Market Commentary – August 13, 2021

Kevin Jock

13th August 2021

Falling unemployment claims boosted Wall Street higher on Thursday, bolstering confidence in the nations eventual recovery despite rising global concerns over the Delta variant’s outbreak. The S&P500 led higher by 0.5%, followed by Nasdaq up 0.4% and Dow Jones at 0.1%. A robust recovery overshadowed by inevitable tapering, particularly as San Francisco Fed President Mary Daily expressed the possibility of “dialling back” support as early as this year during an interview with Financial Times. Daly had been one of the more dovish Fed members.

European benchmarks painted a similar picture, the STOXX settled 9 consecutive days higher. The CAC40 and DAX30 closing at all-time highs. Amid developed economies, lagging quarter GDP growth in the UK saw the FTSE slip 0.4%. In Asia, the S&P200 rallied whilst the Hang Seng and Nikkei succumb to regulatory pressure in China. The Communist party revealed a five-year plan to strengthen control over strategic sectors including technology and healthcare.

Defying rhetoric from Turkey President Erdogen, the nations central bank held one-week repo’s at 19% for its fifth consecutive month. The lira rallied 0.6% in response as traders were appeased with Governor Sahap Kavcioglu’s collision course with the president, who holds the view that lower interest rates would slow economic growth. The previous three governors who did not succumb to political pressure were fired. The dollar gained across majors and most exotics following Daly’s tapering remarks. Gold stood steady at $1,752. Bitcoin finds equilibrium at $45,000 level.

Crude fell $0.40 to under $69 following a report by the International Energy Agency illustrating a sharp downgrade in oil demand for the remaining of 2021. Delta variant being the biggest contributing factor where fresh social restriction is expected to curb consumption. The most recent data out of China, the world’s largest oil importer, revealed a decline in oil imports from 9.8m b/d to 9.7m b/d for the month of June. Meanwhile, should OPEC continue planned production increase in coming months, the likelihood of a stockpile surplus would increase. The cartel is scheduled to hold a meeting on September 1st.

EURUSD-2

Figure 1 (Source: IS Prime) EURUSD daily : The euro heads towards a major support line after falling 640 pips from the highs of the year as sentiment shifts from easing to tapering in the U.S.

Headliner to Review

  • U.S monthly PPI figure beat expected figure of 0.6% and came out as 1% in July, with a recording breaking of 7.8% over the past 12 months, due to the rising demand from the opening of the economy, while at the same time supply is constrained as a result of the pandemic disruptions.
  • US jobless claims meet expectations of 375,000, continues to fall compared to last week which signals stepwise economic recovery from the pandemic.

Headliner to Watch

  • U.S Retails Sales data is expected to decline by 0.2%, after a bounce back of 0.6% in previous month with a recent shift towards spending to services.
  • Reserve Bank of Australia (RBA) will release minutes of the latest monetary policy meeting held in August, a pick-up in both wages growth and underlying inflation is expected, while the cash rate target is also expected to remain unchanged.

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Authors:
Antony Tan
Kerry Man