Risk-on sentiment emboldens Wall Street to elevated valuations whilst the delta virus variant has tempered optimism elsewhere around the globe. Both the S&P500 and Dow Jones rallied 0.2% and 0.7% respectively, what the former notches its 5th consecutive record high. This despite, rising geo-political tensions on the peripherals as the U.S. and Japan conduct joint military exercise in the face of China’s conflict with Taiwan. In a speech, marking the Communist Party’s 100-year anniversary President Xi had called for unification with Taiwan a “historic mission” and warns foreign forces will have their heads broken “on the steel Great Wall”.
In Asia, COVID-19 resurgence continues to plague Japan. The Nikkei fell 0.4% as the government edges closer to extending two weeks to a month of restrictions ahead of Tokyo’s 2021 Olympics. Meanwhile, Sydney Australia’s most populous city is struggling to contain the variants outbreak. The past 24 hours has seen another 24 new local cases despite emergency lockdown protocols being implemented. The S&P200 tumbled 0.5%.
Overnight European benchmarks faired no better, retreating across the board, but nonetheless recorded their fifth straight month of gains. A similar story as Asia with the delta variant risk tilting sentiment to risk-off. This despite Moderna’s recent announcement that their vaccine produces relevant protective antibodies against the highly transmissible mutation.
Ahead of Friday’s US jobs data, the dollar index strengthened anticipating strong job gains and in turn cementing the Federal Reserve’s view to bring the first rate rise forward. Crude oil fluctuated between 73 and 74 as expected output increase coming from todays OPEC meeting is offset by COVID-19’s delta variant. Gold bounced off support to rally back to $1,770 and bitcoin finds equilibrium around $34,000.
Resurgence in COVID-19 cases and emergence of the highly transmissible Delta variant looks set to derail the global reflation trade as cyclicals underperformed on Monday. In Europe, tourism related stocks tumbled leading to broad based benchmarks posting losses after Spain, Portugal and Malta are looking to impose new travel limits from Britain as daily infections hit just under 18,000 cases. Hopes are also fading that the U.S and U.K. would agree to open travel bubble before summer finishes. By sessions end, the FTSE100 had slumped 1%.
Meanwhile, by and large Wall Street defied global sentiment with President Bidens’ infrastructure deal keeping risk-appetite high. The S&P500 edged higher to close at all-time high times whilst the Dow Jones declined 0.6%. Nasdaq benefited from the mild delay to return to normalcy as the index surged 1.1%.
In Australia, Delta variant outbreaks across Sydney had saw the city enter emergency lockdown for at least 2 weeks. The S&P200 gapped lower by 0.3% on open but has since recovered lost ground. Worsening labour market conditions ahead of an already shaking Tokyo Olympic dragged the Nikkei half a percentage point down. Elsewhere, the Hang Seng down 1% with the special territory banning all passenger flights from the U.K.
Crude oil retreated $1.30 following a tumultuous run from $61 since late May. Largely from uncertainty over global demand recovery alongside OPEC’s expected productions increase in the coming months. In defiance over a global regulatory crackdown, bitcoin stabilises above $34,000 after failing to push below $30,000.The U.S. dollar manage to eke out gains overall against counterparts with the South African Rand in focus. On Sunday, President Ramaphosa moved the country to alert 4, outlawing social gatherings, closure of schools and limiting travels. The rise of the Delta variant puts South Africa's economic rebound for 2021 in peril. Since the start of the year, the rand had gained 8.6% only to depreciate 6.7% the past month.
Wall Street resumes its upwards trajectory following a brief intermission on Wednesday. Both the Nasdaq and S&P500 established new record-highs whilst the Dow Jones surged 1.2%. The move spurred on by President Biden securing an infrastructure deal worth $1tn. Whilst less than the $2.3tn announced back in March, with bipartisan support from Republican senator Susan Collins, the deal removes layers of uncertainty for prospects of additional government spending in the future.
Whilst indices in Asia retreated, European benchmarks overnight reacted positively to headlines across the Atlantic, with the STOXX50 gaining 1.1%, CAC40 up 1.2% and DAX30 higher by 0.8%. Good news was also highlight via the Ifo Institute’s business climate index posting higher than expected readings. Elsewhere, the UK100 rallied 0.6% following the Bank of England recent unchanged policy decision. The monetary summary remarked existing policy “remained appropriate” and that the UK would “experience a temporary period of strong” growth fuelling transitory inflation beyond prescribed targets but will eventually fall back.
