Market Commentary – May 17, 2021

Kevin Jock

17th May 2021

    Benchmarks retreated in Asia as renew spikes in daily COVID-19 cases around the region weigh in on risk appetite. After reporting 38 new cases on Sunday, their highest in more than year, the Singaporean government will begin closing most schools till May 28. Meanwhile, Taiwan has imposed restrictions on social gathering and in turn shutting down entertainment venues and religious activities as a record 180 cases were discovered. The Hang Seng outperformed slipping only as much as 0.3% intra-day whilst both Australia and Japan fell 0.34% and 2% respectively.

    Wall Street ended Friday on a higher note as softer economic data alleviated inflation concerns and fears of tighter central bank policy pushing ahead of schedule. Nonetheless, markets still recorded their worst week since February this year on U.S inflation data rising 4.2% year or year last Wednesday. Exceeding the 2% mandate. The Nasdaq was up 2.4%, S&P500 climbed 1.5% and Dow Jones following suit higher by 1.1%.

    In Europe, investors followed cues from the U.S. as the STOXX surged 1.8% but fell just short of making an all-time whilst the French CAC enjoyed settling at record levels. Since April, EU infections have halved as vaccine were delivered en masse allowing the block to begin reopening economies. Over the past week, German eased their lockdown, France lifted their travel ban and Spain elapsed their state of alert.

    The embattled posterchild of cryptocurrency dipped below $44,000 today after Musk performed a 180 flip on his previous statement that Tesla won’t be selling any bitcoin despite suspending purchases. A twitter exchange on Sunday between Musk and twit handle @CryptoWhale implied the company may sell Bitcoin in the next quarter or has already sold its holdings.

    Weaker data saw the American greenback lose ground against majors. Crude fluctuates between $63 – $66 as COVID flare-ups in Asia offset demand recovery. And gold soars above $1,850 on the back of a commodity super cycle.

XAU

Figure 1 (Source: IS Prime) XAUUSD Daily : Gold makes a comeback alongside a commodity super-cycle continually breaking out of intermediate highs.

Headliner to Review

  • Retail sales in U.S. stopped expanding in May whilst core sales contracted -0.8% when a 0.5% grow was expected. The anticipated follow through in household demand after stimulus checks failed to eventuate as consumer sentiment surprising fell from 88.3 to 82.8.
  • U.S. industrial disappointed consensus expanding only 0.7% with 0.9% expected largely a result of auto output affected by a supply shortage in semi-conductor chips.

Headliner to Watch

  • RBA to release their monetary policy meeting minutes as investors keen to decipher factors affecting the central banks outlook.
  • Following consecutive state of emergencies, Japan is expected to contract in Q1 with GBP figures declining to -1.2% from 2.8%. With a resurgence in recent cases and calls to halt the Olympics, Q2 figures look dire.

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Authors:
Antony Tan
Kevin Jock