Market bulls did not manage to keep the increases until the end of the week and Friday brings a retreat. In the case of the US indices, this is a retracement from historic highs. Also with fears of another wave of COVID-19, oil seems to be falling as this could result in a drop in demand from Asia.
European stock indices traded in the red during Friday's session after it emerged that preliminary PMI data showed a decline in economic activity across the continent, driven by deteriorating conditions in the services sector and weaker manufacturing growth. Airline stocks were among those that lost the most, and the reason may have been Thursday's decision by European leaders to keep borders open, but with the caveat that any travel that is not necessary must be restricted to reduce the spread of the epidemic. Countries in Europe continue to battle infections, hospitalizations and deaths at record levels and continue to impose tightened measures and restrictions. ECB President Christine Lagarde warned Thursday of the impact of rising infection rates on the economic outlook, especially if the lockdown is extended further than March.
Meanwhile, in the United States, the Dow Jones index fell more than 200 points and the S&P 500 and Nasdaq lost about 0.5 percent on Friday, retreating from record highs earlier in the week. Investor attention has returned to an epidemic situation, while initial optimism about earnings and additional stimulus from the new Biden administration has already been discounted by the market. The U.S. President warned that the pandemic would get worse before it got better, while signing executive orders to expand testing, vaccinations, economic assistance and increased worker protections.
On the corporate front, Intel and IBM results released Thursday after the close beat forecasts, although IBM's revenue disappointed. PMI data, on the other hand, showed factory activity rose at a record pace in January, and readings in services also came in higher than expectations.
Crude oil fell nearly 2 percent on Friday, retreating from an 11-month high reached the previous week, A barrel of WTI crude on Friday cost $52 and Brent approx. 55 dollars. The declines may have come amid growing concerns about restrictions, particularly in China, the world's largest oil importer.
A new wave of coronavirus infections in China has led to blockades in Hebei province, with authorities asking people to stay indoors during the Lunar New Year holiday next month.
On the supply side, API data showed U.S. crude inventories unexpectedly rose by 2.562 million barrels last week, the biggest jump in a month.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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