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US and European equity markets slump during Wednesday’s sessions, while USD rises versus its main peers

Jan 28 • Market Commentaries • 1570 Views • Comments Off on US and European equity markets slump during Wednesday’s sessions, while USD rises versus its main peers

The confusion and arguments over vaccinations from AstraZeneca and Pfizer between the UK and EU, negatively affected overall sentiment in all European equity markets. France’s CAC index ended the day down -1.26% while the UK FTSE 100 closed out the day down -1.37%.

Germany’s DAX index plunged to a five-week low during Wednesdays’ sessions. The German economy’s latest GfK consumer climate metric came in at -15.6 an eight-month low, and the German government predicted a fall in growth from 4.4% to 3% in 2021.

Both data increased the bearish mood for the Eurozone’s epicentre of growth, and the DAX ended the day down -1.81% at 13,620, some distance from the record high over 14,000 printed earlier in January 2021.

EUR falls, but GBP rises versus several peers

The euro fell versus several of its main peers, at 19:00 UK time EUR/USD traded down -0.36%, EUR/GBP down -0.20% and EUR/CHF down -0.22%.

GBP/USD traded down -0.20%, but sterling experienced positive sessions versus its other main peers. GBP/JPY traded up 0.37% and versus both NZD, and AUD sterling rose by over 0.40% while breaching the third level of resistance R3 during the day’s sessions. 

During the New York session, US dollar strength was evident in a correlated reaction to the three primary US equity indices slumping dramatically. The dollar index DXY traded up 0.38% and above the critical handle of 90.00 at 90.52. USD/JPY traded up 0.45% and USD/CHF up 0.15% as investors preferred the safe-haven appeal of USD to CHF and JPY.

US markets slump due to several factors

The US equity markets plunged during the New York session due to various reasons. Investors are concerned about the acquisition and distribution of vaccines. None of the active vaccines is in plentiful supply. European nations have monopolised the Pfizer and Astra Zeneca supply, which is currently subject to intense disagreements at the governmental level.

Meanwhile, the US government’s relaxed and libertarian approach to managing the COVID-19 crisis while putting the economy ahead of the nation’s health with a projection for 500K deaths by March, creates a lack of confidence that the USA can ever get ahead of the virus.

During the earnings season, the frothy valuations also concern analysts and investors, as they begin to doubt the justification of individual tech firms’ stratospheric valuations.

At 19:30 UK time, the SPX 500 traded down -1.97%, the DJIA down -1.54% and the NASDAQ 100 down -1.85%. The DJIA is now negative year-to-date. The In late evening the Federal Reserve announced that the interest rate would remain unchanged at 0.25%, they also delivered monetary policy forward guidance, suggesting there would be no adjustment to the current stimulus programme in place.

Precious metals fall in a market lacking any confidence in hedge strategies

Gold, silver and platinum all fell during Wednesday’s sessions, gold down -0.37%, silver down -0.79% and platinum down -2.47% falling from the recent eight-year high printed last week.

Crude oil traded up 0.17% at $52.72 per barrel, maintaining the bullish run-up during 2021 which has seen the commodity rise by over 8.80% due to signs the global economy might improve quickly if the virus vaccines prove to be efficient and effective.

Economic calendar events to closely monitor on Thursday, January 28

The main focus during Thursday’s sessions involves data from the USA which could impact USD and the US equity markets. The latest weekly jobless claims will be published, and the forecast is 900K weekly claims, identical to the previous week.

The latest GDP growth figure gets revealed during the New York session for Q4 2020. The stunning 33% growth figure for Q3 was unsustainable, and analysts predict a further increase of 4.2% for the fourth quarter. If the reading misses or beats the news agencies’ forecasts, then both USD and equity values could be affected. The expectation is that December’s goods trade balance figure to come in at -$86b, a deterioration from the -$84b in November.

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