Market Commentary – May 24, 2021

Kevin Jock

24th May 2021

    Mixed results for Wall Street on Friday as cyclical prominent benchmarks namely S&P500 and Dow Jones managing to end the session higher spurred on by better-than-expected flash manufacturing and services data. Likewise, in the face of lingering inflation risk, European indices rose on the back of similar leading economic output indicators. Whilst remarks by Philadelphia Fed Bank President Patrick Harder noting talks regarding asset purchase reduction should happen “sooner rather than later” spooked the tech heavy Nasdaq 0.6% lower.

    In Asia, weekend crypto turmoil saw cash indices fall on open, only to recover by mid-session. The Australian S&P200 and Japanese Nikkei just 0.1% higher from last week’s close while the Hang Seng initially declined 0.8% has since climbed back to only post a 0.2% lost. Despite persisting headlines of inflation. There is signs China is attempting to temper the commodity boom as rhetoric around surging commodity prices is increasing amid State Councils. Since last year, the PBOC had already begun limiting the flow of money into the economy, now there are clear signs infrastructure spending has also declined with drop in bond sales.

    For the past month, crude oil finds equilibrium between $61 – $67. World leaders and Iran are expected to converge in Vienna this week likely to revive the nuclear talks. If U.S. lifts sanctions Iranian oil production would flood the market. On the other side of the spectrum, COVID-19 infections in the US and EU continue to slow, fuelling energy consumption. Elsewhere, the U.S. dollar capped the week trimming some loses against majors and gold post 7 consecutive days of advances to settle at $1,881.

    A day after China announced a regulatory crackdown on digital currencies, the crypto onslaught continues with the Biden administration also unveiling plans of their own to tax transfers of more than $10,000. This comes amid President Biden’s $1.8tn American Families stimulus plan and addressing tax evasion alongside a $600bn tax gap last year. Across the East, last week China delivered a one-two punch as regulators initially reiterating a ban of digital tokens in financial transactions, followed up by a crackdown on crypto mining to assist in meeting its clean energy and carbon emission goals. Monday saw Bitcoin fluctuating around $35,000.


Figure 1 (Source: IS Prime) Bitcoin vs XAUUSD Daily : Whilst Bitcoin suffers near 50% decline from historic highs, gold has enjoyed a rise of popularity as of recent.

Headliner to Review

  • Retail sales in the UK surged beyond expectations primary reflecting the easing of coronavirus restrictions as non-essential retail reopened back up. The official data rose from 5.1% to 9.2%
  • Canadian retail sales beat expectations of 2.3% to post 3.6% MoM growth. Largely attributable from demand in building materials, garden equipment and clothing.
  • Flash manufacturing and services out of the US, EU and UK depict similar pictures of accelerating growth.
    • EU manufacturing and services came in at 62.8 and 55.1
    • UK manufacturing and services came in at 66.1 and 61.8
    • US manufacturing and services came in at 61.5 and 70.1

Headliner to Watch

  • Most European States are on a bank holiday to observe Whit Monday today.
  • The BOJ Governor Kuroda will be delivering opening remarks at an online conference hosted by the BOJ and Institute for Monetary and Economic Studies.
  • The BOE Governor Andrew Bailey is due to testify before the Treasury Select Committee on the Bank of England’s Monetary Policy report.

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Antony Tan
Kevin Jock