Markets Update Tuesday 05/01/2021 – Inflation Hedge

Frankfurt – 05/01/2021

Inflation Hedge

The sharp price increase identified by the Institute for Supply Management (ISM) in the US puts the recent developments in gold, Bitcoin and other inflation hedges in a very different light. The ISM purchasing managers’ index rose from 57.5 points in the previous month to 60.7. Sentiment in American industry is thus the best it has been since August 2018.

However, the indicator of price development calls for extreme caution. It rose particularly sharply by 12.2 points to 77.6. The ISM index of manufacturing prices paid is considered the leading inflation indicator. If producers have to pay more to suppliers, the likelihood of a price increase for the final product also rises.

US Markets at a glance

The US stock market was friendly on Tuesday on the back of signs of inflation. The Dow Jones ended the session 0.55 per cent higher at 30,391.60 points. The NASDAQ also climbed into the profit zone and finally went into the evening with a plus of 0.95 per cent at 12,818.96 points.

Investors focused on the Senate election in Georgia on Tuesday. The result will determine the majority in the US Senate. If the Democrats win, the “Biden administration” will effectively have a majority in both Congress houses. “There’s concern about possible regulations of the big tech companies and higher taxes,” dpa quotes Patrick Spencer of Baird: “But with only a razor-thin majority, I don’t think we’ll see that much of it.”

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Far East Markets at a glance

The Asian stock markets trended mixed on Tuesday. While the Japanese benchmark index Nikkei ultimately lost 0.37 per cent to 27,158.63 points, the Shanghai Composite on the Chinese mainland closed 0.73 per cent higher at 3,528.68 points. In Hong Kong, the Hang Seng grew 0.64 per cent to 27,649.86 index points by the end of trading.

Meanwhile, the CSI 300 index of the top 300 stocks on the Shanghai and Shenzhen stock exchanges climbed to a thirteen-year high on Tuesday, closing up 1.91 per cent at 5,368.50 points on the day, reflecting the strong recovery of the Chinese economy.

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Investors were also already looking ahead to the run-off election for the US Senate in Georgia. The election would have a major impact on Joe Biden’s US administration’s future policy, as the newly elected US president could “govern through” if the Democrats win.

European Markets at a glance

The bears dominated the European stock markets on Tuesday.

The EuroSTOXX 50 slid deeper into the red and closed 0.62 per cent lower at 3,542.18 points.

The Dax also fell, dropping 0.55 per cent to 13,651.22 points. The TecDAX was volatile in the course of trading after starting with red signs. However, at the close of trading, it still managed a plus of 0.19 per cent at 3,251.57 points.

The more aggressive COVID-19 variant from the UK, which is spreading rapidly, caused concern to market participants. Boris Johnson has now announced a third lockdown for England from Wednesday. Meanwhile, in Germany, Chancellor Merkel and the state premiers are expected to decide on a lockdown extension beyond 10 January. Besides, market participants are cautious due to the race for the two senatorial seats in Georgia entering the decisive phase.

Forex, gold, oil and crypto

The euro gained slightly again on the foreign exchange market on Tuesday. In New York trading, the common currency most recently rose to 1.2302 US dollars. 

Oil prices rose significantly on Tuesday. According to the Russian news agency Tass, the oil cartel OPEC and its ten cooperation partners (OPEC+) have agreed on a mostly stable production level for February and March. The last price paid for a barrel of North Sea Brent was 2.16 dollars more than the previous day’s 53.25 US dollars. The cost of West Texas Intermediate (WTI) rose by 2.31 dollars to 49.94 US dollars. 

The gold price also continues to climb. By the close of trading on Wall Street, the price of a troy ounce had risen to $1.951.

Buoyed by news that the Office of the Comptroller of the Currency in the US had given banks its blessing to use stablecoins and blockchains for payments, cryptocurrencies received another massive boost today. The US Treasury Department’s bureau charged with regulating banks, the OCC, released clarity-oozing guidance paving a path for a digital settlement infrastructure within the US financial system. Bitcoin thus rose yet another 9.1 per cent to cross the $34,000 barrier, while Ethereum rallied more than 6 per cent to $1,080 a coin. The only cryptocurrency that continues to be depressed in the digital assets space and does not run up arm-in-arm with the other coins and tokens is XRP. For how much longer, we will see, but by now it should be pretty clear that the whole SEC lawsuit against Ripple is about paving even more clarity for digital assets which may work out more than just fine for XRP.

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Corporate and world economic news

Economic data

Sales in the German retail sector rose in November, contrary to expectations. As the Federal Statistical Office (Destatis) announced based on provisional data, sales after deducting inflation rose by 1.9 per cent compared to the previous month. Economists surveyed by Dow Jones Newswires, however, had forecast a decline of 2.3 per cent. For October, the monthly increase of 2.6 per cent was confirmed. On an annual basis, sales in November increased by 5.6 per cent in price-adjusted terms.

Activity in US industry accelerated in December. The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index rose to 60.7 from 57.5 the previous month. Economists surveyed by Dow Jones Newswires had forecast a decline to 57.0. Among the closely watched sub-indices, the index for new orders rose to 67.9 from 65.1 a month earlier, while the index for employment increased to 51.5 from 48.4 a month earlier. The production index increased to 64.8 (previous month: 60.8), while the sub-index for prices rose to 77.6 (last month: 65.4).

Gloomy December for Ryanair

The pandemic’s tightened travel restrictions have hurt Ryanair’s business even more in December than in the months before. Last month, the Irish budget airline counted 1.9 million passengers, 83 per cent fewer than a year earlier. The slump was the worst since the de facto travel ban in April, May and June.

Hello Lockdown, HelloFresh

The record rally at HelloFresh is getting back into gear in the new year after a three-week break. On the previous day, the shares had already just surpassed their previous high of mid-December at 64.60 euros, and now investors continued to buy on Tuesday. With an increase in XETRA trading of 4.24 per cent at times, the shares of the provider of cooking boxes were traded at 66.45 euros and thus at more than 65 euros for the first time.

HelloFresh has long been considered a major beneficiary of the Corona crisis. Restaurants have been closed for weeks in the second lockdown in Germany, and it appears that the measures to contain the pandemic cannot be eased for the time being.

Consumers who have to eat their meals at home during these times are cheerfully grabbing HelloFresh products. The same has been confirmed for investors for months. Since the crash low in March at 16.14 euros, the shares have roughly quadrupled.

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