Equities mostly fell this past week with a few key exceptions. On Wall Street, the S&P 500 sank over 1% while small-cap stocks outperformed the broader market as the Russell 2000 soared about 2%. In Europe, the DAX 30 and FTSE 100 declined 1.9% and 2.0% respectively. Meanwhile in the APAC region, the Nikkei 225 and Hang Seng climbed 3.74% and 2.5% respectively.
The broader risk-off tone reflected in currency markets, where the anti-risk US Dollar and similarly-behaving Japanese Yen shined. The growth-linked Australian and New Zealand Dollars wobbled. Taking a look at commodities and precious metals, crude oil netted little changed while anti-fiat gold prices dropped roughly 1%.
A big theme that most traders will likely be watching ahead is where US fiscal policy goes as Joe Biden is sworn in as the 46th president. Some of the weakness in equities this past week may have been as a result of investors pricing in a watered-down version of Biden’s USD 1.9 trillion relief package due to what may be difficulty passing it through the Senate.
The week ahead is also quite busy, with earnings season in play: companies like Bank of America, Morgan Stanley, Netflix and Intel are reporting. Soft results from Wells Fargo and JP Morgan this past week may foreshadow another round of dismal figures for bank companies ahead. A reminder that Monday is a holiday in the US, expect sub-par liquidity conditions to start the week.
The Euro, Japanese Yen and Canadian Dollar are eyeing the ECB, BoJ and BoC respectively. Chinese fourth-quarter GDP will have key insights into the state of global growth. Will a jobs report stoke volatility in the Australian Dollar? Europe is going to update economic sentiment indicators. What else is in store for financial markets ahead?