charge thoughts set to cause heightened volatility in the currency markets in particular. The hearings are usually a few hours in length and can create market volatility for the duration.

The week should be wrapped up with Bailey’s European counterpart, Christine Lagarde hosting her own press conference on Friday. With the UK and EU now having parted ways, as well as COVID infection rates picking up again across the continent, it will be interesting to see the tone struck and look for any clues as to future economic stimulus.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in January 2021.