Weekly Market Update: 11th of January 2021

Domestic Markets | S&P/ASX200 Up +171pts (2.6%)

Markets rose to 10-month highs.

CBA $3.52 (4.3%)
FMG $1.19 (8.2%)

The ASX200 added 170.8 points or 2.6% in the first week of 2021. The week saw Australian Prime Minister Scott Morrison announcing during the week that the Pfizer vaccine could be approved by the end of the month and rolled out soon after.

Global Markets | Dow Jones Up +491pts (1.6%)

Markets rallied on the back of optimistic hopes for 2021.

S&P 500 +69pts (1.8%)
Nasdaq +314pts (2.4%)

All three major indices finished Friday at all-time record highs, with investors focusing on the prospects of further stimulus and a Democrat-led economic recovery. The record highs are leaving some analysts to speculate that we’re seeing a bubble start to form.

Europe | DAX, CAC, FTSE
The Euro Stoxx 50 increased 2.60% to reach 3,645 points while the FTSE100 rose 6.4% despite a third national lockdown being announced. Given the economic damage that the lockdown will cause, the Bank of England looks likely to take interest rates negative this year.

Asia | HSI, CSI, KOSPI, NIKKEI
The CSI 300 marked a positive start to the year with consecutive green days before falling back on Friday, though it still rose 4.18% over the course of the week. Japan’s Nikkei 225 rose 2.53% in the first week of the trade. Thursday saw the market decline on the back of Japanese Prime Minister Yoshihide Suga announcing a state of emergency in regard to the COVID situation, though it recovered strongly to close the week.

Commodities | Gold -47USD/oz (-2.61%)

Gold Prices Remaining Steady at Elevated Levels.

Copper 0.13USD/Lbs (3.56%)
Iron Ore 16.4USD/T (6.94%)

Precious Metals | Gold, Silver
Gold reached as high as $1,957.75 an ounce earlier this week, its highest point since early November, signs pointed toward a ‘Blue Wave’ occurring – which has now been confirmed. While gold prices dropped since to near month lows of $1,847.70, this is being blamed on gold investors taking profits during a brief rally in the US dollar rather than investors growing bearish on the metal. The Blue Wave is a significant catalyst as it should as it will allow for greater amounts of fiscal stimulus to be introduced than when the Republicans still held vetoing power. Driven by the same catalysts, silver reached highs not seen since early September though it reacted to the same action that gold reacted to late in the week to fall 3.82% over the course of the week.

Oil | WTI Crude, Brent
Oil prices enjoyed a strong week this week, both specific to oil and otherwise. Wednesday saw OPEC+ agree to keep oil production steady this month and only slightly increase it in the coming months. This news was welcomed by oil markets, though there was even better news to come as Saudi Arabia said it would voluntarily cut production by 1m barrels per day in order persuade other OPEC+ members to not overproduce. US oil inventory figures for the week saw an inventory decrease of 8m barrels for the week, which exceeded expectations by 5.2m barrels. This positively impacted oil price as it showed that demand for the week was stronger than expected.

Iron Ore
Iron ore rose 6.94% over the course of the week, with the reason for the increase mainly being attributed to the US Senate news which has generally carried the price of most commodities this week. There are expectations that iron ore prices will start to decline as the Chinese Ministry of Industry and Information Technology has asked its steel sector to cut production. Supply of iron ore is set to increase from Brazil as the BHP/Vale jointly owned Samarco mine resumed production on the 28^th of last month.

Copper
Copper price had a solid start to the year, with futures contracts to fresh highs which haven’t been seen since February 2013. The price per pound of copper increased by 4.89% over the course of the week to reach $3.690 a pound. As COVID vaccines continue to roll out, we can expect to see manufacturing and infrastructure projects increase, providing greater demand for copper, while demand is further increased by hopes of further stimulus into construction projects to help economic recovery. In China, the figures were released for the Caixin Services PMI, which indicated that the Chinese manufacturing industry expanded for the 8^th month in a row, data which provides continued support to copper prices.