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News & Analysis

Vaccine progress, Aussie QE extended and Silver rally fizzles

5 February 2021

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By Lachlan Meakin

Major global markets rallied convincingly this week with strong corporate earnings from the US, commitments from central banks to keep accommodative measures in place and good progress in US COVID vaccinations gave investors optimism.

Equity markets

The S&P 500 climbed to a record this week, with the NASDAQ and Dow Jones touching on all time highs. The charge higher was led by bank and tech stocks as strong earnings were reported by heavyweights such as eBay, PayPal , Amazon and Alphabet (Google).

US unemployment claims also came in less than forecast last night, giving hope the US labour market is improving ahead of tonight’s all important non-farm payrolls figure.


Source: Bloomberg

The ASX 200 hit its highest price in 12 months, rising to levels we haven’t seen since the beginning of the COVID inspired sell off in February 2020.

A strong US market, China’s good recovery, record iron ore prices on top of the RBA extending it’s QE bond buying program by another 100B have buoyed the Aussie market.


Source: Bloomberg

COVID

Helping investor optimism this week in the US was the news that more Americans have received at least one dose of a Covid-19 vaccine than have tested positive for the virus.

Only a few other countries have crossed that milestone so far Israel, the U.K. and the U.A.E. The U.S. has been administering shots at a faster daily rate than any country in the world, giving about 1.35 million doses a day.

Source: Bloomberg

Forex markets

The US Dollar index rallied over 1% continuing its strong uptrend after finding solid support a few weeks ago. With improving optimism in the US economic recovery buyers are flocking to the greenback at these levels.


Source: GO MT4

The US dollar outperformed all major currencies this week with the safe haven Swiss Franc the worst performer with the markets on risk on mode.


Source: Bloomberg

Aussie Dollar 

AUDUSD came under pressure this week with US dollar strength and the accommodative tone of the RBA rate statement on Tuesday. While the RBA didn’t surprise with their target cash and 3 year bond rate remaining unchanged, the announcement of a QE extension by another 100B in bond purchases gave the Aussie a hit.

Technically it is precariously holding it’s 50 day moving average, a break of this level could see a prolonged down move.


Source: GO MT4

Commodities 

Silver

Silver became a target of the Reddit crowd who announced they were going to attempt a short squeeze of the precious metal in line with what they achieved with stock such as GameStop.

As a result silver had a very volatile week, gapping up 7% on Monday to be down on the week at the time of writing.

The Chicago Mercantile Exchange stepped in and hiked Silver futures margins by nearly 20% seemingly stopping the silver rally in its tracks, this is a similar tactic they used back in 2011 to stop the then parabolic rally in silver.


Source: Twitter

By Lachlan Meakin

Monday, 8 February 2021 
Indicative Index Dividends
Dividends are in Points
ASX200 WS30 US500 US2000 NDX100 CAC40 STOXX50
0 0 0.087 0.04 0.118 0 0
ESP35 ITA40 FTSE100 DAX30 HK50 JP225 INDIA50
0 0 0 0 0 0 0


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