US tech stocks lead the way higher

Joshua Mahony MSTA Scope Markets

US and European markets are gaining ground as tech stocks enjoy a welcome rise ahead of Microsoft, Alphabet, and Twitter earnings. In the UK, energy names are on the back foot, while domestically-focused stocks rise on easing fears around ‘Plan B’ restrictions.

US tech stocks lead the push higher.
Energy names to weaken as volatility persists.
Travel and services names outperform as UK covid cases ease back.

US tech stocks are leading the push higher today, with a pullback in the US 10-year yield coming as traders await fresh Q3 numbers from the likes of Twitter, Microsoft, and Alphabet after the close. Coming off the back of a well-received set of Facebook numbers, there is a clear feeling of optimism that has pushed the Nasdaq back within touching distance of record highs. While many have been fearful of a shift from growth to value as treasury yields push higher, it is likely that today’s forthcoming earnings data provides a timely reminder of the reliability of tech stocks.

Energy stocks are suffering a pullback after a period of outperformance, with the likes of Petrofac, Harbour Energy, and Tullow Oil losing traction in the UK. Natural gas has been a big mover today, with prices down 4% as uncertainty around supply brings continued volatility. On the crude front, we have seen Brent largely tread water since hitting the $85, although further upside looks likely given the tightening supply-and-demand dynamic. While Cathie Woods has talked down the prospect of further price increases, she appears to be an outlier as a lack of fresh investment and depleted inventories signal the potential for an energy crunch this winter. BlackRock CEO Larry Fink is one major player calling for $100 oil, and that looks to be increasingly likely as the world reopens.

Travel and services sector names are outperforming in the UK, as fears of a five-month ‘plan B’ period of restrictions have been allayed by the government. The recent rise in Covid cases had brought increased anxiety over the potential for fresh limits on travel and movement. However, we have started to see cases decline of late, raising hopes that transmission will ease without the need for further limits. Meanwhile, Andrew Pollard (head of the Oxford Vaccine Group) noted that the relatively high rate of UK Covid testing means it was always likely that UK figures would be elevated in comparison to those with a less comprehensive testing approach.

Author

Joshua Mahony MSTA

Scope Markets

Joshua Mahony is Chief Markets Analyst at Scope Markets. Joshua has a particular focus on macro-economics and technical analysis, built up over his 11 years of experience as a market analyst across three brokers.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.