Market Commentary – August 5, 2021

Kevin Jock

5th August 2021

Tech outperforms on Wall Street whilst cyclicals fell following a disappointing ADP jobs report, falling short half-way from expectations, and hawkish monetary rhetoric from top policy makers. Amid an online event hosted by the Peterson institute for International Economics, Federal Reserve vice-chair Richard Clarida remarked the central bank should consider raising rates in the beginning of 2023. Nasdaq rose 0.1%, S&P500 closed 0.5% lower and Dow Jones slipping 0.7%.

Likewise, technology kept European and U.K benchmarks afloat on Wednesday. Reinvigorated interest in the sector comes amid the surge of the Delta variant, prolonging the eventual return to normality. In Europe, both STOXX50 and DAX30 rallied 0.6%, whilst the FTSE100 eked out 0.1% into bull territory.

Asia ended the session mixed as both the S&P200 and Nikkei advanced 0.4% and 0.75% respectively. The Hang Seng fell with China’s regulatory crackdowns and re-introduced social restrictions dominated sentiment once again. In China, train and subway usage has been curbed with taxi services being curtailed in 144 worst-hit Delta COVID-19 areas. Hong Kong reacted with re-imposing quarantine restrictions on mainland travellers.

Another volatile session for crude, down over $2 to $68.22. Again, a victim of Delta’s outbreak implications on global economic growth, especially as inventory data revealed a surprise surplus in stockpiles. The dollar rose against majors on Richard Clarida’s comment. Gold steadied at $1,811 and bitcoin fails to break above $40,000 to settle at $38,000

crude-1

Figure 1 (Source: IS Prime) Crude oil daily : Crude tumbles 3 consecutive days as the delta outbreak clouds demand recovery for the remainder of 2021.

Headliner to Review

  • US ADP non-farm employment change came in worst than expected at 330K with 695K the forecast. Job creation had tumbled late July over mounting fears that delta would leave governments no choice but to re-introduce restrictions
  • US ISM services posted better results at 64.1 from 60.1 with respondents saying there’s still on-going pent-up demand from the pandemic.
  • Crude oil inventory revealed a surprise surplus in stockpiles at 3.6M when -3.2M was expected.

Headliner to Watch

  • Unemployment claims data out of the U.S. expected to decline to 382K from 400K.
  • BOE members to deliberate on monetary policy. No changes in cash rate are expected but investors will keen focus on the number of members changing their votes in favour of tapering.

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Authors:
Antony Tan
Kevin Jock