Market Pulse - January 2021

Key themes
• A boost to US growth
• Game Stop squeeze derails monthly gains
• Earnings results exceed expectations Markets snapshot

• The MSCI AC World equity index fell -0.1% (+0.3% in euro terms).
• Emerging markets rose 3.8% (3.8% in euro terms), benefiting from their sensitivity to the improving global growth outlook as growth forecasts were revised higher.
• Pacific Basin equities rose 1.1% (1.4% in in euro terms), supported by relatively strong economic news flow across Asia and higher commodity prices, which benefited the Australian market.
• Europe fell -1.1% (-1.1% in euro terms) as economic data was weak, with growth in the region expected to contract in the first quarter as restrictions were extended across many countries.
• The US​ fell -0.9% (-0.2% in euro terms) and was affected by the sell-off related to the squeeze of short positions among hedge funds at month-end.
• Eurozone >5-year bonds fell -0.8%, with the German 10-year yield rising to -0.52%, pulled higher as fears of rising bond supply on the back of increased fiscal stimulus weighed on US and global yields.
• Peripheral spreads widened slightly on the back of renewed political tensions in Italy, with Italian 10-year spreads rising to 116 basis points (bps). Meanwhile, Spanish spreads were marginally higher, at 62bps.
• The euro fell slightly against the US dollar to 1.2136 as the European Central Bank (ECB) attempted to ‘talk down’ the euro after its recent appreciation, and suggested it is monitoring the exchange rate and could adjust policy if necessary.
• The dollar also benefited from the more ‘risk off’ environment at month-end. Commodities rose 4.9% (5.7% in in euro terms) as global growth forecasts for 2021 were revised higher.
• West Texas Intermediate (WTI) oil rose 7.6% as Saudi Arabia announced that it would cut oil production by 1 mbl a day through February and March. Meanwhile, demand forecasts were revised higher on the better economic backdrop.
• Gold fell -2.5%, negatively affected by the stronger US dollar.  





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