Market Commentary – June 21, 2021

Kevin Jock

21st June 2021

Despite holding out among Wall Street, Nasdaq succumbs to Fed tapering rhetoric and slips 1.1% on Friday. Meanwhile, the Dow Jones recorded its 10th consecutive decline, tumbling 2.1% whilst the S&P500 down 1.7%. Surprise hawkishness from policymakers on Wednesday spooked investors into a shock re-evaluation about how much the inflationary risk the central bank is willing to stomach beyond set bands, impeding economic growth.

Contagion spread across Europe as broad-based benchmarks retreated from record highs, eroding gains from previous weeks in a single day. Likewise, Asia dumped on open today. The S&P200 gapped and fell lower by 1%, then Hang Seng posted negatived 0.9% intraday thus far. The Nikkei among the worst performers, tumbling 2.4%, extending losses from last week. With Japan lacking a domestic catalyst for growth, particularly with its ever-failing prospect of a buoyant 2021 Olympics, the nation has been hostage to global demand, especially from the U.S.

Crude oil touches $72 after the 6th round of negotiations between Iran and world powers in Vienna fail to reach an agreement on the nuclear deal. The situation worsened after a hardline cleric, Ebrahim Raisi was elected President of Iran. Talks currently hinge on whether the U.S. can deliver on a guarantee that the nation will not exit reimpose sanctions in the future.

Bitcoin fell to as low as $34,142 on Sunday after regulatory crackdown within China, shutting down mining operation resulting in a declining hashrate. The push comes amid a spike in electricity consumption from server farms. In turn, stoking illicit coal extraction from producers in mines deemed dangerous in meeting rising demand from power plants, endangering President Xi’s ambitious environmental initiatives.

With rate rises anticipated in 2023 compared to earlier predictions of 2024, the U.S. dollar index records it’s largest two-day gain for the year whilst dampening inflation prospects has gold edging lower to $1,764.

dow

Figure 1 (Source: IS Prime) Dow Jones Daily : Bad week for Dow with the Federal Reserve bringing forward rate rises dampening long term economic growth prospects.

Headliner to Review

  • Australian retail sales rose lower than expected at expanding only 0.1% compared to 0.4%. Food retailing rose but was largely offset by demand in household goods as well as clothing, footwear, and personal accessory retailing.

Headliner to Watch

  • The ECB president Christine Lagarde is due to testify before the European Parliament Economic and Monetary Affairs Committee. Investors will be on the lookout on whether the central bank will follow their U.S. counterparts in participating in hawkish endeavors.

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Authors:
Antony Tan
Kevin Joc