Market Commentary – August 26, 2021

Kevin Jock

26th August 2021

Wall Street stocks hit record highs on Wednesday, both S&P 500 and the Nasdaq indices were up about 0.2%, led by growth-sensitive stocks from the finance and energy sectors. The overall volatility has been rather mute as investors watched closely ahead of Jackson Hole’s symposium starting on Thursday.

In Europe, markets followed a similar pattern in which most of the main stock indices were positive or flat. London’s FTSE 100 index rose 0.3%, STOXX 600 closed flat, Dax down by 0.3% and CAC40 up by 0.2%. Trading activity was well below average levels across national bourses since investors have been cautious about making big bets ahead of the symposium.

Elsewhere in Asia, China stocks snapped a three-day winning streak to end lower on Thursday, as tech shares stepped back after a sharp rebound, while a government-induced slowdown in the country’s property market deepened concerns over the economic health. It is the same situation for HK stocks as they close lower on tech slide, with the Hang Send index fell 1.1% to 25,415.69.

Furthermore, crude oil continues to climb for 3 consecutive days to above $68 by encouraging signs that China’s delta variant outbreak is well-under control. In terms of gold, its spot prices remained under pressure as the dollar rose ahead of the Fed’s speech, however, the widening impact of the pandemic might continue to levy some support to the safe haven asset gold.

SP500-2

Figure 1 (Source: Refinitiv Eikon) S&P 500 Daily : The blue-chip S&P 500 index continue to rally and break all-time highs for the fourth consecutive day.

Headliner to Review

  • German business sentiment worsened in August for the second consecutive month as their Ifo business-climate index decreased to 99.4 points from 100.7 points in the previous month. Such decline is caused by supply bottlenecks as well as concerns over the Delta variant which clouded the short-term outlook.
  • US crude oil inventories decreased by 3.0 million barrels from the previous week, since a tick higher in refinery runs and a tick lower in imports has yielded a third consecutive draw to crude inventories.

Headliner to Watch

  • The annual Jackson Hole Symposium will commence in this week. We believe the focus of this year’s meeting should be the Fed to lay the groundwork for a tapering programme given the rise in inflation. Although the Fed minutes highlighted that the Fed do expect to taper at some point this year, but the timing remains a key concern that appear to divide opinion as there is a lack of consensus.  
  • We also expect to see the release of the monthly US Core PCE Price Index, forecasted to increase by 0.3% compared to the last month’s figure of 0.4%.

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Authors:
Antony Tan
Kerry Man