Market snapshot: what we’ve learned from the first week of February

Our head of markets has a positive take on the UK and US fiscal stimulus.

With investors looking through the vaccination roll-out programmes to the economic recoveries which should ensue, the first week of the month’s trading has been generally positive.

The acceleration of the roll-outs is focusing the collective mind on better days to come. There are some tentative signs already emerging in the US, where some better-than-expected economic data, especially on employment, have been reported.

The expectation for the non-farm payrolls figure later in the day is for 50,000 jobs to have been added, compared to a decline of 140,000 in December, with the unemployment rate remaining at 6.7%.

Meanwhile, there have been some encouraging developments on the progress of President Joe Biden’s $1.9 trillion (£1.39 trillion) relief plan, which has prompted further optimism. With the Federal Reserve ready to give monetary support if required, and with a generally positive earnings season so far, there are an increasing number of factors lending support.

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The main indices are not only in positive territory but are again testing or passing through new record highs. In the year to date, the Dow Jones has added 1.5%, the S&P 500 3.1% and, fuelled by some recent blowout figures from the likes of Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX) and Alphabet (NASDAQ:GOOGL), the Nasdaq is already ahead by 6.9%.

This good news has not been fully replicated on UK shores, however. The strength of sterling and an evaporation of initially positive sentiment has left the FTSE 100 marginally ahead by just 0.6% in the year to date.

Comments from the Bank of England provided limited grounds for fresh optimism, although the current path of vaccination roll-outs could yet lead to an earlier recovery.

More positively, the recent and successful flotations of both Moonpig (LSE:MOON) and Dr Martens (LSE:DOCS) have indicated something of a return to form for new issues.

Indeed, with more technology floats expected in the first six months of this year, it has been estimated that the total value of initial public offerings could exceed those of 2020 by the end of the first half.

In the meantime, the primary index is itself in need of a shot in the arm before it can return to the brisk gains seen in early January.