29.01.2021 - As of noon on Friday, global equities were lower on the week amid a rise in volatility. The yield on the US 10-year note was unchanged at 1.09%, having dipped to 1% earlier in the week. The price of a barrel of West Texas Intermediate crude oil rose $0.50 to $52.95 while volatility, as measured by the Cboe Volatility Index (VIX), vaulted to 32 from 21.7 last Friday.
MACRO NEWS
Retail traders spur volatility spike A handful of heavily shorted stocks went on wild rides this week as retail speculators banded together in Internet chat rooms to unleash a historic squeeze. Several hedge funds were substantially impacted, prompting a wide array of investors to reduce market exposure, both long and short. Volatility, as measured by the Cboe Volatility Index, rose as high as 37 this week from 21 little more than a week ago while volume on the New York Stock Exchange reached record levels. Additional market turmoil was seen on Thursday as the Depository Trust and Clearing Corporation demanded more collateral from brokerages, prompting many to restrict trading in the targeted shares. At a press conference on Wednesday after a meeting of the Federal Open Market Committee, US Federal Reserve Chair Jerome Powell soft-pedaled the link between low interest rates and frothy asset values while downplaying financial stability risks.
Biden ups vaccination goal in US With the pace of coronavirus vaccinations already on pace to meet his goal of 100 million doses in his first 100 days in office before his inauguration, US President Joe Biden upped his target to 150 million vaccinations and pledged to inoculate 300 million Americans by the end of the summer. On Friday, Johnson and Johnson announced that it would seek emergency use authorization from the US Food and Drug Administration for its single-dose COVID-19 vaccine in early February, which would increase the availability of vaccines, if received. The company reported that its formula was 66% effective in preventing moderate-to-severe disease.
Tensions flare between China and Taiwan Repeated Chinese military incursions into Taiwanese airspace prompted countermeasures from Taiwanese forces this week, raising tensions between Beijing, which views Taiwan as a renegade province of China, and Taipei. The Chinese defense ministry said on Thursday that any move toward independence for Taiwan would mean war. As a result of the rising tensions, the Biden administration moved a carrier battle group into the South China Sea and reaffirmed the US commitment to Taiwan as "rock solid." This week, Biden signaled the US will maintain pressure on China, including retaining tariffs and delisting Chinese stocks.
Italian PM resigns After losing his narrow majority in the Italy's Senate, Giuseppe Conte resigned as prime minister this week. Conte will now attempt to form a broader coalition at a time when 80% of Italians oppose early elections amid a still-raging pandemic. Italian president Sergio Mattarella is holding talks with party leaders aimed at finding a lasting solution and avoiding an early return to the polls. Conte's resignation came after he lost the support of a small-party coalition partner that disagreed with his government's intended use of funds allocated by the European Union's rescue fund.
QUICK HITS
The US economy expanded at a 4% annualized rate in the final quarter of 2020 and contracted 3.5% for the full year, its worst performance since 1946.
European Central Bank President Christine Lagarde said this week that climate change can have implications for monetary policy due to underlying risks to the assets that the ECB buys under its asset purchase program and the collateral provided by counterparties for its operations.
The United Kingdom will delay a full economic opening until those over age 50 have received two doses of vaccine. The reopening is expected to begin in April with restrictions similar to those of summer 2020.
Because of production problems, supplies of the AstraZeneca vaccine have fallen far short of expectations in Europe, prompting the EU to issue an export ban on European-produced vaccine. The shortage has forced France and Spain to partially suspend their vaccine programs, potentially delaying the reopening of their economies.
US-listed companies have conducted 80 follow-on stock offerings in 2021, raising over $16 billion, both figures were records for this point in the year. Globally, companies have raised more than $400 billion in debt and equity in less than a month.
The US Senate this week confirmed Janet Yellen as treasury secretary.
President Biden signed three executive orders aimed at battling climate change, including a moratorium on new oil and gas drilling on federal lands.
EARNINGS NEWS
With 36% of the constituents of the S&P 500 Index having reported for Q4 2020, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings growth is running at -2.5% while sales rose 1.6% compared with the same quarter a year ago, according to data from FactSet Research. About 85% of companies are beating analysts' estimates this quarter, compared with the typical 75%.
Hinweise:
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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
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