Spreadex Market Update

2021 sophomore slump sees FTSE, Dow Jones at 9-day lows following US retail shock



The markets suffered a sophomore slump in the 2nd week of the year, culminating in some rather ugly losses this Friday afternoon.

Conscious of the difficulties in getting anything done in the American political system, let alone when you are trying to impeach the outgoing President, investors greeted Joe Biden’s $1.9 trillion covid-19 stimulus plan with a ‘we’ll see’.

Unfortunately that meant attention lingered on a rough couple of days for US data. Following on from Thursday’s sky high jobless claims figure – the worst since the end of August, and perilously close to the 1 million mark – investors had to deal with a pair of glum December retail sales readings suggestive of a tough Christmas across the country.

The standard number came in at -0.7%, against the 0.0% forecast and -1.4% seen in November, while the core figure slumped to -1.4%, a far cry from the -0.1% expected.

This staggered the Dow Jones, the index’s jelly legs causing it to tumble 320 points. Now the wrong side of 30,700, it is sitting at its worst price in 9 days.

That was the story across the Western markets. The DAX was really shaken, shedding 2% to hit 13,700, with the CAC right there behind, dropping 1.8%.

It is a sign of how risk-off investors felt this afternoon that the FTSE fell 1.6% – putting it at its own 9-day nadir of 6,690 – despite cable itself plunging 0.7%.

And it’s not necessarily looking any easier for the markets next week. If they can pull themselves out of this New Year nosedive is arguably doing to be down to 2 things: how chaotic Biden’s inauguration ends up being, and how quickly the Democrats can get down to the dirty business of passing bills once the new POTUS takes office.

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