Market Commentary – May 5, 2021

Kevin Jock

5th May 2021

    Amid an event host by The Atlantic magazine, remarks by U.S. Treasury Secretary Janet Yellen sparked a mid-session tumble on Wall Street when she noted “that interest will have to rise somewhat to make sure that our economy doesn’t overheat” alluding to President Bidens’ rounds of pandemic, infrastructure, and welfare expenditure. The point was further echoed by White House Press Secretary Jen Psaki who said the administration views “inflationary risk incredibility seriously. Whilst the Dow Jones recovered losses by sessions end, Nasdaq suffered their worst daily loss since March as tech juggernauts came under pressure. Contagion from Janet Yellen’s comments throughout Europe as tech firms dragged down broad-based benchmarks.

    In Asia, indices and futures began recovering overnight losses as Yellen clarified herself in a later event hosted by Wall Street Journal saying she was not over-stepping her role or recommending interest rate interests and that “if anyone appreciates the independence of the Federal Reserve, I think that person is me”.

    Meanwhile, global geopolitical tension is on the rise following the G7 foreign minister meeting in London, of whom Germany, Italy and France is considering following U.S. footsteps to counter China’s economic coercion. Though the U.K. remains reluctant as Prime Minister Boris Johnson hopes to strike a balance between East and West.

    On the coronavirus front, in response to surging cases of global COVID variants, Singapore has tightened social distancing measures alongside border controls. Whilst Vietnam will prolong the length of quarantine.

    Despite volatility across global indices, the U.S. dollar index stayed steady. Crude oil advanced $1.60 to over $66 following reports of a potential commodity super cycle as poor weather and distribution bottlenecks affect supply. Gold retreated back below $1,790 and bitcoin continues out of favourability to settle at $54,500.

Dow Jones-3

Figure 1 (Source: IS Prime) Dow Jones : Intra-day price action from Dow Jones saw the benchmark tumble after Janet Yellen’s raising interest rates remark only to recover entirely once the U.S. Treasury Secretary corrected herself.

Headliner to Review

  • Joblessness improve better than expected in New Zealand with quarterly employment change increasing by 0.6% compared to a 0.3% consensus on top of the unemployment rate lowering to 4.7% compared to 4.9%.

Headliner to Watch

  • ADP Non-farm employment out of the U.S. expected to increase substantially from 517K to 872K as President Biden’s fiscal splurge improve overall business sentiment. Meanwhile, US ISM Services PMI expected to edge higher to 64.2 from 63.7
  • Crude oil inventories set to go into deficit to -1.9m. Despite a bumpy global recovery as a select few defend resurging COVID cases, much of the global economy has found strong foundations to catapult themselves forward in 2021.
  • Investors will be keen to see the EU Economic Forecast release for the year of 2021, which generally details the bloc’s fiscal plans.

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Antony Tan
Kevin Jock