Week in a Glance: Texas Freezing, Retail Sales and a Trillion BT

22 Feb 2021

The main movements in the past week show a rather sharp decline on most risk-free assets fronts, traditionally accompanied by an increase in risky assets. In terms of news, freezing temperatures in Texas have distracted attention from the usual top-level topics like the US stimulus package fate and pandemic news.

So, gold underwent quite evident losses last week, but the yield on US Treasuries rose to the highest values ​​since February 2020. Such dynamics is a clear signal in favor of risky assets (capital flow). But also it gives a serious reason to think about whether it is worth buying shares at such exorbitant prices, if the risk-free profitability has almost tripled over the past six months. Judging by the dynamics of the US stock market last week, the markets were really focused on that.

This thoughtfulness, however, did not appear in the cryptocurrency market. Bitcoin capitalization has approached a trillion. Perhaps air never costs so much. Even Musk’s rather vague explanation about Tesla’s investment in bitcoin didn’t help stop the insane rally: his thought boiled down to the fact that he had nothing to do with it, this was not his idea, and in general he believed that this had been a rather adventurous idea.

The oil prices grew last week. Unlike the same cryptocurrency market, there were quite tangible reasons for this. The main one, of course, is that the record frost in the US provoked a collapse of the energy system in some states (mainly Texas). It resulted in up to 40% loss in the US oil production. Note that since this shock is short-term (the temperature has already climbed up), this week oil pricing may well be significantly corrected. Moreover, Saudi Arabia has announced that it will soon stop cutting production by an additional 1 million B/D.

The top macroeconomic statistics of last week shows

• The data on retail sales in the US (they came out much better than forecasts thanks to incentives) and
  
• The UK (much worse than forecasts, thanks to the pandemic, lockdowns and Brexit)

In addition, data on PMIs in Europe and the US were released on Friday stating that the Europeans are supposed to do very well, especially in the service sector. Then the United States continued to literally radiate positive, continuing the positive series of macroeconomic statistics.