Market Commentary – June 1 2021

Kevin Jock

1st June 2021

    As the U.S. and U.K. observes Memorial Day and spring bank holiday respectively, futures and indices across the globe retreated on lighter volume as the lack risk-on sentiment spurred profit taking. In Europe, despite the weaker session on Monday, benchmarks are set to record consecutive weeks of gains with ever-growing confidence of a post-pandemic economic recovery fuelled by an accelerating vaccination program. Of which had its distribution hiccups amid the first quarter resolved.

    In Asia, as the S&P200 and Hang Seng begins recovering previous day’s losses, the Nikkei lags suffering a 1% decline intraday on weaker capital spending data. The nation is also suffering varying degrees of predicaments arising from their 2021 Tokyo Olympics as regardless how it handles the games from “cheer-free” stadiums to banning eating inside, Japan will face huge financial losses.

    Crude oil is set advance to a 32-month high, currently just below $68, following an assessment from an OPEC+ committee illustrating improving global demand will be able to absorb the incoming 2 million bpd from Iran should the scenario eventuate. Confidence arises as stockpiles slide, built during the pandemic and Iran ensuring their supply will be orderly and transparent.

    With bitcoin falling out of favour, gold continues to rise, safely settling above $1,900. Demand has risen alongside two prevailing factors. The first being inflationary risk, the second a commodity boom driven by a global supply constraint.

    The U.S. dollar index fell, nearly yearly lows, among a basket of majors with the pound grabbing headlines as it hits a three-year high. The progress of vaccinations across the U.K. has ensured the nation as one of the first to return to economic normalisation.

Crude Oil-Jun-01-2021-08-03-59-05-AM

Figure 1 (Source: IS Prime) Crude Oil Weekly : Crude hits a 32-month high as OPEC+ members forecast falls in inventory levels despite Iran’s supply if the group sticks to their current plan.

Headliner to Review

  • As expected, the RBA kept monetary policy unchanged at 0.10% and leaving the pace of quantitative purchases as is until inflation can be kept at a sustainable band between 2% – 3%.

Headliner to Watch

  • Growth of the Canadian economic is expected to increase pace from 0.4% to 1% and post 11 consecutive months of gains alongside a recovering export sector and booming housing demand.
  • ISM manufacturing in the U.S. set to remain stable at elevated levels from 60.7 to 60.8
  • GDP in Australia is anticipated to normalise as it declines from 3.1% to 1.1% in Q1 of 2021. The government has been slowly retracting subsidies across the economy as to ensure it doesn’t not overheat.

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Antony Tan
Kevin Jock