Mixed performance across Wall Street following Wednesday’s FOMC meeting. Nasdaq shrugged off expected rate rises in 2023 to surge 1.7%. The S&P500 closed flat, whilst the Dow Jones slipped 0.4% largely from an unexpected spike in unemployment claims. Across the Atlantic, European benchmarks recorded new all-time highs and is expected to post 4 consecutive weeks of advances. In Asia, profit-taking saw the S&P200 and Nikkei drift lower throughout the session. This despite the BOJ extending their pandemic relief program by 6-months. The Hang Seng bucked the trend to rally 0.6% on open.
Crude oil fell back below $71 as the US dollar rallied strongly for two consecutive sessions among developed counterparts. Expected as costlier crude oil of the US would unturn offset rising global demand. Meanwhile, taper tantrum spoiling the inflation risk premia in gold left the metal much less to be desired, tumbling 2.1% on Thursday. Bitcoin though, not immune to cross-currency contagion has edged lower to below $38,000.
Feds tapering plans does not bode well for exotic currencies, particularly the Turkish lira and Chinese yuan. Both currencies overshadowed by varying forms of political and regulatory ideology that may contradict the direction dictated by natural market forces. The USDTRY rose another 1.3% on Thursday, alongside reluctance from Turkey’s central bank in increasing interest rates to fight inflation has the currency now sitting at all-time highs. Following indirect PBOC intervention of recent days, the USDCNH rose above 6.4000, a monthly high. Bringing in rate rises by the Federal Reserve, could derail the PBOC’s plan for a steady and stable depreciation in the yuan.
Wall Street retreated on Tuesday following disappointing retail sales figures alongside faster than expected PPI data fuelling inflation risk. With policy makers set to conclude their two-day meeting on Wednesday, focus will shift towards their outlook and projections, with some analyst expecting the central bank to bring forward their first-rate increase by a year to 2023. Despite this possibility, the VIX index, Wall Street’s fear gauge hit its lowest point since February 2020.
Meanwhile European benchmarks edged higher and the FTSE100 shrugged off lockdown extension worries to gain 0.4% as risk as the potential service job losses is barely expected to put a dent on economic growth this year. In Asia, indices pointed lower in Australia, Japan, and Hong Kong wary of any hawkish indications that might arise out of FOMC.
Bitcoin stabilises around the $40,000 level after MicroStrategy CEO Michael Saylor triples down on the cryptocurrency, currently down 78% of his equity base. The software company turned crypto hoarder raised $400mn to spend on the acquisition of bitcoin.
Crude oil climbed another 1.8% to $72.44 amid continuing signs of stronger global demand. The U.S. dollar index steadied at 1-month highs with the Turkish lira still in focus. The currency weakened 2% to 8.5437 on Tuesday as simmering geo-political tensions drove demand towards the greenback. Elsewhere, gold fell for 3 consecutive days settling at $1,859.
Late-stage rally spurred the Nasdaq to record-highs. The S&P500 eked out a 0.2% lead though the Dow Jones disappointed closing in negative territory. On Wednesday, the Fed is widely expected to maintain its $120bn monthly bond purchases alongside an upgrade on their 2021 growth outlook and materially revise inflation forecast of which investors have seemingly priced in.
Whilst European benchmarks crept higher on Monday volatile sessions, the FTSE100 was weighed down by a 4-week extension to UK’s lockdown following a recent rise in coronavirus cases. Without government support, experts estimate the delay would cost the hospitality industry 3bn pounds a single month.
In Asia, risk-appetite extended towards the S&P200 and Nikkei, up 25 and 176 index points respectively intraday. The Hang Seng slipped 1% on liquidity concerns in China’s stock market and declining metal prices.
Rising geopolitical tensions between US – Turkey left the lira depreciating 2% in two-days with the USDTRY reaching above the 8.5000 level. Relations became strained after President Erdogan doubled down on his of purchase of a S-400 missile defence from Russia abandoning the possibility of lifting sanctions on the country.
As the Chinese renminbi hit a 3-year high in May, Beijing expand the QDII allocation by $10bn early June to stifle the currency’s appreciation. Recent data revealed a cumulative $147bn have been approved allowing domestic investors to access assets outside mainland China. The USDCNH reacted by settling above 6.4000.
