Market Commentary – July 8, 2021

Kevin Jock

8th July 2021

Another spate of state of emergency in Japan saw a reluctance in risk appetite in the Nikkei as the benchmark fell 0.6% intra-day. The renewed measures will take effect from next week until August 22nd, overlapping Tokyo’s already dire Olympic games. On Wednesday, the country reported 920 new cases of coronavirus where the delta variant contributed 14%. Likewise, the S&P200 slipped 0.1% as various suburbs in Sydney had their lockdown restrictions extended following 38 new local cases. The Hang Seng set to record their 8th consecutive decline with technology underperforming from peripheral risk arisen from Didi’s IPO debacle alongside China’s tech crackdown.

FOMC meeting minutes spurred Wall Street higher across the board as Federal Reserve members withheld a timeline in tapering off quantitative easing concerned of an uncertain economic outlook. Especially as supply bottlenecks leading to labour market imbalances and persistently high transitory inflation remain visible. Both Nasdaq and S&P500 records another all-time high, whilst the Dow Jones rose 0.6%. In Europe, the STOXX and DAX rose 0.8% and 1.5% respectively, regaining the previous days lost ground. In contrast, Spain underperformed ending the session down as the country battles with the highest COVID-19 rate within the bloc.

Gold rallied above $1,800 following Fed minute remarks and so too did the US dollar index, gaining across the board. Crude oil nose dived another 2.3$ ahead of OPEC-JMMC meeting today. With talks broken down, fears that rogue nations will increase production in a game of prison dilemma is rising. Elsewhere bitcoin fluctuates above $33,000.

crude oil-Jul-08-2021-07-44-22-93-AM

Figure 1 (Source: IS Prime) SPT.CO.US Hourly MTD : Rising concerns that members will deviate from OPEC production outlines with supply increases of their own as negotiations fail to reach an agreement.

Headliner to Review

  • European Commission released their summer 2021 economic forecast detailing overall improved near-term economic outlook as the economy re-opens. Though concerns still prevalent around persistent COVID-19 cases, especially the delta variant and supply constrained inflation.
  • Amid an online webinar, RBA Governor Lowe remarked there are limits to quantitative easing as central banks cannot keep buying assets. Rather fiscal policies will be required to play a bigger role in future cycles.
  • FOMC meeting minutes encompasses fierce debate among members but fell short in cementing a timeline for quantitative tapering whilst acknowledging the need to formulate a plan now.

Headliner to Watch

  • Unemployment claims in the U.S. set to decline from 364k to 345k.
  • As OPEC-JMMC tussles with achieving a deal in production increases for the coming months, US crude inventories expected to remain in deficit at -4.0M

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Antony Tan
Kevin Joc