Mark Lister, 25 January 2021

Most equity markets were higher last week, with the inauguration of Joe Biden and the start of the global reporting season providing some positive news for investors to latch onto. The S&P 500 in the US rose 1.9%, while the Nasdaq was up 4.2% to finish the week at a new record.

The NZX 50 gained 2.4%, rebounding from a very poor performance the week before as some of the larger companies posted solid gains and the electricity sector recovered from some of its recent losses.

Late in the week some caution crept into global markets, with the focus shifting to potential challenges Biden might face in getting the US$1.9 trillion support package approved. Virus-related restrictions and lockdowns are also showing little sign of easing in many places, while concerns remain over the speed of vaccinations.

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The COVID-19 situation remains troubling in much of the world. Singapore now requires all inbound visitors to get tested upon arrival, the UK reported its highest daily death toll since the outbreak began last week, and the number of deaths in Americans from the virus passed 400,000 just as Biden officially took office.

Then again, signs are emerging that the US may have passed the worst of the pandemic and turned a corner. The number of people hospitalised in the US with COVID-19 posted the highest daily and weekly falls on record last week.

Turning to the week ahead, the global reporting season will keep analysts busy. More than 120 S&P 500 companies due to announce results, including the likes of Apple, Boeing, Caterpillar, Facebook, McDonalds, Microsoft, Starbucks and Tesla.

Johnson & Johnson’s result on Tuesday will also be closely watched, as investors await an update on its vaccine. It is expected to be a single shot one, as opposed to the double-shot vaccines that are currently available from other companies. Outside of earnings, markets will focus on the outcome of the first Federal Reserve meeting of the year, the latest GDP releases from the US, Germany and France, as well as the latest economic update from the International Monetary Fund.

The World Economic Forum in Davos usually takes place at this time of year, although in 2021 the summit will instead be held in late May in Singapore. However, on online version called "The Davos Agenda" is due to take place this week, starting on Monday and continuing through the rest of the week. This will include numerous global leaders and central bankers, so it will still generate some attention and interest. Chinese President Xi Jinping, German Chancellor Angela Merkel and French President Emmanuel Macron will all contribute, as will the central bank representatives from the Bank of Japan, European Central Bank and the Bank of England.

The first Federal Reserve meeting of the year takes place this week, with the outcome of the meeting set to be released at 8:00am on Thursday in New Zealand. This won’t see the release of any updated financial or economic projections, those will come at the next meeting in mid-March. Investors will still be very interested in the statement, as well as the comments of Fed Chair Jerome Powell in the press conference that will follow.

The US will release its advance GDP report for the December quarter on Friday, before the usual revisions that will come over the next couple of months. Markets are expecting an annualised quarterly increase of 4.4%, following on from the 33.4% rebound in the September quarter (which followed the 31.4% contraction during the June quarter).The US will likely fare a lot better than Europe’s two biggest economies, Germany and France, both of which are also report December quarter GDP this week.