Caution ahead of the FOMC meeting on Wednesday saw gold touch a 4-week low to $1,845. Meanwhile, the U.S. dollar index stood steady against major counter parts and crude continues to climb, closing at $71.18. Consecutive endorsements fuelled bitcoins rebound back to $41,000. The most recent support coming from Paul Tudor Jones, whom re-endorsed the cryptocurrency amid a television interview.
With Australia and Hong Kong observing national holidays, the Japanese Nikkei was mute, but manage to notch a modest 0.2% lead intra-day. Likewise, global futures took the opportunity to position in bull territory ahead of each market’s respective opens. Wall Street ended last week with the S&P500 and Nasdaq edging out 0.1% higher after shrugging off Thursdays’ CPI data and was further buoyed by growing American consumer confidence. Despite improving economic data, the inflation rhetoric has seemingly run its course with investors looking towards the FOMC statement due this week.
Elsewhere, the G-7 summit concluded with French President Emmanuel Macron welcoming the U.S. back to the “club”. President Biden announced the summit as a win with headline topics including committing 1bn vaccine doses to poorer countries and holding China accountable for human rights violations.
Friday saw European benchmarks extend their all-time high, whilst the FTSE100 has finally broken out of its tight consolidation with confidence, gaining 1% by sessions end. This despite Prime Minister Boris Johnson expecting to delay the final measures of easing on Monday by another 4 weeks in hopes to the Delta variant strain, first discovered in India.
Crude rose 75 cents as the newest reports from the IEA echoed statements by OPEC, revealing oil demand is set to exceed pre-pandemic levels by the end of 2022. Though consumer demand contracted a record 8.6m bbls a day in 2020, thus far demand has recovered to 5.4m bbls per day on the back of a global vaccine roll-out and subsequent economies opening up. The only impediment, if vaccine distribution were to slow.
Bitcoin saw a rebound back to $39,000 after Elon Musk tweet out the viability of the cryptocurrency should 50% of electricity usage is sourced from clean energy. The U.S. dollar gained among a basket of majors whilst focus shifts towards the Aussie dollar this week particularly the Australia jobs data and Governors Lowe’s expected speech, as it continues to be wedged between 0.76 – 0.78.
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.
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.
Losses made on Thursday were recovered on Wall Street by weeks end following a weaker than expect labour statistics, alleviating concerns of an economy running too hot. Giving weight to the Fed’s continuing narrative that despite overshooting inflation being a real possibility, the effect is transitory. A theory reassured by the U.S. Treasury Secretary Janet Yellen on Sunday, stating that even if inflation triggers higher interest rates, elevated rates could be good for both society and the Fed.
In Europe, the STOXX ended on another record, rising 0.4%. Similar price action was seen for the CAC and DAX. The FTSE100 still fluctuating within a tight range, managing to eke out a 0.1% gain. Profit-taking prevailed in Asia with Australia, Japan and Hong Kong slipping on open following Yellen’s overnight higher interest remarks. Optimism was further dampened after G7 ministers arrived at a global a tax deal to implement a global minimum rate of at least 15% on multinational corporations.
Friday saw crude oil closing beyond $69 and recording 6 consecutive days of advances with Monday open seeing prices touch as high as $69.98 intra-day after comments from Vitol Group on Sunday echoing similar remarks of the OPEC+ meeting of rising fuel consumption. The U.S. dollar depreciated against majors whilst gold surged $20 to $1,890.
Over the weekend, bitcoin traded below $35,000 after reports that Chinese social-media service Weibo suspended various crypto-related accounts. When attempting to view the accounts, the service tags the account as violating laws and regulations. Meanwhile, a Goldman survey of 25 CIO’s around globe reveal there’s still reluctance in adopting the alternative asset.
Nasdaq led Wall Street lower on Thursday tumbling over 1% whilst cyclical heavy blupchip S&P500 slipped 0.4% and Dow Jones stood unchanged by sessions close. The asymmetric weakness comes amid data release by the UN Food and Agriculture Organization revealing food prices have surged by their highest margin in a decade in May, further fuelling inflationary concerns.
Expanding on a Trump-era blacklist policy, President Biden signed an order banning U.S. investment in 59 Chinese firms with ties to China’s surveillance industry or military. The ban will take effect one year from now, allowing U.S. American companies to divert holdings elsewhere.
