Market Commentary – May 10, 2021

Kevin Jock

10th May 2021

    Mixed start in Asia as Australia’s business sentiment reaches new records propelling the S&P200 as high as 1% intra-day. Indicators for hiring, sales and profits surged giving weigh that the Australian economy has moved past the rebound phase on towards growth. Despite new polls on Monday indicating popularity for Japan’s presiding Prime Minister declining, the Nikkei mustered enough strength to gain 0.5%. Following a COVID-19 scandal, PM Suga’s favourability has declined to 40% and the government extending their state of emergency in prefectures covering 40% of the economy risk a potential double-dip recession. Elsewhere, Hong Kong underperforms, down 0.9%.

    For Wall Street, bad news is good news with last Fridays’ jobs data sorely missing market expectations. Not only did non-farms employment change came in way below forecast, but the unemployment rate edged higher. With this, risk of overshooting inflation eased whilst President Bidens’ on-going fiscal stimulus gained support. Both the S&P500 and Dow Jones welcomed the figures, rallying to all-time highs as the Nasdaq gained 0.8%.

    European markets followed U.S. counterparts adding onto risk towards the broad market. In the U.K, the FTSE100 recorded 3 days of consecutive gains after Prime Minister Boris Johnson emerged stronger from local elections whilst the Scottish National party pushing for Scotland’s independence fell one seat short of outright majority.

    The U.S. dollar index fell sharply amongst a basket of currencies as risk-on appetite increased. Gold rose sharply the last two trading days to $1,833 alongside a bull-run on metals driven by strong from China. Meanwhile, crude edged above $65 after reports of a cyber attack on the biggest pipeline in America. Colonial Pipeline Company was forced to shut down their entire system on Friday after getting hit with ransomware. Meanwhile, bitcoin recovers back to $59,000 as it attempts to chases the out-performance seen in altcoins such as Ethereum and Litecoin.

Sp200-1

Figure 1 (Source: IS Prime) S&P200 Daily : Australia’s S&P200 set to recover back to pre-pandemic levels as the nation emerges beyond the COVID-19 crisis 

Headliner to Review

  • Jobs market data from the U.S. came in well below expectations at 266k whilst 990k was expected. In turn, the unemployment rate increased to 6.1% from 6.0 % as more American’s return to the labour force whilst demand for labour has slowed. The largest sector attributing to last month’s disappointing results was employment declines in temporary help services, couriers, and messengers.
  • Likewise, Canada’s labour market followed suit, with jobs contracting 207.1K and the unemployment rate spiking from 7.5% to 8.1%. The situation is largely a result of a third wave of nationwide lockdowns crippling employment demand.
  • Press briefing by Treasury Secretary Janet Yellen heard remarks of reassurances that she doubts an inflationary cycle would eventually, especially as wage growth has not picked up.

Headliner to Watch

  • China to release YoY CPI data expected to increase to 1% from 0.4% whilst YoY PPI data spikes to 6.5% from 4.4%.

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Authors:
Antony Tan
Kevin Jock