Market Commentary – August 17, 2021

Kevin Jock

17th August 2021

Despite being overshadowed by slowing growth in China, social distancing restrictions being piecemeal reintroduced globally and over-arching regulatory clampdown from Beijing, Wall Street managed to eke out gains by sessions end with the S&P500 up 0.3%, closing its fifth consecutive gain. Meanwhile, Nasdaq gains 0.1% and Dow Jones 0.3%. On the forefront of investor optimism, delays in tapering by the Federal Reserve and the newly signed trillion-dollar infrastructure package to assist in propelling the country beyond the pandemic.

Across the Atlantic, Europe illustrated a different story as all major indices fell, snapping a 9-day and 5-day rally on the STOXX50 and CAC40 respectively. DAX30 down 0.3% and FTSE100 slipping 0.5%, succumbed by a surprised slowdown in China’s indicators. Bearish sentiment overflowed into early Asia session with the Hang Seng performing sliding 1.2%. Similar price action for both the S&P200 and Nikkei, both losing 1% and 0.6% respectively.

The American greenback rallied across the board, whilst regulators and government officials perpetuated tumbles on the Aussie and Kiwi dollar. Monetary policy meeting minutes from the RBA released today revealed the central bank is ready to act should lockdowns induce economic strains. Whilst in New Zealand, authorities announced they are investigating their first COVID-19 case since February.

Elsewhere, gold rallied for a fourth day to $1,787, bitcoin fluctuates around the $46,000 level and crude continues to lose ground to $67.46.

NZDUSD-2

Figure 1 (Source: IS Prime) NZDUSD daily : Kiwi dollar test major support level following discovery of first coronavirus case since February this year.

Headliner to Review

  • The August retail sales growth figures released in China came out to be 8.5% compared with the same month a year earlier, lower than the anticipated figures of 10.9%. The outbreak of the Covid-19 Delta variant and the widespread flooding has exacerbated concerns that the country’s growth trajectory would continue to lose momentum, as the consumers cut back on spending across the board.
  • The newly released quarterly preliminary Japanese GDP data is 0.3%, rebounded compared to the last quarter of -1%. The better-than-expected growth was fueled by renewed investment by businesses and a rebound by consumers. However, the virus has spread far more widely since July and the pace of recovery will hinge on how infection is brought under control.

Headliner to Watch

  • Canadian CPI is forecasted at 0.3%, which is in line with the previous month.
  • The release of the Fed minutes this week will be key to short-term outlook for the greenback, especially if it confirms more policymakers are leaning toward tapering its bond purchase plan, since the US is experiencing higher than expected inflation rates and employment statistics.

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Authors:
Antony Tan
Kerry Man