Coinbase IPO euphoria, Wall Street rallies and gold rebounds

Week from 12 to 18 April 2021

Coinbase, the largest cryptocurrency exchange in the United States, made its debut on the Nasdaq in direct listing. Its shares closed at $342 on Friday, well above the reference price of $250 set on Tuesday. This closing price valued the company slightly below $90 billion counting all its outstanding shares. In comparison, it is more than ICE, the parent company of the New York Stock Exchange, which is worth less than $70 billion.

At the same time, Bitcoin and other cryptocurrencies fell dramatically, suffering a flash crack over the week-end due to a blackout in the Xinjiang region which powers a lot of bitcoin mining. Last but not least, several countries such as Turkey and India now threaten to ban the use of cryptocurrencies.

Wall Steet Rallies as Bonds Yields Ease

Wall Street ended the week higher in the wake of the earnings season kickoff. As expected, large banks reported strong profits, thereby beating analysts’ forecasts. Stock markets were fueled by better-than-expected retail sales and jobless claims falling to their lowest level of the pandemic. Also, Treasury yields fell to a six-week low (10-year T-note yield at +1.59%, 30-year at +2.27%) after data showed U.S. inflation was not spiking much more than anticipated. Yet the U.S. consumer price index rose 0.6% in March but this gain remained close to the Dow Jones estimate (+0.5%). Approximately half of the increase resulted from a 9.1% jump in gasoline prices.

Dow Jones above 34,000 for First Time in History

The Dow Jones Industrial Average closed at a record high of 34,200.67 points, up 400 points over the week, or +1.18%. The S&P 500 was likewise at a new record high (4,185.47), with a gain of +1.37%. The Nasdaq Composite rose +1.09%. All lights were flashing green for stocks, including small caps. The Russell 2000 thus offset the losses suffered last week (+0.86%).

Most of the S&P sectors finished in positive territory. Communication services were the only exception (-0.01%). Utilities (+3.66%) and materials (+3.24%) led the pack. A 11.26% surge in PPG Industries lifted the later. The paints, coatings and specialty materials company more than doubled its first-quarter earnings. Health care followed suit (+2.88%) even if the FDA halted the use of Johnson & Johnson's Covid-19 vaccine. Real estate (+2.62%) and consumer discretionary (+2.04%) also fared well. Energy remained weak (+0.23%) though U.S. crude stockpiles fell by 3.6M barrels last week. West Texas Intermediate rose $3.81 a barrel on the news (+6.42% week-over-week).

Major European equity indices closed higher (FTSE: +1.50%, DAX 30: +1.48%, CAC 40: +1.91%). APAC markets closed mixed as was the case last week. The Nikkei 225 slid -0.28% and the Shanghai Composite was down -0.70%. In India, the NIFTY slumped -1.46% as an unabated surge in Covid-19 infections raised fears of new lockdowns. By contrast, Korean stocks jumped again with the KOSPI up +2.13% on recovery optimism. In Australia, the S&P ASX 200 added +0.98%.

Bullish Trend Prevails on Credit Markets

Lower yields continued to favor U.S. credit markets. Investment grade corporate bonds were up +0.49% while their European counterparts edged down (-0.09%). Emerging debt (+1.28%) recovered from the losses incurred in the second half of March. High yield bonds posted their fourth straight positive week (+0.08% in Europe, +0.25% in the U.S.).

Elsewhere gold shined again (+1.87%) as U.S. bond yields plunged and the greenback was weakening (EUR-USD up +0.75% at 1.1979).

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