- The UK stock-market was higher this week, recovering some of the previous week’s losses. Markets remain focused on coronavirus news and any indications of economic recovery.
- Markit PMI for UK manufacturing was revised higher to 54.1 for January but this is still below December’s number and indicates that the sector slowed significantly at the start of the year.
- The Bank of England kept interest rates at 0.1% on Thursday and left its bond-buying programme unchanged. The UK economy is expected to shrink by 4.2% in the first three months of 2021 and BofE said we should prepare for negative interest rates. Governor, Andrew Bailey, called the vaccine rollout “excellent news” and said “We do think that this is going to support a sustained recovery throughout the rest of the year”.
- Our Breadth indicator turned back to positive but our Momentum Indicator ticked lower again.
- Stocks bounced this week after the previous week’s sharp fall. Main drivers were optimism over the vaccine roll-out program and hopes that Joe Biden’s fiscal stimulus plan will be delivered soon.
- The Senate and the House both passed a budget resolution on Friday that will allow the President’s proposal to be passed in the Senate on a simple majority.
- Also helpful was the abating of the damaging retail buying frenzy seen the previous week providing some respite for hedge funds on the wrong side (short) of the trade.
- Strong earnings were reported by Alphabet (Google) and Amazon, both roaring past estimates although the market was more than surprised at the announcement that Jeff Bezos was stepping down as Amazon’s chief executive.
- Our Market Breadth Indicator turned back to positive this week and our Price Momentum Indicator remained positive.
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