UK vaccinations and a silver frenzy drive markets

Published at Feb 2, 2021, in Market Wrap

Joshua Mahony, Senior Market Analyst at IG, discusses what is trending in the markets.

The FTSE 100 is enjoying a buoyant start to the week, with precious metal miners and high-street names leading the charge. However, fears remain thanks to weak Chinese PMI data, and questions around US stimulus efforts.

European markets have followed their Asian counterparts higher in early trade, with traders seemingly willing to overlook a host of risk factors that loom over markets. Weekend data from China has done little to boost sentiment over the economic recovery in the region, with both headline and Caixin PMI surveys turning sharply lower to signal slowing growth.

Despite the clear Chinese success in combating the Coronavirus, the January PMI readings highlight recent difficulties as cities such as Shijiazhuang were placed into lockdown. Meanwhile, hopes of an impending $1.9 trillion coronavirus package from Joe Biden have been dealt a blow after 10 Republican senators proposed a counter $600 billion measure.

Nevertheless, while this could signal difficulty in passing his $1.9 trillion package, there is a feeling that the Democrats could still pass much of that package via ‘budget reconciliation’ which would require a simple Senate majority.

UK coronavirus deaths and hospitalisations have finally started to turn the corner, following on from a dramatic decline in cases over the past week. Worries that the more contagious Covid strain were making lockdown measures less effective are being allayed by this latest development, although it is clear that these measures are likely to remain in place until vaccinations reach a critical mass.

On the vaccination-front, the UK is ramping up their process to such a degree that close to 1% of the population was inoculated on Saturday alone.

While precious metal miners understandably lead the way this morning, the notable rise in high street names like JD Sport, Dunelm, and Restaurant Group does highlight the feeling that the UK vaccination efforts will help get things open as soon as possible.

Silver appears to be the latest toy for the Reddit community, with the precious metal spiking 10% in early trading today.

Fresh off a historic week that saw a host of downbeat US stocks dramatically appreciate, the latest targeting of silver prices highlights the lack of physical products to back the products currently being offered on Wall Street.

iShares Silver Trust ETF enjoyed a $1 billion inflow on Friday, with a weekend of physical silver shopping around the globe ensuring that those institutions will find it tough to source enough silver to back the latest surge in investment.

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