A review of the week past and the week ahead

Charts (3)

What mattered last week:

  • The S&P500 fell 3.3% last week, on concerns over softer economic data, and following volatility/deleveraging after retail investors took on hedge funds in heavily shorted stocks
  • As well as fears of delays to extra US fiscal stimulus, slow vaccine rollouts and doubts about vaccine efficacy against new strains of the virus.  
  • Despite the Federal Reserve reaffirmed its dovish commitment "It's just too early to be talking about dates" for tapering.
  • Volatility, as measured by the VIX index closed sharply higher at 33.1.
  • U.S. 10-year yields fell slightly to close at 1.07%.
  • Gold fell 0.4% to close near $1848.00.
  • Crude oil closed flattish for the third week in a row near $52.20/bbl.
  • The ASX200 fell 2.84% to close at 6607.4.
  • The AUD/USD fell 0.90% to close near .7644, reflecting the risk-off tone in equities and commodity prices.  

For the week ahead, the key events are:

Australia: Home loans (Monday), RBA interest rate decision (Tuesday), RBA Governor Lowe speech and building permits (Wednesday), RBA Statement of Monetary policy, and retail sales (Friday).

  • RBA interest rate meeting and communique: The RBA is expected to make no changes to monetary policy. In other RBA communique, this week including the Statement of Monetary Policy, stronger than expected jobs and inflation data is expected to be noted which may be interpreted as a toning done of the RBA’s dovish bias.

New Zealand: Employment (Tuesday), building permits (Thursday).

China: Caixin manufacturing PMI (Monday), Caixin services, and composite PMI (Wednesday).

Japan: Leading economic index (Friday).

Singapore: Markit PMI (Wednesday), retail sales (Friday).

Korea: Inflation (Tuesday), current account (Friday).

U.S: ISM manufacturing PMI (Monday), ISM non-manufacturing PMI (Wednesday), factory orders (Thursday), non-farm payrolls (Friday)

  • Non-Farm payrolls (Friday): The market is expecting a gain of 80,000 jobs in January after a soft number in December and the unemployment rate to remain unchanged at 6.7%.

US earnings season continues with reports from companies including Amazon and Paypal.

Euro Area: German retail sales and EA unemployment (Monday), EA Flash Q4 GDP (Tuesday), EA inflation (Wednesday), EA retail sales (Thursday).

  • Euro area Q4 GDP (Tuesday): Evidence suggests that the EA economy has adapted to the effects of lockdowns through increased online shopping and more selective lockdown measures. This will result in a less severe -1.2% fall in GDP than might otherwise have been expected.

UK: BoE interest rate meeting and MPR (Thursday).

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