The passing week brought a breakthrough in waiting for the COVID-19 vaccine, which made the markets euphoric. Some of them maintained the levels from the day of the announcement of an effective coronavirus fight, and some of them were corrected. In the coming week, investors may also return to the topic of the epidemic and possible restrictions introduced in the USA.
Of the popular markets, which were gaining the most on a weekly basis, the oil market is the one that is attracting most attention. The price of a barrel of WTI crude oil rose by more than 8.5 percent in relation to the previous week. This could also be supported by the statements of OPEC+ representatives, which may result in a very flexible approach to oil production. OPEC+ may extend the current production limits or even increase the scale of production cuts if demand does not grow while waiting for the vaccine.
Interestingly, for the first time in a very long time, the European stock exchange index Euro Stoxx 50 was at the top of the list, which was ahead of the American stock exchange indices in the weekly ranking. Euro Stoxx 50 grew by more than 7 percent in one week. The German DAX, in turn, grew by almost 5 percent. The driving force behind the indexes' growth was the news about the vaccine, but also, and above all, the return of investors to value-oriented companies related to the real economy. A moderate retreat from technology companies was observed, and the Nasdaq 100 index seems to be losing 1.5 percent on a weekly basis.
The key changes also seem to have occurred in the interest rate market, where the game of interest rate cuts has basically stopped. This in turn may mean that we have recently seen highs in the bond market. This may also be a premise for the return of capital to the stock market in favor of the bond market.
The New Zealand dollar has gained in relation to the US dollar on a weekly basis. It seems to have strengthened by 0.8%. However, the dollar itself in relation to other currencies gained over 0.5%, and the Swiss franc and the Japanese yen lost the most. The currencies considered safe havens with the optimism caused by the vaccine lost about 1.5 percent to the USD in a week. The strong USD also seemed to be conducive to the fall of the price of gold, which lost about 3 percent, and the price seems to be going back to 1900 USD.
Next week, in turn, may raise concerns about the condition of the American economy in the fourth quarter due to the possibility of further restrictions. These have already appeared in New York or Chicago. The number of hospitalized people in the US is growing, which raises concerns about the capacity of hospitals. Any lockdown in the US now seems to be out of stock prices. In addition, it is still unclear what scale and when the US aid package will be introduced.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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