US markets once again finished a rather choppy week on a high, with the S&P 500 setting another new record, and both the Nasdaq and Russell 2000 also posting strong gains in the last hour of trading, in a broad-based uplift across the board.
In a week that saw optimism and pessimism in equal measure, stock markets have proved to be fairly resilient in the face of a variety of factors, including extended lockdowns in Europe, vaccine nationalism, and the added wrinkle of the blockage in the Suez Canal, which now shows signs of being cleared in the next day or so.
European markets also finished a somewhat rollercoaster week on the front foot, and look set to start this week in a similar vein, as the UK gets set for a loosening of restrictions from today, as hospitalisations, and deaths continue to fall in the face of a successful vaccination program.
The saga around the EU’s own vaccination programme looks set to continue this week with the bloc, once again threatening to block AstraZeneca from sending any vaccines outside of the area, until it meets its promised targets. This seems a rather strange position to adopt given that Pfizer is also struggling to meet its vaccine targets, and yet is not being similarly threatened, or sanctioned. To its credit on this occasion, the UK government has tried to stay out of the fray, rising above the politics of the blame game. On the plus side, the UK has said that it should be receiving extra doses from Moderna in April, which should offset any shortfall elsewhere if the EU follows through on its bluster.
For the time being markets appear to be adopting a glass half full mentality when it comes to sentiment as we look ahead to the end of the month, and the quarter later this week.
The situation in France appears to be going from bad to worse, with the prospect that the UK could follow the example of Germany last week and impose entry restrictions at the French border as authorities there struggle with surging cases of the Brazil and South African variant.
With now over 30m Britons having received their first dose of a Covid-19 vaccine the UK government will be only too aware of how delicate a stage the UK reopening process is currently, with all non-essential shops due to reopen two weeks from today.
One part of the UK economy that has held up reasonably well over the last 12 months has been the housing market, bouncing back strongly in the wake of last year’s first lockdown, as the stamp duty holiday continues to underpin the market.
Mortgage approvals have been trending at their best levels since 2007 in the past few months, peaking a few months ago at 105k, and in today’s February numbers are expected to show a number in the region of 95k, down slightly from 99k in January. The slowdown since the peaks at the end of last year are likely to have been as a result of some uncertainty as to whether Chancellor Rishi Sunak would extend the stamp duty tax break for a little bit longer in his budget. That he did so could well see an uptick in this month’s numbers when they get released in a month from now. Net consumer credit is also expected to slow slightly from the -£2.4bn seen in January with -£1.5bn for February.
Crude oil prices are slightly lower this morning as the Ever Given looks set to be cleared in the coming days after this morning’s reports that the ship has been successfully pulled out of the banks of the Suez Canal.
Later today all eyes will be on US markets after a big plunge in the likes of Discovery and ViacomCBS shares on Friday, amid concern over a big liquidation block trade. It now appears, according to reports, that the sell-off was the result of a liquidation from a fund called Archegos Capital Management, after some its positions moved offside, raising some concerns about a trickle-down effect to other stocks. We’ll see whether those concerns are well founded later today. In the meantime, you can read my thoughts on it here.
EUR/USD – finding some support at the 1.1750 area, a break of which could open up further losses towards the previous lows at 1.1615. The 1.1870 area still remains the key resistance on any pullback.
GBP/USD – appears to have found some support at the 1.3660 area, and having got back above the 1.3770 level now needs to get back above the 50-day MA and 1.3820 area to stabilise. A move back below 1.3760 argues a return to the recent lows.
EUR/GBP – having failed to overcome the 0.8650 area last week, the euro is now looking at a possible test of key support at the 0.8530/40 area. A break below 0.8530 opens up the 0.8400 area, and potentially a return to the lows last year at 0.8280.
USD/JPY – having broken through the 109.30/40 area we are now looking to move towards the 110.00 level. The 109.20 level now should act as interim support. The 108.20 level also remains a key support.