It was a sluggish January for equity and forex markets, with the Dow Jones Industrial Average shedding more than 2 per cent and the S&P500 dropping 1.4 per cent over the course of the month. In the currency markets, the EUR/USD closed 0.84 per cent lower after hitting highs of 1.2350.
A lot of the weakness over the past month was a result of a stronger US dollar. The US Dollar Index, a measure of the value of the greenback against a weighted basket of major currencies, gained 0.68 per cent on the month after bouncing off 20-month lows. The ongoing pandemic concerns and the strain on global health systems to efficiently distribute Covid-19 vaccines also led to some of the selling pressure.
But perhaps one of the biggest factor driving stock markets down over the past few days was the trading tug of war between large groups of retail day traders and Wall Street institutions. The move in GameStop (GME) has been well-documented. After a group of Reddit users sparked a buying rally in the stock, hedge funds and other large financial institutions focused on short selling were forced to buy GameStop to balance the gamma as the losses in their GME put options escalated amid the buying frenzy. This drove up the price of GME further.
Many of these large institutions had to finance their GME losses by dumping other stock holdings to build more liquidity in their portfolios. While the short-squeeze move has largely played out and markets seem to be getting back to normal, attention has turned back to more promising vaccine news across both sides of the Atlantic and US President Joe Biden’s $1.9 trillion relief package.
The dispute between AstraZeneca and the European Union saw the drugmaker decide to cut its vaccine supplies to the bloc last month. The row over the vaccine supply chain spooked markets in January. However, at the start of February, a new resolution will see around 9 million additional doses being delivered to the EU in the first quarter, taking the total to 40 million. This is in addition to German Chancellor Angela Merkel targeting the end of summer to have all of Germany vaccinated.
The euro area has been particularly susceptible in January. Despite strong gains in euro area Purchasing Manager Indices (a key economic barometer in determining the direction of economic trends in the service and manufacturing sectors), the EUR/USD pairing has been under pressure over the past few weeks and now finds itself holding above 1.20 levels.
While the recovery in the euro area manufacturing sector is positive news, consumption still lags. We can expect continued positive developments around vaccine deployment and the upcoming US relief package to add more optimism to markets.
At the time of writing, bipartisan negotiations were still ongoing in Washington, but an announcement is imminent. Looking ahead, we have US non-farm payrolls due this Friday. Expectations are for new jobs added in the region of 50,000.
US earnings continue this week. At the time of writing, Amazon, Alphabet and Alibaba Group were yet to report, but we can expect stronger earnings to have a positive impact on US equity markets.
Finally, I am keeping an eye out for the Dubai Gold & Commodities Exchange’s GBP/USD contract. Currently trading below 1.37 levels, it has faced stiff resistance at 1.3760, a level it has consistently tested and failed over the past eight trading days. If there is a conclusive break of this level, we will then be exposed to 1.40 levels on the upside in the months ahead.
Gaurav Kashyap is a market strategist at Equiti Global Markets. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti
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MATCH INFO
Uefa Champions League semi-final, first leg
Bayern Munich v Real Madrid
When: April 25, 10.45pm kick-off (UAE)
Where: Allianz Arena, Munich
Live: BeIN Sports HD
Second leg: May 1, Santiago Bernabeu, Madrid
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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Sector: Tech
Size: 20 employees
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Investors: Three founders (two silent co-founders) and one venture capital fund
The End of Loneliness
Benedict Wells
Translated from the German by Charlotte Collins
Sceptre
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Goalkeepers: Ibrahim Alma, Mahmoud Al Youssef, Ahmad Madania.
Defenders: Ahmad Al Salih, Moayad Ajan, Jehad Al Baour, Omar Midani, Amro Jenyat, Hussein Jwayed, Nadim Sabagh, Abdul Malek Anezan.
Midfielders: Mahmoud Al Mawas, Mohammed Osman, Osama Omari, Tamer Haj Mohamad, Ahmad Ashkar, Youssef Kalfa, Zaher Midani, Khaled Al Mobayed, Fahd Youssef.
Forwards: Omar Khribin, Omar Al Somah, Mardik Mardikian.
