Market Commentary – June 2 2021

Kevin Jock

2nd June 2021

On Wall Street the S&P500 and Nasdaq edged lower whilst the Dow Jones settled just above positive territory as fundamentals conflict between persistently improving economic optimism against overshooting inflationary risk. In Europe, indices started June strongly as the CAC, STOXX and DAX closed at all-time highs with miners and energy companies leading the way. The FTSE100 gained half a percent but was still fluctuating within a tight consolidation between 7,000 – 7,100. Asia opened mix with the S&P200 rallying 0.7%, so too did the Nikkei gain however the Hang Seng retreated 0.4%.

The USDTRY surged to record highs todays to 8.784, appreciating as much as 2,400 pips intraday after President Erdogan publicly remarked “I even spoke to the central bank governor today…we certainly need to lower interest rates”. This despite annual inflation rates hitting 17.14% in April. Since 2015, the Turkish lira has averaged 17% annual losses. Investors regained confidence late 2020 when a more hawkish central bank chief was selected, only to be abruptly replaced mid-March 2021 by Sahap Kavcioglu, an extreme dove.

China’s renminbi is set to post 3 consecutive days of losses after the PBOC announced stricter foreign currency requirements in Chinese lenders. The measure not used by the central bank since the GFC as the renminbi’s appreciation increasingly worry Beijing. A stronger currency would make exports pricier but on the other hand cheapens imports of raw material.

Crude oil reached a hit of 68.87 on Tuesday following the OPEC+ meeting. Whilst there was no mention of Iran, members reaffirmed the existing commitment to gradually return 2 million bpd this year on the back of “ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling”.

The U.S. dollar gained overall, gold fell back to $1,900 and bitcoin stabilises around $37,000.


Figure 1 (Source: IS Prime) USDTRY Daily : Turkish lira hits all-time lows as confidence in the currency wanes following President Erdogan’s comments.

Headliner to Review

  • Flash CPI estimates out of Europe came out better than expected at 2% compared to an expected 1.9%. At this level, inflation has surpassed the ECB’s target for the first time in more than 2 years.
  • ISM manufacturing PMI posted higher than expected at 61.2 against 60.8 expected. Manufacturing activity continue to expand with businesses survey suggesting they’re struggling in meeting increasing levels of demand.
  • Quarterly economic growth Australia normalised from 3.2% to 1.8%. This quarters growth largely reflects the continuing easing of COVID-19 restrictions and recovering labour market.

Headliner to Watch

  • Aussie retail sales expected to grow another 1.1% in May. With labour markets improving, households continue to confidently spend.

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Antony Tan
Kevin Jock