Following the turbulence of 2020, markets got off to a fairly subdued start to the new year with most major exchanges either flat or slightly higher. Both Australia and the US were just 0.3% higher while Europe finished marginally lower for the month. Indeed, most of the market’s attention was focussed on the trading fiasco surrounding the US electronics retailer GameStop, where coordinated buying from a bunch of day traders, inflicted major losses on hedge funds that were heavily short the stock.
Yield curves began to steepen as long dated bond yields crept higher, factoring in the potential for inflation to emerge as a consequence of the monetary and fiscal stimulus measures used to blunt the economic impact of the pandemic. US 10-year treasury yields were 20bp higher to edge above 1% for the first time in almost a year.
Following its strong appreciation from the lows of March last year, the AUD fell slightly against the USD to finish at 76.4c while gold was also a touch weaker to finish at US$1850/oz.