Crude oil settles above $73 and is set for its 5th consecutive week of advances. Tight markets alongside shrinking stockpiles have been the prevailing rhetoric, despite OPEC’s piecemeal increase in output. With prospects of Iranian oil flooding the market also diminishing, investors look towards the OPEC+ meeting schedule for 1st of July, widely expected to increase quota output.
Among a basket of majors, the U.S dollar index stood there though the pound did slide 0.4% following the BOE’s dovish monetary policy release. Gold edged lower to $1,775 and bitcoin attempts to find equilibrium around $34,000 despite increasing global regulatory scrutiny.
Wall Street applauds Federal Reserve Chair Jerome Powell’s balancing act yesterday testifying before the House Select Subcommittee. Nasdaq has since recovered all losses from last week’s hawkish turmoil to record fresh highs, with the S&P500 set to follow suit today and Dow Jones under way. From his opening statement, Powell took a dovish tone, reiterating “a pretty substantial part, or perhaps all of the overshoot in inflation comes from categories that are directly affected by the re-opening of the economy”. Meanwhile, acknowledging “that these effects have been larger than we expected, and they may turn out to be more persistent than we expected”.
In contrast, European and UK markets crept lower over lack of domestic headlines. Elsewhere, overnight U.S. risk-on appetite did not flow into Asia’s open. The S&P200 contacted 0.5% following weaker than expected manufacturing and services PMI. Meeting minute releases from the BOJ weighed down the Nikkei. Board members noted “uncertainty over the pace and effect of coronavirus vaccinations, which could heighten downward pressure on economic activity”.
Mixed performance on the U.S. dollar saw the index holding steady. In focus, the USDCNH notching its’ 8th consecutive rally to 6.4800 after the PBOC’s intervention to ensure institutions hold greater foreign reserves. Crude oil traded above $73 on an industry report illustrating declines in U.S. stockpiles. And gold edges lower to $1,778 following Fed chairs transitory inflation remarks.
Bitcoin briefly wipes out all its’ gains for the year after tumbling 12% on Tuesday touching as low as $28,824. The cryptocurrency is down more than 50% from its’ April peak of $64,900. Persisting sweeping regulatory crackdown to reign in on the largely unregulated market has put the digital asset under immense pressure. On Monday, Chinese authorities summoned officials from major banks and Alipay to reiterate a ban on cryptocurrency services. Beyond China, global regulators have also advised the toughest capital requirements for holding bitcoin and similar tokens.
Despite holding out among Wall Street, Nasdaq succumbs to Fed tapering rhetoric and slips 1.1% on Friday. Meanwhile, the Dow Jones recorded its 10th consecutive decline, tumbling 2.1% whilst the S&P500 down 1.7%. Surprise hawkishness from policymakers on Wednesday spooked investors into a shock re-evaluation about how much the inflationary risk the central bank is willing to stomach beyond set bands, impeding economic growth.
Contagion spread across Europe as broad-based benchmarks retreated from record highs, eroding gains from previous weeks in a single day. Likewise, Asia dumped on open today. The S&P200 gapped and fell lower by 1%, then Hang Seng posted negatived 0.9% intraday thus far. The Nikkei among the worst performers, tumbling 2.4%, extending losses from last week. With Japan lacking a domestic catalyst for growth, particularly with its ever-failing prospect of a buoyant 2021 Olympics, the nation has been hostage to global demand, especially from the U.S.
Crude oil touches $72 after the 6th round of negotiations between Iran and world powers in Vienna fail to reach an agreement on the nuclear deal. The situation worsened after a hardline cleric, Ebrahim Raisi was elected President of Iran. Talks currently hinge on whether the U.S. can deliver on a guarantee that the nation will not exit reimpose sanctions in the future.
Bitcoin fell to as low as $34,142 on Sunday after regulatory crackdown within China, shutting down mining operation resulting in a declining hashrate. The push comes amid a spike in electricity consumption from server farms. In turn, stoking illicit coal extraction from producers in mines deemed dangerous in meeting rising demand from power plants, endangering President Xi’s ambitious environmental initiatives.
With rate rises anticipated in 2023 compared to earlier predictions of 2024, the U.S. dollar index records it’s largest two-day gain for the year whilst dampening inflation prospects has gold edging lower to $1,764.
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.