Record highs galore

Stock markets are off to a decent start again this week with the US seeing more record highs on Wall Street.

This week is shaping up to be much quieter (famous last words) but against the backdrop of an encouraging earnings season, better Covid news and a massive stimulus package making its way through Congress, there’s still plenty of optimism out there.

Investors may be particularly encouraged by Treasury Secretary Janet Yellen’s assertion that the country could be back to full employment next year if it acts boldly now. The administration is facing strong opposition to their plans, including from former Treasury Secretary under Bill Clinton, Larry Summers.

Summers warning of inflation risks as a result of going too big have struck a nerve, it seems. Few are more qualified to weigh up the risks than Yellen, given her previous role as Chair of the Federal Reserve and she has stated there are tools to address it, should it materialise. But Summer’s words may impact the unity needed by Democrats to get the package over the line. Although this isn’t a risk that markets are seemingly taking too seriously at this point.


Italy outperforms as Draghi edges closer to forming a government

Italian stocks are outperforming in Europe and former head of the European Central Bank, Mario Draghi, inches closer to becoming the country’s new prime minister. Talks with various parties appear to have progressed well over the weekend and more are due to take place today.

While I don’t think anyone expects this to lead to a prolonged period of political stability, it should provide enough to see Italy through the crisis, with the country having been hit terribly hard the last 12 months. Draghi has a massive task on his hands though, starting with how to spend the pandemic aid from the EU and reverse the economic damage of the last 12 months. That’s before he even considers longer-term growth policies in a country that’s struggled on that front for many, many years.

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Former 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.