Market Update – 20 Apr 2021

Good Morning, I’m on holiday for a few days so today’s update is just a short one and apologies for the football chat towards the end!

It’s also the last one in the current format as from next month I’ll be introducing a new monthly update which will be theme based more to follow.

In the market today the FTSE 100 which reach 7000 last week could be set to fall back below it after tech stocks tumbled following a slump in Bitcoin.

The cryptocurrency lost ground over the weekend and into Monday, hitting sentiment in technology shares in the US last night.

Traders said that would take some of the momentum out of the markets in Europe, where improving sentiment around the Covid vaccines had pushed the markets upwards.  However, such tiny moves are easily reversible and any positive news could swing it in the other direction.

That positivity could come before the markets open with unemployment data for February due out this morning. Although the numbers are historic given that so much has changed with the lockdown situation since then, they will give an idea of direction of travel.

January’s ILO unemployment number fell to 5% and is expected to remain there, said analysts at CMC Markets, but “there is a worry we could see the number nudge back up, given the sharp jump higher in the jobless claims number a month ago.”

Monthly jobless claims numbers are also out today for March. February’s increase from 7.2% to 7.5% made for grim reading and the hope is it will fall back to 7% today as employers reined in some of the cuts pushed through in January’s lockdown.

Still, as CMC points out: “That still can’t disguise the reality that there are 700,000 fewer jobs in the UK economy since this time last year, with most of those job losses in the hospitality sector, and in the under 25 age consort.”

Reactions to data are increasingly hard to second guess in the through-the-looking glass world of zero interest rates and pandemic disruption to market norms.

US government bonds bizarrely rallied last week after surging economic data, defying the conventional flight from safe haven assets into riskier waters where returns are higher.

Expectations of “reflation” – where prices begin rising due to the improving economy – have increased apace since the start of the year. That has triggered an increase in bond yields and a fall in the price, reflecting expectations of higher interest rates. Yet now, that traditional cause-and-effect dynamic seems to have decoupled, baffling investors.

That said, the biggest talking point in dealing rooms is likely to be football, not fixed income yields. Traders are hanging on every detail of the row over plans for a breakaway European Super League and not just because they are football fans, football has been about making money for many, many years.

Few proposals can have met with more universal opposition than the idea of Britain’s biggest clubs skipping off for the big bucks of a new closed-shop tournament. Yet, for now at least, share in Manchester United and Juventus have been racing away.

Some pundits expect those gains to peter out as the opposition din grows louder, making the league likely to fall away like similar proposals have done in the past. Even Prime Minister Boris Johnson has rallied to the cause of the antis.

Still, even the dimmest of prospects of a reported £200 million to £300 million signing on bonus for clubs who join the new league could keep shares buoyant for a few days yet.

JPMorgan has committed to underwriting a £3.25 billion “infrastructure grant” to be shared among the clubs as part of a debt financing deal amortised over 23 years and secured against future broadcasting rights.

There are doubts among pundits, however, that audiences will pay enough to see endless clashes between the same teams, with no prospect of relegation or promotion.

It’s no longer the beautiful game, it’s a cash machine and all of footballs authorities have been complicit, this latest proposal is overt and is stirring up emotions and like all of us fans, traders are looking for details but not necessarily for the fixture list, they’re looking for opportunities.

To coin a well-used phrase, it’s a game of two half’s so still plenty to play for.

Stay Safe