Market Commentary – August 6, 2021

Kevin Jock

6th August 2021

On Thursday, Wall Street advanced with both Nasdaq and S&P500 emerging onto all-time highs. Dow Jones too recovered losses from previous day as jobless claims declined, contradicting the disappointing figures from Wednesday’s ADP non-farm employment change. Ahead of Friday’s closely watched non-farm payrolls data though, a strong print would risk increasing tapering speculation which has supported the U.S. stock market during the pandemic.

European benchmarks extend gains yesterday as the DAX30 and STOXX50 settled just below record highs, whilst the CAC40 rallied 0.5%. In London, hawkish remarks from the Bank of England weighed down the FTSE100, slipping 0.1% by sessions end. The central bank acknowledged given growth has been persistently running “slightly” above forecast, “modest tightening” is a possibility in the next two years.

In Asia, the Hang Seng continues to fluctuate wildly torn between China’s ever-increasing restrictions, with new nationwide travel bans to be implemented to stifle Delta variant’s spread against Wall Street’s record close. In Australia, despite Sydney now in 40 days of lockdown, the S&P200 rallied 5 consecutive days. The Nikkei relatively unchanged throughout today’s session.

Relief rally for crude oil up just over $1 to $69.29 but nonetheless is headed for its biggest weekly loss since March. Shedding 5.9% thus far this week, Delta being the largest contributing factor downgrading global economic growth, particularly China the world’s biggest importer. The U.S. dollar index held steady awaiting pay-roll data, gold at $1,800 and bitcoin back above $40,000.

USDCNH-Aug-06-2021-09-36-43-58-AM

Figure 1 (Source: IS Prime) USDCNH daily : Following the PBOC’s indirect intervention back in June, the USDCNH ranges between 6.45 – 6.5 as regulatory policy collide with fundamental direction.

Headliner to Review

  • Bank of England monetary policy meeting had most committee members acknowledge conditions to start discussing tapering as now been met, though Governor Bailey was light on discussions of the magnitude and the measures to be taken.
  • Unemployment claims in the U.S. fell to 385K from 399K. The spreading of Delta variant had some states re-impose restrictions but primarily only mask mandates.

Headliner to Watch

  • Non-payrolls expected to post any triple gain at 870K with unemployment declining from 5.9% to 5.7% as the economic state in the U.S. improves. Likewise, 148.5K Canadians are expected to find jobs in July, leading to a 0.4% decline in jobless rate to 7.4%.

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Authors:
Antony Tan
Kevin Jock