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Risk continues to edge it: European stock markets moved higher as the dust settled over US presidential election at last and investors continue to overlook any short-term worries about the virus and focus on more stimulus, fiscal expansion, infrastructure spending and a return to near-normal later in the year that should unleash higher consumption levels. There are hopes of a more settled political environment in the US and the firm belief that fiscal expansion and continued monetary policy support will deliver further upside for equity markets. The big concern is that procyclical fiscal policy is too hot: the stimulus isn’t really needed, inflation really gets out of hand, bonds crater and market interest rates move aggressively higher, forcing central banks into needing to make some unpalatable decisions later this year. The risk is the Democrats really over-egg the pudding, but this is not a significant worry today given we are still in the midst of a pandemic and, it should be said, most of the stimulus is supporting real people in the real economy and not being funnelled into financial institutions.


The FTSE 100 ticked back up towards 6,900 in early trade and is set for a strong +6% move this week, albeit the gains this morning are tentative, and investors may lock in some of the gains over the last four days.  That said, UK equities still have some catching up with peers to equalize after underperforming for some time. Meanwhile, the DAX moved clear of 14,100 after German industrial production rose 0.7%. Asian stocks also moved to record highs and whilst shares in Tokyo climbed over 2% to their highest in 30 years. 


The risk-on mood followed a strong day for Wall Street with new record highs – the Nasdaq Composite rose 2.6% to close above 13,000 for the first time, while the Dow added 0.7%, closing above 31,000 for the first time. The S&P 500 rallied 1.5% and closed above 3,800 for the first time. The Dow transports, a good proxy for expected economic activity in the US, also hit an all-time high. 


Gold retreated under $1,900 with the metal offered due to rising bond yields, with the US 10-year Treasury backing up to 1.10%, its highest since the pandemic struck last March. Gold found support around its 21-day SMA at $1,880 with the key 50-day line sitting a little lower at $1,870. The US dollar remains bid, with the dollar index back above 90 this morning and testing the 21-day SMA resistance at 909.13 where it has just pulled away from. In perfect symmetry EURUSD was lower at 1.2220 after testing its 21-day SMA at 1.22150. USDJPY rallied to 104 where it the 50-day SMA and strong descending trendline resistance.


Oil prices continue to edge higher and continued the steady progress with WTI firming up above $51. The decision by Saudi Arabia to unilaterally cut an extra 1m bpd continues to support sentiment, whilst the roll-out of vaccines underpins the sense that demand is reappear later this year. It should be said though that whilst EIA inventories showed a big draw this week, gasoline stocks are building. 


Today’s nonfarm payrolls shouldn’t make too much difference to sentiment as investors are only really focussed on the path forward with vaccines and stimulus. Nevertheless, it’s expected the US economy added 50-60k jobs last month. Weekly initial claims were steady at 787k in the week ended Jan 2nd, from an upwardly revised 790k in the prior week. 


The madness of crowds: Bitcoin surged above $40,000 before pulling back to $38,500. This could be a massive pump before a major selloff in the coming days. The rally we’ve seen is simply astonishing, but you should be watching the iFinex case closely. The Jan 15th deadline relating to a request by the NY Attorney General is coming and the rally is probably related to this. I’d be mindful of a big crash, but shorting Bitcoin has consistently been a pain trade like shorting Tesla. On which topic, shares in the carmaker popped another 8% yesterday to take Tesla’s market cap above that of Facebook.




Rentokil announced yet another acquisition – Tampa, Florida-based Environment Pest Services. It’s completed 23 acquisitions in 2020. Trading remains strong – disinfection services seem to be in demand still.  Management said trading across both Hygiene and Pest Control categories continued to be strong in Q4, which they say primarily reflects strong sales from one-off disinfection services. It now expects profits to be above the top end of the range of market forecasts which currently stand at £292m to £337m. Shares rose over 2%. 


Marks & Spencer warned that trading remains very challenging as it reported a 8.4% drop in group sales in the third quarter. Food LFL sales increased 2.6% in the UK, with LFL ex-hospitality up 5.7%. Clothing & Home was horrible, declining 24.1% on LFL basis. Shares traded marginally higher as the results were not as bad as feared. 


Pets at Home – another Covid winner – rallied over 6% after raising its guidance for underlying profit before tax to at least £77m.  

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