Market Commentary – July 9, 2021

Kevin Jock

9th July 2021

Sea of red on Thursday over rising concerns about prospects for the global economy following worrying signs the Delta variant could hamper recovery efforts. Especially as low vaccinations are still prevalent in some parts of the world and central banks considering tapering monetary policy support. The severity of the variant strain became clearer after Pfizer requested the U.S. to authorize a 3rd booster shot after a study in Israel saw the vaccines efficacy decline from 93% to 64% in 6 months. The S&P500 closed 0.9% lower, Dow Jones retreating 0.8% and Nasdaq down 0.7%. Tensions between the US and China also flared after the White House added another 10 Chinese entities to their economic blacklist over human rights and high surveillance violations.

Despite the ECB’s formalising wording surround the central banks 2% inflation target allowing for temporary price pressures to exceed the ceiling, European benchmarks still faltered ending the session the negative territory. CAC40 and STOXX50 tumbled 2% and 2.2% respectively. The UK economy is re-opening from restrictions but still the FTSE100 slipped 1.7%. Renewed Brexit spat between Brussels and London also grabbed headlines as the EU obliged Britain to fork out £40.8bn whilst Downing Street refuted the figure to be between £35bn – £39bn. In Asia, the Nikkei and Hang Seng tempered overnight risk-off sentiment with “buy-the-dip” mentality though the S&P200 followed through, down 0.7% thus far.

Crude snapped a 2-day decline to rebound 1.5% above $73 on increase inventory deficit. Nonetheless, oil is set to post their worst week since April after a breakdown in alliance between OPEC members and United Arab Emirates on top of the delta strain clouding overall outlook. Softer optimism drove demand in the greenback against majors and bitcoin settles around the $33,000 level.


Figure 1 (Source: IS Prime) IDX.AU.200 Daily : AUS200 fluctuates between 7,200 – 7,400 range as Sydney extends lockdown for another week after delta variant outbreak remains not contained.

Headliner to Review

  • Weaker price pressure out of China with both CPI and PPI declining from 1.3% to 1.1% and 9.0% to 8.8% respectively. Rhetoric surrounding the data illustrate the pull back of government stimulus as Beijing fears overheating the economy.
  • Crude oil inventories deepened more than expected at -6.9M compared to -4.0M. With supply deadlocked by OPEC and demand ever increasing alongside the rebounding economic engine, stockpiles continue to drawdown.
  • Unemployment claims surprisingly increased in the US from 371k to 373k whilst 345k was expected.

Headliner to Watch

  • Labour market data anticipated to improve in Canada with the unemployment rate declining to 7.8% from 8.2% and 172.5k to find jobs.
  • Both ECB President Christine Lagarde and BOE Governor Andry Bailey will speak at the panel discussion “Digitalisation, intangibles and potential growth in a post-COVID world”.
  • Finance minister will kick of the 2-day G20 meeting today in Venice with the main agenda being the global corporate tax rate.

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Antony Tan
Kevin Joc