It looks like the market has taken a break ahead of European economic growth numbers, which will be released on Thursday. Germany has a rather sluggish start in 2021, and the numbers have deteriorated significantly since November 2020. Job losses have accelerated. If in November it reached -17%, then in early January the numbers show -52.3%. The volume of trade and entertainment services fell by 63%.
Investors expect that GDP contraction will be less than 6% by the end of 2020. This is a key number. If the data comes out worse, economists may revise the growth rate in the first quarter of 2021 downward, and the market may be unsettled.
The stock market, pending the statistics, stalled near the highs with the likelihood of a southern correction, as the yield on Treasury bonds is declining. One of the drivers of the fall in Treasury yields was FRS member James Bullard’s statements, who tried to dispel doubts about long-term soft monetary policy. In his speech on Tuesday, he said that overcoming the pandemic remains a policy priority; a view later echoed by Boston Fed chief Eric Rosengren.
However, not the entire market responded to the comments. If 10-year bonds went down, then 2-year bonds are confidently holding near the January highs, which slightly narrowed the spread between 10-year and 2-year bonds.
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The dollar index fell against the background of comments from FRS members. The British pound showed record-breaking growth against the dollar. Sterling bulls reacted positively to the Governor of the Bank of England’s statements, Andrew Bailey, who criticized the rate cut to negative values. According to him, the negative area is undesirable and will cause many problems. Options in February fell, while sterling returned to January highs.
Main market quotes:
S&P 500 (F) 3,799.88 +5.38 (+0.14%)
Dow Jones 31,068.69 +60.00 (+0.19%)
DAX 13,949.05 +23.99 (+0.17%)
FTSE 100 6,761.28 +7.17 (+0.11%)
USD Index 90.120 +0.056 (+0.06%)
- – 13:00 (GMT+2) Eurozone Industrial Production (MoM) (Nov);
- – 16:30 (GMT+2) US Core Consumer Price Index (CPI) (YoY) (Dec);
- – 16:30 (GMT+2) US Consumer Price Index (CPI) (MoM) (Dec).
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.