Weekly market recap 01.02.2021

US

Stocks declined sharply last week as volatility and trading volumes rose. Large-cap indexes performed better than mid- and small-cap shares. On Wednesday the S&P 500 Index lost almost 2.6%, the worst drop since October. Total trading volume hit a record high of 23 billion shares on Wednesday, a huge jump from the year-to-date average daily volume of about 14 billion. 

Many companies posted quartery results, but unusual fluctuations in the prices of certain stocks took the media attention. Reatil investors reading certain social media collectively bought stocks with high percentages of short interest. In this „short squeeze“ rising stock prices forced short investors to buy back the shares at a higher price, driving stock prices even higher. GameStop, a video game retailer, and movie theater operator AMC Entertainment Holdings were two of the heavily shorted stocks that experienced short squeezes, causing huge price gains and major losses on short positions.  

EU

European shares fell as strict lockdowns were imposed in many european countries and delays occured in the distribution of coronavirus vaccines. The pan-European STOXX Europe 600 Index ended the week 3.11% lower. Major European indexes also declined: Germany’s Xetra DAX Index fell 3.18%, France’s CAC 40 dropped 2.88%, and Italy’s FTSE MIB slid 2.34%. The UK’s FTSE 100 Index lost 4.30%. 

The German economy expanded 0.1% in the fourth quarter, pulled by exports and construction. Spain’s GDP unexpectedly grew 0.4%, driven, in part, by increased household consumption. France’s economy shrank 1.3% in the fourth quarter, an upside surprise relative to a consensus estimate that had called for a 4.1% contraction. Bright spots for the French economy in the fourth quarter included robust exports, steady business investment, and a rebound in consumer spending. However, due to continuing lockdowns, the German government cut its 2021 forecast for GDP growth to 3% from its previous estimate of 4.4%.

Japan

Japan’s stock markets declined for the week. The Nikkei 225 Stock Average fell 3.4% (968 points) and closed at 27,663.39. For the year-to-date period, the blue chip index is ahead 0.8%. The broader equity market benchmarks—the large-cap TOPIX Index and the TOPIX Small Index—also retreated, giving back most or all of their year-to-date gains. The yen weakened and traded above JPY 104 versus the U.S. dollar.