Market Commentary – June 25, 2021

Kevin Jock

25th June 2021

Wall Street resumes its upwards trajectory following a brief intermission on Wednesday. Both the Nasdaq and S&P500 established new record-highs whilst the Dow Jones surged 1.2%. The move spurred on by President Biden securing an infrastructure deal worth $1tn. Whilst less than the $2.3tn announced back in March, with bipartisan support from Republican senator Susan Collins, the deal removes layers of uncertainty for prospects of additional government spending in the future.

Whilst indices in Asia retreated, European benchmarks overnight reacted positively to headlines across the Atlantic, with the STOXX50 gaining 1.1%, CAC40 up 1.2% and DAX30 higher by 0.8%. Good news was also highlight via the Ifo Institute’s business climate index posting higher than expected readings. Elsewhere, the UK100 rallied 0.6% following the Bank of England recent unchanged policy decision. The monetary summary remarked existing policy “remained appropriate” and that the UK would “experience a temporary period of strong” growth fuelling transitory inflation beyond prescribed targets but will eventually fall back.

Crude oil settles above $73 and is set for its 5th consecutive week of advances. Tight markets alongside shrinking stockpiles have been the prevailing rhetoric, despite OPEC’s piecemeal increase in output. With prospects of Iranian oil flooding the market also diminishing, investors look towards the OPEC+ meeting schedule for 1st of July, widely expected to increase quota output.

Among a basket of majors, the U.S dollar index stood there though the pound did slide 0.4% following the BOE’s dovish monetary policy release. Gold edged lower to $1,775 and bitcoin attempts to find equilibrium around $34,000 despite increasing global regulatory scrutiny.

crude oil-Jun-25-2021-07-43-51-06-AM

Figure 1 (Source: IS Prime) Crude Oil Daily : Crude oil expected to notch it’s 5th consecutive week as conditions align for rising prices.

Headliner to Review

  • As expected, the BOE kept monetary policy unchanged and reiterated their dovish stance in the face of rising inflationary pressure. Citing the prevailing rhetoric, that the existing inflation seen is driven by the supply side and transitory.
  • German ifo Business Climate exceeded expectations of 100.8 to post 101.8. Of the business owners survey, many remained highly optimism of future prospects.
  • US unemployment claims can in weaker than expected declining only to 411K from 418K when 382K was anticipated.

Headliner to Watch

  • Core PCE price index is set to remain in elevated levels at 0.6% compared to 0.7% last month. All of which is expected by the Federal Reserve
  • Consumer sentiment out of the US is expected to hold stead at 86.5, still below pre-pandemic levels.

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Authors:
Antony Tan
Kevin Joc