Equities Rise, Silver Soars, Euro Dips as Week Begins

Market Drivers February 01, 2021

Risk on flows in stocks

Silver hits $30 for first time since 2013

Nikkei 1.55% DAX 0.95%

UST 10Y 1.08%

Oil $52.8

Gold $1861/oz.

BTCUSD $34379/oz.

Asia and EU

GBP UK PMI Manufacturing 54.1 vs. 52.9

North America Open

USD ISM Manufacturing 10:00

Equities were well bid in Asian and early European trade, staging a strong turnaround from the open when they fell on further market structure concerns as the Reddit rally is select highly shorted stocks continued unabated.

GameStop was up another 6% in pre-market dealing but the frenetic pace and the near universal attention to the names has started to cool off as markets began to focus on stories elsewhere.

One asset that has seen a big jump at the start of week’s trade is silver which popped nearly 10% to briefly touch the $30/oz. level for the first time since 2013. Silver was touted as the next big squeeze on Reddit boards last week, but the number of posts was considerably less. There is no doubt that retail participation has jumped markedly in the metal with some spot dealers providing anecdotal evidence of record demand, but the asset is traded by a variety of institutional players and it is very likely that those parties have joined the move to push the metal higher while market makers may have quickly deleveraged and are providing only scant liquidity to the longs which could have resulted in the outsized move today. Given the recent record of the short squeezes we’ve seen the move in silver may be just beginning.

In FX the action was considerably more muted and mixed. The EURUSD was especially weak as the EU continues to have issues with vaccine distribution and acquisition although the spat with AstraZeneca appears to have been resolved as the two parties agreed on a nine million unit order. The region appears to be in chaos both economically and politically as the frustrations over the lockdowns and the inept roll out of vaccination program has created a populist outcry and the markets are clearly concerned that EU authorities have lost control of policy. The telltale sign of true market panic will be is the EURUSD breaks the 1.2000 figure and does not rebound which would suggest that the problems in the region may be more than temporary.

In North American today the eco focus will be on Manufacturing which has been the one bright spot in the COVID economy. The market is looking for a slightly lower but still strong reading of 60 from the ISM Manufacturing report and if the data print better than expected it could provide a further push to USDJPY which is flirting with breaking the 105.00 barrier as the day proceeds.

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