Market Commentary – May 25, 2021

Kevin Jock

25th May 2021

    Risk-on sentiment prevailed on Monday as Wall Street looked past last week’s crypto rout with technology outperforming against cyclicals. Nasdaq led the benchmarks gaining 1.7%, followed by the S&P500 up 1% and then Dow Jones lagging 0.5%. Reassuring remarks from Federal Reserve Bank of Atlanta President Raphael Bostic amid an online event hosted by the Homer Hoyt Institute further soothed angst when he reiterated that inflation is transitory driven largely by demand responding faster than supply as the economy moves beyond the pandemic.

    Despite subdued trading activity. Of the markets opened in Europe, indices followed U.S. optimism higher with the French CAC settling just below all-time highs. Corporate earnings kept upward momentum going alongside the ECB President Christine Lagarde noting on Friday that it’s too early to discuss reducing their 1.85tn euro emergency bond purchase scheme in opposition to fellow colleagues who are keen to discussing tapering.

    A healthy start for Asia with both the S&P200 and Hang Seng rallying 0.6% and 1.6% respectively on open. Gains on the Japanese Nikkei were weighed down by a travel warning from the U.S. whilst the country is currently under a state of emergency. The COVID-19 resurgence has re-casted doubts over Tokyo’s plan for the 2021 Olympic due to start in less than 2 months.

    Crude oil rose over $2 to close at $66 following stalling negotiations between Iran and US. The American greenback index declined, closing just above a 5-year low. Gold steadied at $1,881 and bitcoin rebounded back to $39,000 after Elon’s demeanour towards the digital asset looked more positive.

Brent Crude

Figure 1 (Source: IS Prime) Brent Weekly : Brent rallies above $68 after Goldman Sachs forecast the oil would hit $80 this year as economies recover from the pandemic.

Headliner to Review

  • Core CPI out of Japan back into negative territory declining from 0% to -0.1% as consecutive state of emergencies depress domestic demand
  • The monetary policy report hearing for BOE Governor and members echoed the Fed’s stance that current inflation is transitory, and policy will not tighten until there is strong proof spare capacity is reducing.

Headliner to Watch

  • Consumer sentiment in the U.S. set to drift lower whilst Germany’s ifo Business Climate to exceed pre-pandemic levels from 96.8 to 98.2
  • The RBNZ is anticipated to leave monetary policy untouched in tomorrow’s meeting, though investors are keen to scrap through the central banks outlook for 2021.

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Antony Tan
Kevin Jock