FX.co ★ Burning issues for global stocks in 2021

Stock investors are pricing in several crucial events in 2021.

First, the season of corporate earnings reports has kicked off in the US. Top American companies are due to release their financial records for Q4 2020. JPMorgan, Citigroup, and Wells Fargo were the first to unveil their financial statements. Interestingly, revenues of the top US banks boosted at the end of the past year amid sell-offs of US Treasuries. Meanwhile, investors are closely monitoring a differential between short- and long-term interest rates as well as updates on dead loans.

Second, market participants are keeping close tabs on the saga of the large-scale stimulus package proposed by Joe Biden. Earlier, he suggested that a relief package should be complemented by extra spending articles, including payments to households, financial aid to some local governments, direct payments to individuals, etc. The US President is forging ahead with the coronavirus stimulus bill worth $1.9 trillion. Nevertheless, market participants realize that Biden’s original proposal will hardly pass the vote in Congress. The Republicans in the Senate have already slammed the draft bill.

Third, Chinese large high-tech companies are not going to leave American exchange floors where their stocks are listed. Ex-President Donald Trump was eager to sweep them away. However, they have been already removed from the blacklist by the new administration and still enjoy popularity among investors, even though the stocks of China’s high-tech giants are trading with the overall downtrend. Nevertheless, investors believe that the bullish trend is around the corner. Meanwhile, Xiaomi’s shares which are still in the blacklist have already tumbled over 10%.

Last but not least, market participants are fretted about political developments in Germany. The Christian Democratic Union has appointed their nominee for the Chancellor’s positions to replace Angela Merkel. Obviously, serious changes are afoot for Germany’s political landscape as the Merkel era is coming to an end. All in all, one of the three candidates is to take office as Germany’s Chancellor. Two of them, Armin Laschet and Norbert Röttgen, will follow the current rhetoric. Unlike them, Friedrich Merz has already targeted some faults of Frau Merkel’s centrist approach and stated his intentions to revise the political course. At the same time, investors should not neglect candidates from the Christian Social Union who are also determined to fight for the win in the federal election slated for September 2021.