Week in a Glance: Bank of England, OPECPlus, NFP and Reddit Fail

8. Feb. 2021

The main event for financial markets last week was the end of the epic confrontation between David (small investors from Reddit) and Goliath (professionals from Wall Street). It’s from the hype viewpoint. David, despite the whole army of sympathizers, lost—yes, this is the real world, not the Bible.

It’s evident when using GameStop stock dynamics as a valuation metric. At the very end of January, they reached $400, but already last week they dropped up to $60. So, they lost 85% in a week. This is everything you need to know about the outcome of Reddit’s war with Wall Street. And we warned about this. The outcome was extremely obvious.

Another important event of the last week was the US labor market statistics publication. The NFP indicator’s traditionally attracted the most attention coming out exactly in line with the forecasts. The markets hoped for the best but the data in positive territory cannot be called a failure. It’s especially significant if we remember that the December data were in a rather deep minus. Anyway, the dollar got its sales share. As long as the Dollar Index is above 91 and the inverted head and shoulders pattern is in play, such declines are a great reason to buy.

Firstly, it’s for purchases against the British pound, which has greatly revived after the Bank of England meeting results were announced. But there was nothing especially to be happy about. The monetary policy parameters unchanged, but the GDP rate growth in 2021 was significantly cut: from 7.25% to 5%. The only reason for the conditional joy was the announcement that they weren’t ready to switch to negative rates.

Another important event of the past week was the OPEC Plus Joint Ministerial Monitoring Committee meeting. They didn’t increase production on it, noting the high compliance level (which didn’t correspond to independent data showing it’s at 85%). At the same time, OPEC again cut its forecasts for the 2021 demand growth rate, lowering them from 5.9M to 5.6M barrels.

But all this didn’t prevent the oil growth. Markets have relaxed too much after the victory over retail investors, as well as against the background of an improvement in the epidemiological situation. It naturally sets up a positive mood in oil demand growth recovery.

In addition to the UK GDP data, the coming week will be rather calm. So, the markets will focus on US stimulus issues as well as pandemic news.