Meanwhile, attempting to secure a bipartisan agreement, the President is prepared to drop his demands for a corporation tax hike to entice republican support for his $1tn infrastructure spending package.
European markets initially followed the U.S. lower but subsequently parred losses as services PMI data kept sentiment upbeat. The STOXX posted only a 0.1% loss after slipping as much as 0.8% with the CAC expressing similar price action. The DAX outperformed closing flat. Ahead of U.S. labour data today, Asia opened mixed. The S&P200 and Hang Seng tracked the U.S. on open whilst the Nikkei declined.
Crude oil is set to post 2 weeks of advances after a significant draw in inventories reinforced the OPEC+ meeting’s bullish outlook. The U.S. dollar was stronger across the board following a rung of optimistic data on Thursday whilst gold hit a 2-week low to $1,870. Elsewhere, the Turkish lira notches lower with USDTRY closing above 8.7000.
Since the PBOC’s intervention, the renminbi has declined 4 consecutive days losing 0.6%. The week has saw authorities raising foreign-exchange reserve requirement and express unfavourable rhetoric against the currency’s appreciation.
On Wall Street the S&P500 and Nasdaq edged lower whilst the Dow Jones settled just above positive territory as fundamentals conflict between persistently improving economic optimism against overshooting inflationary risk. In Europe, indices started June strongly as the CAC, STOXX and DAX closed at all-time highs with miners and energy companies leading the way. The FTSE100 gained half a percent but was still fluctuating within a tight consolidation between 7,000 – 7,100. Asia opened mix with the S&P200 rallying 0.7%, so too did the Nikkei gain however the Hang Seng retreated 0.4%.
The USDTRY surged to record highs todays to 8.784, appreciating as much as 2,400 pips intraday after President Erdogan publicly remarked “I even spoke to the central bank governor today…we certainly need to lower interest rates”. This despite annual inflation rates hitting 17.14% in April. Since 2015, the Turkish lira has averaged 17% annual losses. Investors regained confidence late 2020 when a more hawkish central bank chief was selected, only to be abruptly replaced mid-March 2021 by Sahap Kavcioglu, an extreme dove.
China’s renminbi is set to post 3 consecutive days of losses after the PBOC announced stricter foreign currency requirements in Chinese lenders. The measure not used by the central bank since the GFC as the renminbi’s appreciation increasingly worry Beijing. A stronger currency would make exports pricier but on the other hand cheapens imports of raw material.
Crude oil reached a hit of 68.87 on Tuesday following the OPEC+ meeting. Whilst there was no mention of Iran, members reaffirmed the existing commitment to gradually return 2 million bpd this year on the back of “ongoing strengthening of market fundamentals, with oil demand showing clear signs of improvement and OECD stocks falling”.
The U.S. dollar gained overall, gold fell back to $1,900 and bitcoin stabilises around $37,000.
As the U.S. and U.K. observes Memorial Day and spring bank holiday respectively, futures and indices across the globe retreated on lighter volume as the lack risk-on sentiment spurred profit taking. In Europe, despite the weaker session on Monday, benchmarks are set to record consecutive weeks of gains with ever-growing confidence of a post-pandemic economic recovery fuelled by an accelerating vaccination program. Of which had its distribution hiccups amid the first quarter resolved.
In Asia, as the S&P200 and Hang Seng begins recovering previous day’s losses, the Nikkei lags suffering a 1% decline intraday on weaker capital spending data. The nation is also suffering varying degrees of predicaments arising from their 2021 Tokyo Olympics as regardless how it handles the games from “cheer-free” stadiums to banning eating inside, Japan will face huge financial losses.
Crude oil is set advance to a 32-month high, currently just below $68, following an assessment from an OPEC+ committee illustrating improving global demand will be able to absorb the incoming 2 million bpd from Iran should the scenario eventuate. Confidence arises as stockpiles slide, built during the pandemic and Iran ensuring their supply will be orderly and transparent.
With bitcoin falling out of favour, gold continues to rise, safely settling above $1,900. Demand has risen alongside two prevailing factors. The first being inflationary risk, the second a commodity boom driven by a global supply constraint.
The U.S. dollar index fell, nearly yearly lows, among a basket of majors with the pound grabbing headlines as it hits a three-year high. The progress of vaccinations across the U.K. has ensured the nation as one of the first to return to economic normalisation.