The stock market has returned to gains and the dollar index is preparing to break out of a steep dive

On Tuesday, the national institutes of statistics released data on economic growth in European countries. Despite the negative values, economists point to the resilience of GDP, as the expected numbers are much worse than those received.

Gross domestic product in the Eurozone decreased by 0.7% in the fourth quarter, when the median forecast was 0.9%. Production decreased by 6.8% on an annualized basis. The economy is managing to avoid a recession on the scale that was expected at the beginning of the pandemic. However, the immediate outlook remains challenging due to problems with vaccination initiation, which means the restrictions will last longer. Against this background, the dollar continued to rise, exceeding the January highs.

German Health Minister Jens Spahn warned of "tough weeks of shortages in the first quarter and April." And while the infection rate in the country is declining, it is still nearly double the level that would ease restrictions according to the government. Against this backdrop, economists still expect another decrease in production in q1, but less than 4%, which was predicted in early January.

Amid problems with the supply of vaccine from AstraZeneca, as well as doubts in France about the effectiveness of the vaccine for elderly patients, European leaders began to look for alternatives. On Tuesday, German Chancellor Angela Merkel said that she will consider Russia's Sputnik V vaccine as she, like other European countries, seeks to strengthen its vaccination program.

This decision, combined with economic indicators and rising oil prices, returned the stock market to the highs of the year. The S&P 500 rose sharply to 3.835. US Treasury yields rose to 1.11%, German Bonds returned to January highs of - 0.460%.

Main market quotes:

S&P 500 (F) 3,836.12 +17.82 (+0.47%)

Dow Jones 30,687.48 +475.57 (+1.57%)

DAX 13,944.75 +109.59 (+0.79%)

FTSE 100 6,560.09 +43.44 (+0.67%)

USD Index 91.067 +0.042 (+0.05%)

• – Employment Change in Australia (q/q) (q4) at 00:45 (GMT+2);
• – ECB Monetary Policy Statement at 10:00 (GMT+2);
• – Eurozone Services PMI (Jan) at 11:00 (GMT+2);
• – UK Services PMI (Jan) at 11:30 (GMT+2);
• – Eurozone CPI (YoY) (Jan) at 12:00 (GMT+2);
• – ADP United States Nonfarm Employment Change (Jan) at 15:15 (GMT+2);
• – ISM Non-Manufacturing PMI (Jan) at 17:00 (GMT+2);
• – US crude oil stocks at 17:30 (GMT+2).

by JustMarkets, 2021.02.03

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.