Market Commentary - June 11, 2021
Wall Street buys into transitory rhetoric as both the S&P500 and Nasdaq surged 0.5% and 0.8% respectively despite headline consumer price inflation accelerating to 5% YoY. This being the largest annual gain since the 2008 financial crisis whilst a 4.7% YoY CPI was consensus among experts. Treasury yields reflected similar sentiment, as the 10-year fell to 1.43% after reaching above 1.7% just 3 months ago. Labour department officials remarked the gains were largely driven by price snapbacks from the reopening of the economy.
In Europe, broad based benchmarks either loss little ground or ended the trading day unchanged after the European Central Bank raised growth outlook for 2021 but reassured market participants the pace of quantitative easing remains unchanged with ECB President Lagarde saying the block is still “far away from ultimate aim for inflation”. Elsewhere, Asia opened with a volatile session with price action swinging between bull and bear territory.
The U.S. dollar shrugged off the inflation spike as it lost ground against major counterparts. Crude continues to consolidate around the $70 levels and gold appreciates to just below the $1,900 level.
Bitcoin holds steady at $37,000 despite on-going global regulatory crackdown. An announcement form the Basel Committee on Banking Supervision have brought forth a proposal to introduce tough capital requirements for banks dealing in crypto assets to reflect a high-risk category.
Figure 1 (Source: IS Prime) AUDUSD Daily : Since 2021, Aussie dollar finds equilibrium fluctuating around the 0.7700 level as U.S. taper talks see's demand for risk-on currency pairs reduce.
- As expected, the ECB kept both rates and pace of quantitative easing unchanged, but 3 policy makers have opened the door to reduce the flow of buying into September.
- Monthly CPI out of the U.S. posted a 0.6% gain whilst 0.4% expected. The continuing elevated levels was largely due sharp increases in used cars and trucks category.
Headliner to Watch
- BOE Governor Bailey is expected to speak online at an event hosted by the Bank for International Settlements.
- Consumer confidence in the U.S. set to resume their upward trajectory increase from 82.9 to 84.1, though still below pre-pandemic levels nearing 100.
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Topics: Market Commentary