Market Update – 09 Feb 2021

Well this weekend in Edinburgh saw power-cuts and I was incredulous when I saw the reports saying that the power was back on inside an hour, that wasn’t the case in our house we went without power for over 4 hours.  Imagine, 4 hours without wi-fi and telly and having to talk to each other about all the things we’ve been doing!   I went to bed early!

This last week has seen the vaccination programme accelerate, my mum got hers at the doctors, so she is pleased and hopes to be able to venture outside in a few weeks. With the positive numbers being reported it really is starting to feel as though we are approaching a return to something like normal.

Obviously it’s still a few weeks away but what’s the first thing that you will do?    You can’t say holidays as they won’t be allowed for a while!

In the markets the positivity surrounding the vaccination programme continues.  The FTSE 100 will pause for breath today after yesterday’s hectic gains amid a jump in the oil price and a leaping bitcoin.

Investors are now openly talking about a new bull run for commodities markets, with some talking of a return to the “supercycle” of the 2000s. Soyabeans, oil, coffee and metals prices have all shown positive returns in recent months – a rare move in lockstep for such a diverse range of goods.

Traders have to figure out whether it really will be a sustained surge over many years or a mere V-shaped correction triggered by the temporary impact of artificial stimulus to economies such as China during the Covid crisis. Super low interest rates, central bank asset-buying campaigns and fiscal stimulus measures across the world have been the cause of much of the gains.

That has been echoed in the market for US Treasury bonds, which overnight saw yields hit new year-highs. Markets have reacted strongly to President Joe Biden’s $1.9 billion stimulus plan, pricing in a boost to US economic growth and higher inflation.

Some investors have seen bitcoin as a foil to such inflation, sending the price of the cryptocurrency to a record high yesterday of $44,100, spurred by its adoption by Elon Musk’s Tesla. The entrepreneur’s carmaker said it bought $1.5 billion of bitcoin yesterday with its reserves and said it would accept payment in it, sending the currency back into orbit.

After three days of losses, commodity price rises meant the FTSE rebounded strongly yesterday before settling at the close up by 0.5%. Wall Street hit new record highs by the close, and Asian markets followed suit today, with Japan’s Nikkei up 0.4%, the Hang Seng up 0.3% and the Shanghai Composite surging up 1.7%.

The China gain was helped by data showing no new infections of Covid for a second day running, which in turn boosted metal and rare earth stock.

Imminent data on German trade could give European markets more direction. Consensus estimates are for a surplus of e15.9 billion for December, down from e16.4 billion the month before with exports falling around 1% against 2.2% growth before.   A poor reading, CMC Markets’ David Madden points out, “could suggest that demand in Europe and beyond is weak, with waning demand from Europe’s biggest economy.

I’m not sure about a “supercycle” and I know it’s going to be volatile but it’s nice to be positive.

Have a good week and stay safe.