Before the Bell: Focus on Andrew Bailey speech later today
It was quiet in the markets yesterday as the overall outlook did not change. The same stories were circulating: vaccine rollouts and the prospect of additional stimulus from the US. Late last week, it was revealed the Democrats decided to try and implement the proposed $1.9 trillion spending package without receiving approval from the Republicans and that has been the overarching theme of the past few sessions.
“Volatility was low in equities on both sides of the Atlantic yesterday,” remarked David Madden, market analyst at CMC Markets UK, this morning.
The US dollar fell again as it has been moving lower from the peak that was set last Thursday, which was its highest level since early December.
“It is not exactly a surprise the dollar retreated from its recent high, but whether the move lower will continue remains to be seen. The rebound in the US economy has its patches of weakness but it is still ahead of the UK and the eurozone, which has been a factor in the dollar’s strength recently,” Madden told Morning Wire
It was announced the EU have reached a deal with Pfizer-BioNtech, the trading bloc ordered 300m vaccines, so that should help the region with its underperforming vaccination process, he added.
Gold, silver and Bitcoin
Weakness in the US dollar gave assistance to gold and silver. Both metals have been moving higher since Friday. Silver’s volatility from the #silversqueeze saga early last week has fallen considerably.
Bitcoin has pulled back a little from the new all-time high that was set yesterday where it traded above $48,000.
Overnight, China’s CPI reading for January was -0.3 per cent, while economists were expecting 0.0 per cent, it was a sharp swing from the December reading of 0.2 per cent. “It suggests that internal demand is weak,” Madden explained.
Meanwhile, the PPI reading was 0.3 per cent. “Keep in mind the previous update was -0.4 per cent. Factory prices turned positive for the first time in one year and that suggests industrial demand is rising, which might point to higher inflation in the months ahead,” he noted.
In mainland China, the CSI 300, hit its highest level in 13 years as traders bought into stocks on the last trading day before the week long holiday for the Lunar New Year. Madden expects European equity markets are tipped to open higher.
Andrew Bailey speech
Andrew Bailey’s speech from the Mansion House dinner will be released at 5pm UK time.
“The update is unlikely to deviate from last week’s Bank of England meeting whereby Mr Bailey cautioned that GDP in the final quarter of 2020 and the first quarter of this year will be impacted by the harsh restrictions that were imposed from November onwards,” Madden said.
It wasn’t all bad news from the central banker, as he predicts there will be a rapid economic recovery as restrictions should be lifted as the vaccination scheme presses ahead.
“Even though the BoE boss said that banks should make preparations for the introduction of negatives rates, he also suggested that rates will not be cut below zero anytime soon, so some in the markets took that as a sign they will not be implemented at all,” he continued.