Market Commentary - June 10, 2021

Posted by Kevin Jock on Jun 10, 2021 8:45:17 AM

Ahead of monthly CPI data today, Wall Street remained largely subdued as the figures are set to illustrate continuing elevated inflationary pressure. Both the S&P500 and Nasdaq traded in a tight range closing close to the open price whilst the Dow Jones slid 0.3%. In the news, while President Biden revokes Trump-era bans on Tiktok and Wechat, the global tax rate endorsed by G7 finance ministers is likely to hit a wall in China. There is no incentives for Beijing to follow suit as the global measure could impede economic development.

In Europe, indices edged higher, lifted by travel companies on reports the White House is looking to relax COVID-10 related travel bans. Though investors remained cautious as attention remained focused on Thursday’s ECB meeting. Despite no changes are expected in monetary policy regime, speculation is rife in policy maker outlook for 2021 could transition to withdrawing quantitative easing for the EU bloc following improving COVID-19 conditions.

Asia opened with more optimism following headlines revealing China commerce minister Wang Wentao and U.S. Commerce Secretary Gina Raimondo spoke via telephone on matters relating to heathier bilateral trade ties and hoping to keep lines of communication open. Both the S&P200 and Nikkei rallied 0.6% with the Hang Kong as high as 0.8% intra-day.

The U.S. dollar index rose slightly against majors on the back of taper rumour though Sino-US trade talks saw the USDCNH trade below 6.3800. Crude oil fluctuates around $70 with gold set to post 3 consecutive losing days. Despite all the negative surrounding regulation and taxation on bitcoin, the cryptocurrency rallied back above 37,000.

USDCNH-Jun-10-2021-07-42-19-82-AM

Figure 1 (Source: IS Prime) USDCNH Daily : Despite efforts by PBOC to stifle the renminbi's rise, macroeconomic factors continue to draw favor towards China's currency.

Headliner to Review
  • As expected, BOC left monetary policy unchanged with the core of the statement seem to allude a possibility of tapering in July as the economy lifts itself out of the third-wave of COVID-19 cases.
  • The deficit in crude oil inventories drew deeper than anticipated, decreasing further from -5.1M to -5.2M

Headliner to Watch

  • Despite talks of tapering across the globe, the ECB is expected to remain on course today, with no changes in monetary nor outlook. As the central bank still sees the prevailing recovery path as fragile, many expect the authorities to side-step any triggers that could potentially tighten financial conditions.
  • Inflation measurements are set to release out of the U.S. with 0.4% expected in CPI and 0.5% in core CPI. Still largely driven by transitory congested supply side factors.
  • U.S. unemployment claims expected to lower from 385K to 370K.

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Authors:
Antony Tan
Kevin Jock

Topics: Market Commentary

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