Dubai: With market-sensitive events like Britain’s exit from the European Union and a stimulus package in the world’s top economy, the US, having been settled for the most part, the first-full trading week of 2021 is set to start on a positive note.
The prior year ended with trading volumes being thin, with many traders away on New Year’s Eve and major markets closed. This trend is briefly seen continuing at the start of this week but slowly expected to pick up in the days ahead.
This week is a busy one for economic data released in some parts of the world, with Purchasing Managers Index (PMI) and ISM manufacturing index figures - indicators of economic health for the manufacturing sector – scheduled to be released in the US, which is a key gauge for economic health.
First set of economic data
“The first full week of the new year sees the revisions to December’s flash PMI figures from around the globe, along with the US ISM numbers for that month, and then culminates in the monthly US jobs report,” noted Chris Beauchamp, chief market analyst at UK-based trading group IG.
“US Jobs growth is expected to slow markedly in December, which poses a risk to a market that has been in full ‘risk-on’ mode since the end of October.”
The MSCI World Index was flat on the last trading day of 2020, slightly below its record level, as the index is headed for a near 14 per cent rise in 2020 after surging more than 60 per cent from its March lows.
European markets declining
Despite a stimulus-charged rebound since the pandemic-induced market slump in March, most European markets have underperformed the US and Asia, where a series of record highs were reached.
The pan-European STOXX 600 recorded a 3.8 per cent drop in 2020 as a rapid surge in coronavirus cases and worries about Brexit curbed the wider recovery in investor sentiment.
Still, despite rising COVID-19 case numbers and increasing unemployment, investors are betting the rollout of vaccines in 2021 will unleash an economic rebound spurred by plentiful fiscal and monetary cash.
2020 headlines still around
Headlines from 2020 will still be around, but analysts say they will no longer be the primary issues for trading decisions.
A Brexit deal with reached and implemented on December 31, but the language of the agreement still needs to be agreed upon and the deal needs to be approved.
The US stimulus package worth $900 billion was signed, however a bill to increase direct aid from $600 to $2000 per person is yet to be executed.
UAE markets begin 2021 strong
UAE bourses began the week and the year on strong footing, with both indices rising as investors placed their bets on the coming year being one of gains for stock markets.
The Dubai Financial Market (DFM) rose 0.7 per cent at 2,508 points and the Abu Dhabi Securities Exchange (ADX) posted a similar-sized gain to end at 5,081 points on Sunday.
However, elsewhere in the GCC, the region’s largest exchange – Saudi Arabia’s Tadawul – dropped nearly 1 per cent at the start of the week, while indices in Qatar and Jordan slipped marginally. In Oman, the Muscat Securities Market gained 0.4 per cent.