“Markets were growing increasingly concerned about the prospects of economic growth leading to higher inflation and resulting in the Federal Reserve tightening monetary policy conditions.”
These fears heavily influenced bond markets, global stocks, currencies, and even commodities during the trading week.
On Monday, we covered the Pound which at the time was the best performing G10 currency year-to-date. A healthy combination of positive vaccine news, falling Covid-19 cases, improving economic data, reduction in Brexit uncertainty and hawkish Bank of England have sweetened appetite towards Sterling.
Although the GBPUSD later tumbled after rallying to 1.4240, this had little to do with a change in sentiment towards the Pound but an appreciating Dollar. Sustained weakness below 1.4200 may open a path towards 1.3820 in the short term.
Earlier in the week, I bet tech stocks caught your attention after the Nasdaq 100 collapsed like a house of cards? The Index recorded its longest streak since October thanks to the great reflation trade.
“In a nutshell, market players are expecting the US economy to outperform as it continues its post-pandemic recovery which may result in faster inflation and the Fed pulling back its support for financial markets.”
Can you believe the dollar was depressed around the 90.00 levels mid-week? Rising hopes around the $1.9 trillion stimulus package boosting growth and leading to inflationary pressures weighed on the greenback. However, soaring bond yields later offered bulls a lifeline with prices trading back above 90.50 as of writing.
The tech-led slump remained the main focus as rising inflation concerns triggered a sell-off in the bond markets. Given how higher yields had the potential to dent the tech “darlings” and reduce the present value of future profits, the Nasdaq got no love.
“Our stock of the week was Nvidia which released its fiscal fourth-quarter results for 2021 after US markets closed on Wednesday. The chipmaker posted strong fourth-quarter results with revenues hitting $5.00 billion, versus the $4.2 billion forecasts and earnings hitting $3.10 per share versus the $2.81 expected.”
For those who are wondering why stocks feel despite the positive earnings, this was based around the CEO Jensen Huang downplaying the cryptocurrency play. He stated that he does not expect the company’s business of selling processors to miners to grow extremely large.
“Since we are talking about cryptos, it was a horrible week for Bitcoin. After peaking above $57,500 on Monday…prices slumped towards $44,000.”
Do you remember the Reddit Gang? Well, they were back in action this week, sending their favoured stocks soaring higher. GameStop is up almost 200% this week while AMC has gained roughly 40%.
As the week slowly came to an end positive vaccine news boosted risk appetite. The US FDA released its report on the Johnson & Johnson single-shot vaccine and found it “safe and effective”. Such encouraging news boosted global sentiment and supported risk appetite. However, this was not fully reflected in stock markets.
“It is becoming increasingly clear that the surge in Treasury yields has sent shockwaves across global markets.”
This has hit appetite for equities while boosting the dollar. Looking at commodities, Gold is set to post its second straight monthly decline while Oil is finding comfort above $60 ahead of the OPEC+ meeting on March 4th.
For more information on the OPEC+meeting on March 4th, check out the “MARKETS EXTRA” Podcast: What do OPEC+ and “Guardians of the Galaxy” have in common?
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