Market Roundup

Spotlight on GameStop (GME)

At the heart of the battle between Reddit retail investors and Wall Street, GameStop, a video game retailer, became the talk of the town. This company has struggled throughout the pandemic as a bricks-and-mortar retailer. Hedge funds heavily shorted the stock, anticipating that GME would drop in price. However, an army of retail investors took an opposing view and began to buy its shares, with GME at one point becoming the world's most traded stock. GME gained more than 700% across four trading sessions between the 23rd and 27th of January. This saga had broad repercussions for markets, with the VIX, a measure of market volatility, reaching three-month highs. This led to extreme reactions, with Robinhood, a trading platform for retail investors, suspending trading of the stock, inciting a vast backlash. Robinhood has since restored trading in GameStop shares, but retail day traders are now funnelling their interest elsewhere, with GME falling by over 84% across points of last week. However, shares rebounded again last Friday, gaining 19.2%. Is there further upside from here? GameStop will continue to be an interesting company to monitor.

FTSE 100

Last week, stocks began to recover following the previous dire week, when the FTSE 100 tumbled more than 4%. Developments regarding the EU and AstraZeneca Covid-19 vaccine supply dispute helped to instil greater optimism in the markets, leading to the index closing 1.4% higher last Monday. Last Tuesday the index was up 0.8%, despite fears of the spread of mutant coronavirus variants limiting its gains. Last Wednesday and Thursday both saw the index down 0.1%, weighed down by pessimism surrounding the impact of the third lockdown, as well as GlaxoSmithKline's shares declining 6.3% due to the group lowering its dividend expectations for 2022. Negative data showing that business activity in January was the weakest it had been in eight months, only contributed to downward pressure.

Moreover, the pound's recovery, stemming from rising expectations that interest rates won't turn negative, weighed on the index. Further negative news also led to losses, such as the Bank of England's lower forecast for British economic growth in 2021. Despite this, throughout the week vaccine rollouts served as a source of optimism, with nearly 11 million in the UK have received their first vaccine dose. The FTSE 100 finished the week with little change on Friday but supported an overall gain of 1.4% for the week, reaching 6,489 and reversing three straight weeks of decline.

S&P 500

The week before last saw the S&P 500 facing its biggest loses since October, with an overall 3.3% decline for the week following the Reddit vs Wall Street saga. Despite this, the S&P 500 made consecutive gains across the whole week's sessions. Last Monday, stocks closed 1.6% higher, with investors optimistic about the US' speedy vaccine rollout. Last Tuesday saw further gains, up 1.4%, as investors' hope surrounding a potential $1.9 trillion US fiscal stimulus package became top of mind, fuelling optimism of a quick economic recovery. The size of the stimulus package remained an important focus for investors throughout the week. In anticipation of higher inflation following the stimulus package, prices of shares in banks rose. During the rest of last week, stronger than expected US data, upbeat earnings results and optimism surrounding progress with the stimulus package led to the S&P 500 making gains, up 0.1% Wednesday but closing at record highs on Thursday, up 1.1%, at 8,007.62. The US House voted to pass Biden's budget plan, fast-tracking his stimulus proposal. On the data front, weekly jobless claims fell to their lowest level since November, with a third consecutive week of declines.

Moreover, US coronavirus hospitalisation numbers fell below 90,000 for the first time since late November. On the earnings front, healthy results were seen across the board, with Ford, Amazon, Alphabet, eBay, PayPal and Estee Lauder, to name a few, all beating earnings expectations. Among them, Alphabet reported its most profitable quarter ever. The S&P 500 finished the week 0.4% up, with gains of over 4.5% for the week.

Dax

An overall positive week for the Dax. The Dax recovered from the previous week's one-month low, which stemmed from volatile retail trading concerns. As these concerns were shrugged off, the Dax rebounded with four consecutive sessions of gains, with the index up 1.4% last Monday, up 1.6% on Tuesday, up 0.7% on Wednesday and 0.9% on Thursday following optimism surrounding the size of the potential US stimulus package and a positive outlook on coronavirus vaccine rollouts. The index ended the week on a slightly downbeat note, down 0.09%, due to negative data news showing that December German factory orders fell by 1.9%, ending seven straight months of positive data. Nonetheless, the index closed up 4.6% for the week.

Asia-Pacific

Asian stocks broadly rose last Monday following positive reports surrounding vaccine developments and rollout. In China, gains of 1.2% reversed 4-week lows, after the news of the country administering over 24 million vaccine doses. However, these gains were capped following January data showing Chinese manufacturing weakened, with PMI down from 53 in December to 51.5 – a seven month low. Hong Kong's Hang Seng was up 2.2% and Japan's Nikkei 225 up 1.2%.

Asian markets were broadly higher last Tuesday, fuelled by prospects of a large US fiscal stimulus package and further positive vaccine news, as well as worries over the retail investor saga receding. Hong Kong's Hang Seng was up 1.2%, Japan's Nikkei 225 up 1% and China's CSI 300 up 1.5%. Asian Stocks were mixed last Wednesday, with upbeat US earnings results and progress on stimulus serving as a cause for optimism. In Japan, the Nikkei 225 gained 1%. However, in Hong Kong, the Hang Seng shed 0.1%, and China's CSI 300 closed down 0.29% as investors booked profits in tech stocks and harmful data showed January services sector activity in China grew at its slowest pace in nine months. This outweighed car manufacturer's positive news of strong 2021 sales growth expectations and China's reports of its fewest daily number of new coronavirus cases in over a month.

Asian markets declined across the board last Thursday, with the Nikkei 225 down 1% and the Hang Seng slipping 0.9% as investors became cautious following local earnings reports. The week ended on a positive note, with Asian markets rising following further better-than-expected US earnings results and positive Japanese data showing that household spending in December fell less than expected. The Nikkei 225 closed up 1.5%, trading near 30-year highs, and the Hang Seng closed up 0.4%.

Conclusion

Overall, a largely positive week for global markets, with stocks rebounding from the previous week's losses. The biggest market movers were upbeat US earnings results, optimism surrounding US stimulus progress, strong US data and positive coronavirus vaccine news, especially regarding vaccine rollout.