US Wrap – A mixed midweek

Retail frenzy eases for now

The rally in stock markets this week eased a little on Wednesday, with US stocks ending a little mixed after two strong days of gains.

The retail frenzy that has provided an unusual distraction over the last couple of weeks appears to have lost momentum, which has brought some relief to the wider markets. A comeback tour may be planned at some point in the not-too-distant future but whether it will be as effective, we’ll have to wait and see. For now, investors look a little relieved.

Some of the data we’re seeing is showing signs of improvement, with the PMIs on Wednesday surpassing expectations in many cases, albeit from very disappointing levels, particularly in Europe.

The ADP report gives some cause for optimism ahead of Friday’s jobs report, although this number can be a little hit and miss – more often the latter – when it comes to the official data. But it has generated some optimism, it seems.

Oil push on as OPEC+ remains optimistic for 2021

Oil prices are continuing to push higher, making a third impressive day of gains on Wednesday and bringing Brent ever closer to $60. OPEC+ appears pleased with the progress and stuck to current output plans after the JMMC meeting. The group is optimistic on the recovery in 2021 and with the vaccine rollout well underway and there being continuing signs of promise, they have every reason to be. Better than expected inventory data and improved sentiment in the markets has further fueled oils rally this week.

Gold lower as USD breaks higher

Gold edged slightly lower on Wednesday but remained within its recent range, even as the dollar broke higher this week. The greenback has stabilized the last couple of months and the dollar index appears to have broken the neckline of an inverse head and shoulders – around 91 – which could point to near-term strength.

It hasn’t yet exploded higher but should it build on recent momentum, it would be bad news for gold and may suggest recent lows are going to come under pressure. We’ve seen strong support in the $1,800-1,830 region over the last month and recent price action suggests it’s going to be tested once more.

Bitcoin gains as retail frenzy loses momentum

The recent frenzy in financial markets surprisingly hasn’t had bitcoin at the heart of it but cryptocurrencies haven’t been quiet either. From eyeing a break of $30,000 to surging 30% on the back of a tweet from Elon Musk, then paring most of those gains before reversing once more. This is whipsaw price action even by bitcoins own standards but I wonder whether the apparent end of the retail backlash in stocks and precious metals may benefit the crypto space. Perhaps that’s what we’re seeing in recent days.

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