Soft end to the week

Taking a break

Stock markets have turned negative after quite a flat week that has been light on newsflow and economic events.

Holiday’s in parts of Asia and the upcoming bank holiday in the US on Monday may ensure markets remain quiet a little longer. Stocks had performed well prior to this week, buoyed by optimism around the ending of lockdowns and economic boom that will follow. A massive stimulus package making its way through Congress naturally supports these views.

Lockdowns have been tough for all but they are clearly working, along with the vaccine rollout which is seeing fantastic progress, which should enable some reopening of economies in the coming weeks. While case numbers and fatalities remain high, they’re falling rapidly which is extremely encouraging. Aggressive new variants may complicate the grand reopening but vaccines should ensure this is the final stretch.

Economies have been battered by lockdowns, few more so than the UK, which shrank by 9.9% last year, the sharpest contraction since the Great Frost of 1709. On a more positive note, GDP in the final quarter of 1% is encouraging and was double market expectations. This comes despite the lockdown light in November and included a decent festive rebound. Of course, that came at a price.

The lockdown in the first quarter was far more severe and the data will show that in the coming months. The country will avoid a double dip recession as a result of the encouraging performance in Q4 as businesses adapted well to the new environment. But it’s all up from here after a very impressive vaccine rollout which should enable a powerful recovery in the coming quarters.

Plenty of work is still needed to support those people and businesses most harmed by the pandemic, particularly in certain sectors like tourism and hospitality, and we’ll see just how committed the government is to that in the Budget. There’s certainly cause for optimism after a dreadful year.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

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