Weekly market recap: 10 stories to remember

Read the 10 stories to remember from the week which ended January 8, 2021.  

Story #1: Bitcoin hits $42k
Cryptocurrencies were the major headline makers on the week, with Ethereum up over 60% and Bitcoin up 40%. Bitcoin hit an all-time high of $42,000 intraday. The record comes just days after the cryptocurrency hit an all-time high of more than $34,800 on Sunday, which was also the 12th anniversary of the bitcoin network being created. Bitcoin first breached the $20,000 mark in mid-December. The asset has become increasingly popular with mainstream institutional investor. Analysts at JP Morgan said this week that bitcoin could eventually hit $146,000 if it bolsters its reputation as an alternative to the precious metal. They said the cryptocurrency was also becoming an option for investors who were looking to hedge against inflation. Meanwhile, Gold sank to $1,850 after a strong start up to pre-vaccine levels.

Story #2: Stocks move to new highs on stimulus hopes
After the S&P 500's worst start to a year since the Dot-com mania on Monday, markets took off and continued to march to record highs despite one of the most tumultuous weeks in the nation’s political history. Heightened prospects for significant fiscal stimulus under the incoming Biden administration appeared to be the major factor driving the week’s gains. With 50 seats in the Senate, Democrats will now gain control of chamber given the tie-breaking vote by incoming Vice President Kamala Harris.

Story #3: Small-caps and Value outperformed
Small-caps outperformed large-caps by a wide margin, and value stocks outpaced growth shares. Energy stocks led the gains within the S&P 500 Index, after Saudi Arabia made a surprise announcement that it was unilaterally cutting oil production by 1 million barrels per day. A surge in longer-term Treasury bond yields boosted financials shares by holding out the promise of improved lending margins, but rising rates weighed on the small real estate sector.

Story #4: Elon Musk now the richest man in the world
On Friday, Tesla surpassed Facebook in market cap as the stock had its best week since July. Elon Musk, the maverick boss of Tesla, has overtaken Amazon’s Jeff Bezos to become the world’s richest person, after shares in the electric car company he co-founded soared on hopes that a Democrat-controlled US Senate would usher in a new green agenda. The 49-year-old entrepreneur’s net worth hit $186bn in New York on Wednesday, making him $1.5bn richer than Bezos, who had held the top spot since October 2017. Musk responded to the news of his status as the world’s richest person with tweets stating “how strange” and “well, back to work …”

Story #5: Mixed U.S data
This week’s economic data provided contradictory signals. On Tuesday, the Institute for Supply Management (ISM) revealed that its gauge of U.S. manufacturing activity in December rose to its highest level (60.7) since August 2018. The ISM’s services sector gauge also surprised on the upside, hitting 57.2, its highest level in three months. Conversely, the labor market showed signs of a sharp slowdown, due mostly to job losses at bars and restaurants shuttered by coronavirus containment measures. Nonfarm payrolls, reported Friday, fell by 140,000 in December, marking the first monthly decline since April. October and November gains were revised significantly higher, however.

Story #6: U.S long-term yields increase to highest levels since March
The bond market appeared unmoved by the poor jobs report, with the yield on the benchmark 10-year Treasury note continuing to move higher in its wake. For the week, the yield jumped roughly 20 basis points and hit its highest level (around 1.12%) since March.

Story #7: European equities rose despite stricter lockdowns
Shares in Europe shrugged off the imposition of stricter lockdowns and rose on hopes that coronavirus vaccines and a potentially massive U.S. stimulus package would spur an economic recovery. The pan-European STOXX Europe 600 Index ended the week 3.04% higher, while Germany’s Xetra DAX Index added 2.41. The UK’s FTSE 100 Index rallied 6.39%, led by banking and energy stocks. These same factors helped to drive core eurozone government bond yields higher. Weaker-than-expected eurozone inflation data and persistent concerns about the coronavirus’ resurgence curbed the rise in yields, however.

Story #8: Strong German economic data; eurozone still in deflation
Better-than-expected German industrial production and trade figures for November, together with stronger factory orders data, signalled that the economy may have expanded in the fourth quarter. Industrial output rose 0.9% in the month versus a consensus forecast of 0.7%. Exports grew 2.2%, beating a forecast for 1.0% growth and a monthly increase of 0.8% in October. Factory orders rose 2.3%. A flash estimate of consumer prices showed that the eurozone suffered a fifth straight month of deflation in December, with consumer prices falling 0.3% year over year. However, a core measure excluding food, energy, tobacco, and alcohol showed a 0.2% uptick in inflation, the same as the previous month.

Story #9: Chinese stocks began the year on a strong note
The CSI 300 Index of large-cap stocks rose 5.5% and the Shanghai Composite Index adding 2.8% since December 31. Nevertheless, sentiment was shaken after the New York Stock Exchange said it would move ahead with delisting three Chinese telecommunications companies, reversing itself for the second time in one week, following an executive order by President Donald Trump. Reports that the Trump administration was considering adding Chinese internet leaders Alibaba and Tencent to a U.S. investment blacklist also tested investors’ nerves and marked an escalation in the Trump administration’s effort to increase restrictions on U.S.-listed Chinese companies.

Story #10: World Bank cuts its global economic growth forecast to 4%
The World Bank’s January 2021 Global Economic Prospects report forecasts global economic growth of 4.0% in 2021, following the 4.3% contraction in 2020. The World Bank lowered the GDP growth targets for about half of the countries worldwide. The latest 2021 global forecast was revised from its earlier 4.2% growth target. The World Bank said, in a worst-case scenario, if infections accelerate or the vaccination process is delayed, global growth could be as low as 1.6%. It believes that the trajectory of the coronavirus and debt accumulation represent the two most significant variables in its forecasts. The World Bank forecasts the U.S. GDP growth to be 3.5%, the eurozone GDP 3.6%, and China’s economy to expand by 8%.

 

Source: www.zerohedge.com, T Rowe Price.  Image: www.dailyhodl.com 

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