The past week will be long remembered by investors in the cryptocurrency market, which fell 20 or 30 percent each, but it also seems that sentiment has deteriorated in stock markets as well, where the first weekly declines not seen in several weeks are emerging.
European equities appear to be on track to post their first loss in eight weeks this week as investors likely overestimated global growth prospects amid rising COVID and new restrictions around the world. E.g. Japan imposes a state of emergency in Tokyo and Osaka starting Sunday, which will last until May 11. At the same time, the impact of a possible capital gains tax hike in the U.S. increased investor concerns and also could lead to a deterioration in sentiment. On the positive side, the European Union announced on Friday that it has agreed to purchase up to 1.8 billion doses of Pfizer-BioNTech's COVID-19 vaccine, which could accelerate the pace of vaccination.
Macroeconomic data showed, based on the Markit PMI survey, that private sector activity in the eurozone rose more than expected in April and grew at the fastest pace since last July, despite a slowdown in German economic activity.
Also in the United States, it seems that we could see the first weekly declines in the S&P 500 index after the previous four weeks of gains. The situation is similar for the Dow Jones Industrial Average index, which could also see its first correction after four weeks of gains. Precious metals seem to be gaining in an environment of greater market turbulence. Silver may rise by about 0.8 percent this week and gold by 0.3 percent.
In the currency market, meanwhile, the US dollar seemed to be in retreat since Monday, especially against the Japanese yen. The JPY may gain 1 percent this week, while the Swiss franc may gain 0.5 percent. This behavior of investors seems to show an increase in risk aversion when cryptocurrencies and stocks are cheapening, while gold or the yen is getting more expensive. However, will this gloomy mood persist in the coming weeks as well? A lot will depend on clear statements about taxes in the US, not just rumors, as well as assurances from central banks and politicians that they will continue to support the economy.
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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