Market Update

As reflected in the provided table, US equity markets enjoyed a robust week, rallying in response to Joe Biden's assumption of the presidency, bolstered by optimistic expectations regarding his proposed $1.9 trillion fiscal stimulus package. Encouraging signs of a potential decline in the coronavirus outbreak, marked by decreasing virus cases and hospitalizations, further fueled market enthusiasm in the United States.
Additionally, the week brought forth a slew of positive economic indicators from America. Initial jobless claims dropped to 900,000, and continuing claims fell to 5.05 million, with revisions indicating a stronger employment market than previously suggested. Housing data and the Philadelphia Fed Business Outlook Survey outperformed expectations significantly. Housing starts surged by 5.8% to 1.67 million, the highest level since September 2006. The Philadelphia Fed Index soared to 26.5 from last month’s 9.1, marking the highest reading since February last year.
Furthermore, the latest Purchasing Managers’ Index (PMI) figures for the US, released on Friday, exceeded expectations, indicating a robust economic expansion. Manufacturing PMI stood at 59.1, while services PMI reached 57.5. These readings not only confirm the ongoing expansion of the US economy but also highlight an accelerating pace of growth.
Moreover, early results from the US company earnings season have been remarkably positive. Out of the 68 S&P 500 constituents that have reported so far, an impressive 57 have exceeded expectations.
However, the situation in Europe and the UK contrasts sharply with the positive developments in the US. The UK's manufacturing PMI fell from 57.5 to 52.9, indicating a slowing expansion, while services PMI dropped to 38.8 from 49.4 due to stricter lockdown measures. Similarly, in the Eurozone, manufacturing PMI declined to 54.7, and services PMI fell to 45.0, both attributed to lockdown restrictions.
Despite these disappointing readings, the beacon of hope lies in the vaccine roll-out. As the vaccination efforts progress, easing current lockdown restrictions becomes plausible, enabling the service sector to fully reopen and stimulating economic recovery.
Looking forward to the upcoming week, key events include the Federal Reserve's monetary policy meeting on Wednesday (January 27, 2021) and the release of weekly US jobless claims data on the following day. Additionally, in the US, data on durable goods orders and Personal Consumption Expenditures (PCE), the Fed's preferred inflation measure, will be released. In the UK, focus will be on employment data, including the unemployment rate and average weekly earnings.