Market Commentary – August 16, 2021

Kevin Jock

16th August 2021

Asia-pacific markets react poorly to China’s leading indicators with retail sales and industrial production declining worse than expected. Illustrating economic strain in which the Delta variant has impeded recovery back to normality. Among the lot, the Nikkei led, down 1.4% whilst the S&P200 and Hang Seng posted losses of their own, respectively 0.2% and 0.4%. The move in the Japan further exacerbated by escalating COVID-19 infections following the end of Tokyo 2021 Olympics. Over the weekends cases in records for three consecutive days. Increasing chances, the government will soon expand the state of emergency that currently covers only Tokyo, Osaka, and limited prefectures.

In the U.S. and Europe, broad-based benchmarks continue to push higher with some indices recording all-time highs on Friday despite fundamentally being overshadowed by delta variants outbreak. Fears among medical experts are arising over the achievability of herd immunity, especially as cases in Southeast Asia such as Thailand, Vietnam and Philippines remain near records. In America, not without uncertainty of their own as President Biden’s $3.5tn infrastructure packages hits a snag in the House of Representatives. Some democrats have insisted on delaying the bi-partisan infrastructure bill until the Senate passes bills upcoming bills on climate change and heath care.

Weak consumer sentiment data on Friday saw the US dollar lose ground against majors. To alleviate risk arising from resurging COVID-19 cases, the PBOC had injected 600bn yuan via their medium-term lending facility. Though thus far, the USDCNH has remained relatively unchanged. Bitcoin proclaims resilience as it retakes $2tn market cap after settling at $47,500. Crude closes at $68 and gold back to $1,779, recovering last week Mondays mini crash.

XAUUSD-Aug-16-2021-05-05-23-02-AM

Figure 1 (Source: IS Prime) XAUUSD daily : Gold steadily recovers after last Monday saw the precious tumble to as low as $1,680 on a culmination of fundamentals, technicals and thin liquidity arising from publics in Japan and Singapore.

Headliner to Review

  • The newly released figures of the US Consumer Sentiment report deteriorated significantly, dropping to 70.2 in August from 81.2 in July, as the pandemic’s resurgence due to the Delta variant has shifted consumer’s emotion, remarking on the bad buying conditions for virtually every product category.

Headliner to Watch

  • The Reserve Bank of New Zealand (RBNZ) is expected to raise the official cash rate by a quarter percentage point to 0.5%, from the previous level of 0.25%, due to the concern of labour shortages unleash wage-push inflation.
  • UK CPI is forecasted to decline to 2.3% from the previously level of 2.5% in July.

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Authors:
Antony Tan
Kerry Man