Market Commentary – June 15, 2021

Kevin Jock

15th June 2021

Late-stage rally spurred the Nasdaq to record-highs. The S&P500 eked out a 0.2% lead though the Dow Jones disappointed closing in negative territory. On Wednesday, the Fed is widely expected to maintain its $120bn monthly bond purchases alongside an upgrade on their 2021 growth outlook and materially revise inflation forecast of which investors have seemingly priced in.

Whilst European benchmarks crept higher on Monday volatile sessions, the FTSE100 was weighed down by a 4-week extension to UK’s lockdown following a recent rise in coronavirus cases. Without government support, experts estimate the delay would cost the hospitality industry 3bn pounds a single month.

In Asia, risk-appetite extended towards the S&P200 and Nikkei, up 25 and 176 index points respectively intraday. The Hang Seng slipped 1% on liquidity concerns in China’s stock market and declining metal prices.

Rising geopolitical tensions between US – Turkey left the lira depreciating 2% in two-days with the USDTRY reaching above the 8.5000 level. Relations became strained after President Erdogan doubled down on his of purchase of a S-400 missile defence from Russia abandoning the possibility of lifting sanctions on the country.

As the Chinese renminbi hit a 3-year high in May, Beijing expand the QDII allocation by $10bn early June to stifle the currency’s appreciation. Recent data revealed a cumulative $147bn have been approved allowing domestic investors to access assets outside mainland China. The USDCNH reacted by settling above 6.4000.

Caution ahead of the FOMC meeting on Wednesday saw gold touch a 4-week low to $1,845. Meanwhile, the U.S. dollar index stood steady against major counter parts and crude continues to climb, closing at $71.18. Consecutive endorsements fuelled bitcoins rebound back to $41,000. The most recent support coming from Paul Tudor Jones, whom re-endorsed the cryptocurrency amid a television interview.

Nasdaq-Jun-15-2021-08-08-59-16-AM

Figure 1 (Source: IS Prime) Nasdaq Daily : With much of inflationary risk, tapering and sector rotation already baked in, Nasdaq reigns supreme breaching all-time highs once again.

Headliner to Review

  • Labour market statistics out of the U.K sees better conditions. The unemployment rate edged lower from 4.8% to 4.7% with contracting claimant count changes of -92.6K.
  • Minutes from the RBA’s monetary policy meeting illustrated improving global outlook though domestically, the central back does not expect the labour market to return to pre-pandemic levels until atleast 2024.

Headliner to Watch

  • Federal Reserve officials convene for their two-day policy meeting with investors focusing on tapering narrative.
  • Retail sales are expected to contract -0.6% whilst core sales set to grow 0.4%. Meanwhile industrial production anticipated to remain stead at 0.6%.

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Authors:
Antony Tan
Kevin Jock