Market Monitor - 05 February 2021

Market Monitor – 05 February 2021

Stock markets around the world have bounced back this week, recovering recent losses and surging ahead thanks to growing optimism about the impact of coronavirus vaccinations. Reports from the United States that Congress looks increasingly likely to pass a stimulus bill worth almost $2 trillion later this month have also driven global share prices higher. Vaccines offer the clearest route out of the pandemic and back to sustainable economic growth, and there have been a number of reasons for confidence on this front in the past few days. As well as the rapid roll-out of inoculation programmes in the likes of the UK, the US and the Middle East, new research suggests existing vaccines can help limit the spread of the disease rather than simply reducing the impact of the Covid-19 on individuals. In the meantime, however, governments remain under pressure to offer substantial support for businesses and consumers.

US markets

Earlier this week, there were concerns that the thin Democrat majority in Congress could limit their ability to pass a significant stimulus package in the face of Republican opposition – but these difficulties now appear to have been overcome. The planned $1.9tn spending programme is expected to help the US avert a double-dip recession, and prices on Wall Street have surged this week as a result. The Dow Jones Industrial Average ended trading on Thursday 3.6% up for the week so far, with the S&P 500 gaining 4.2% to reach another all-time high. There was more good news in the US as the impact of organised groups of retail investors – coordinated on platforms such as Reddit and Facebook – appeared to recede after an ultimately unsuccessful attempt to inflate the price of silver at the start of the week. And sentiment has also been helped by some solid company results: Google parent Alphabet led the way with strong fourth-quarter figures.

The UK & Europe

In the UK, the FTSE 100 ended Thursday 1.5% ahead for the week: the relatively muted gains were partly due to sterling’s strength, against the euro in particular. The Bank of England helped the pound by downplaying the prospect of introducing negative interest rates – although the country’s banks have been told they should prepare for this eventuality over the next six months. Both BP and Shell reported major losses for 2020 – an inevitable consequence of the pandemic and falling oil price last year. The successful roll-out of the UK’s vaccination programme has raised hopes that the economy could reopen fully in the spring or summer, boosting the price of shares in hard-hit sectors such as travel and hospitality. In Frankfurt, the DAX index ended Thursday’s up 4.7% for the week, while France’s CAC 40 gained 3.9%. Share prices on the Continent were helped by a fall in the euro this week, which had the effect of inflating the value of overseas earnings. But investors in the eurozone are hopeful the European Union can put its early vaccination programme mis-steps behind it and drive economic recovery later this year.
Change (%)
FTSE 100
FTSE All-share
S&P 500
Dow Jones

Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 04/02/2021.

5 February 2021
Mark King
Head of Investment Content
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Market Monitor – 05 February 2021

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