2H January Global Market Recap
16th January 2021 – 31st January 2021
Global cases have reached 102 million on 31st January, according to data from Johns Hopkins University, with total death of over 2.2 million worldwide.
The US economy is showing scattered signs of recovery but slower than expected, as the continued rising cases of Coronavirus have put restrictions on recovery of nation-wide personal consumption. US GDP expanded at an annualized 4% in Q4 2020, while GDP overall shrank 3.5% for the full year 2020, marking the first negative reading since 2009 and lowest since 1946.
China’s GDP expanded 6.5% in the last quarter of 2020 from a year earlier, faster than 6.1% forecasted by economists and up from 4.9% in the third quarter. Overall, China’s GDP grew 2.3% in 2020, contributed by a strong recovery in fixed-asset investment and export, making China the only major economy to register a gain in 2020.
The stock market was volatile in the second half of January as investors awaited earnings reports and eyed on more stimulus spending from central banks. U.S. stocks registered a gain in the 3rd week driven by tech shares’ strong lift. While the last week was gloomy with all the three major indexes declining sharply, especially on 28th of January when Federal Reserve was mildly dovish and did not announce any new stimulus plans in FOMC meeting. Most equity indexes in Greater China area registered gains in the second half of January, with ChiNext index leading by surging 5.5% in the first month of the year.
The 10-year U.S. treasury yield rose in January as the US government bond selloff continues with the market fearing that the Biden led administration and Democratic controlled Congress could further ease fiscal policy. In the final week of January, the PBOC removed a net 470.5 billion yuan from the banking system, hence pushing the interbank repo rates up, with the 7D, 1M and 3M rates rising significantly. Performance of other ten-year government bond yields were mixed. Notable movements were spotted from the Vietnam, Australia, and Singapore 10-year yields.
Overall, the credit market remained relatively stable and market sentiments remains positive as vaccination across countries continues. Across the board, most major CDS indices rose in January as markets anticipates the upcoming US$1.9 trillion stimulus package by the new Biden administration. Most CDS spreads have recovered back to pre-COVID levels as the global economy continues to recover.
The dollar index rose in January as the dollar strengthens against other international currencies. The Chinese Yuan strengthened against the dollar with onshore and offshore currencies appreciating by 1.5% and 0.8% respectively. Chinese Yuan appreciated against the dollar for the past nine months and hit its strongest level since June 2018 due to the strong recovery of the Chinese economy and slowdown in the US.
As vaccination ramp up across some countries and the gradual decline in US shale production and inventories, Brent and WTI crude oil prices continue to rise in January, increasing by 7.9% and 7.6% respectively as the market expects demand to be back quicker on hopes of a faster pace of economic recovery. Major oil producers continue to cut their crude output in line with their commitments to reduce supply. US Gasoline price rose by 9.7% on the back of optimism that demand for oil will increase with the ongoing vaccination in place. Meanwhile, Bitcoin price tumbled in the last two weeks of January, after hitting its all-time high on 8th January at USD40,675, as investors concern about the cryptocurrency’s soaring price. The price has almost quadrupled since the end of September 2020 and a huge reason for the massive spike in price is due to the huge purchases from large-scale institutions.