Market Commentary - May 3, 2021

Posted by Kevin Jock on May 3, 2021 6:09:08 AM

    Inflation concerns back in the foray following a mix of upbeat global economic data releases on Friday. In unison, Wall Street ended Friday in negative territory with the S&P500 retreating from all-time highs, the Dow Jones in tight 500 index point consolidation since late April and Nasdaq underperforming lower by 0.5%. Despite Treasury Secretary Janet Yellen downplaying inflationary risk, personal income of U.S. households expanded double digits to historic highs whilst the PCE price index increases beyond market consensus spooked sentiment. Meanwhile the Federal Reserve Chair Jerome Powell continues to do this part, reassuring investors that creeping U.S. inflation is transitional and does not justify hawkish monetary policy endeavors.

    In Europe, benchmarks followed America’s lead, declining for two consecutive sessions underpinned by increasing monthly CPI figures whilst a negative quarterly GDP see’s the bloc enter a technical recession. Likewise, the ECB echoed similar views of the Fed, denoting inflationary pressure as transient brought on by rising oil prices since last year November. Ahead of a host of UK elections, the FTSE managed to outperform global counterparts edging higher by 7 index points. On Thursday, votes on Scottish and Welsh parliament as well as mayoral constituents are expected to take part with the ruling conversative parties enjoying a healthy 44% support. Though, Sadiq Khan a labour incumbent is expected to win a second term as London’s mayor.

    Mixed start to Asia despite bank holidays in China and Japan. The S&P200 reversed all its gains from open after a leading economic CPI indicator from the Melbourne Institute saw inflation remaining on elevated levels. Hong Kong tumbled 1.6% whilst Japan bucked the trend to climb higher by 0.5%.

    The U.S. dollar index gained 0.7% as investors position cautiously, ahead of this week’s raft of policy decisions and central bank chief public remarks. Crude fell approx. $1.40 to $63.40 as India COVID-19 predicament clouds global outlook. Gold closed at $1,768 and bitcoin resumes its long-term uptrend, touching $58,000 intraday.

JP225-2

Figure 1 (Source: IS Prime) Japanese Nikkei Daily : A cycle of COVID infections and the government implementing state of emergencies weigh down the Nikkei as it ranges between 28,000 - 30,500 whilst global counterparts rally.

Headliner to Review
  • In Europe :
    • The continent entered a technical recession after two consecutive quarterly contractions largely a result of national lockdowns implemented to contain the bloc’s persistent COVID-19 cases.
    • Meanwhile, flash CPI saw figures rise to 1.6% from 1.3%. The main factor being rising fuel cost.
    • The unemployment rate beat expectations to improve from 8.2% to 8.1% whilst consensus was 8.3%.
  • Canadian GDP grew by only 0.4% whilst 0.5% was expected. The expansion was slower as the country entered a third wave of nationwide lockdowns.

Headliner to Watch

  • Hong Kong to release Q1 GDP today with the previous quarter posting only a 0.2% expansion. Consensus see’s a higher expansion this quarter largely due to a combination of easing social distancing measures as well as government stimuli back in Feb where spending vouchers totaling $5,000 per Hong Kong resident was disbursed.
  • ISM manufacturing PMI data out of the U.S. to edge higher from 64.7 to 65, lifted by continuing government expenditure.

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Authors:
Antony Tan
Kevin Jock

Topics: Market Commentary

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