Markets are ready for a correction

A vibrant trading week is ending with PMI indicators remaining to close it. We have witnessed inauguration of a new President of the United States Joe Biden, new highs of stock indices, brilliant Netflix earnings report, demure ECB meeting statement amid worsening pandemic situation in Europe.

Today traders will focus on the business activity expectations, known as Purchasing Managers’ Index or PMI for six major economies – Eurozone, the United Kingdom and the United States following already released data for Japan, Australia and New Zealand.

Consensus forecasts are not inspiring since a major decline in business activity in euro zone and the U.S. is expected to plummet while in the U.K. it will ideally remain at December level. So, if expectations would turn to reality we may record the beginning of a global economic decline not seen since October 2020.

The reaction of stock markets may be mixed on Friday after S&P 500 broad market index renewed its highs on Thursday, above 3840 points.

As for the corporate earnings season in the United States we should not expect major stories to be reported today, and, moreover, that any of reporting companies would be close to a shining Netflix report that propelled its stocks to a record highs at $593 per share, or almost 18% in a single day. The company report beats any forecasts of its net profit and revenue, but also announced suspension of new borrowings on movies and series production.

So, with no big stories today in mind we may expect a correction in stock markets.

Oil market is not expected to perform significant volatility in short-term. Brent crude prices are stuck close to $56 per barrel, and are waiting for some triggers like crude reserves to identify further direction.

Gold prices rose slightly above a strong resistance level at $1870 per troy ounce that was a good selling point after U.S Treasuries yields resumed climbing.

The U.S. Dollar edged lower this week, but we may expect the Dollar to redound in the mid-term vs the Euro, British Pound and Japanese Yen.