nasdaq

The Weekly Wrap – COVID-19 Fueled Market Jitters Muted by Bargain Hunting

The Stats

It was a quieter week on the economic calendar, in the week ending 9th July.

A total of 42 stats were monitored, which was down from 58 stats in the week prior.

Of the 42 stats, 20 came in ahead forecasts, with 22 economic indicators coming up short of forecasts. There were no stats that were in line with forecasts in the week.

Looking at the numbers, 20 of the stats reflected an upward trend from previous figures. Of the remaining 22 stats, 21 reflected a deterioration from previous.

For the Greenback, economic data and the FED failed to deliver Dollar support, with a Friday pullback leaving the Dollar in the red. In the week ending 9th July, the Dollar Spot Index fell by 0.13% to 92.102. In the previous week, the Dollar had risen by 0.41% to 92.226.

Out of the U.S

After Monday’s holiday, service sector PMIs for June were in focus on Tuesday.

The all-important ISM Non-Manufacturing PMI fell from 64.0 to 60.1. While in decline, plus 60 levels continued to support the bullish outlook on the U.S economy.

On Wednesday, JOLT’s job openings for May had a muted impact on the Dollar as did the weekly jobless claim figures.

In the week ending 2nd July, initial jobless claims rose from 371k to 373k.

On the monetary policy front, the FOMC meeting minutes delivered mixed signals. The minutes pointed to a more patient stance on policy, easing concerns of an imminent move. As expected, there was tapering talk, however.

In the equity markets, the Dow rose by 0.24%, with the NASDAQ and the S&P500 ending the week up by 0.43% and by 0.40% respectively.

Out of the UK

It was another relatively quiet week. Early in the week, finalized service sector PMI figures were in focus.

In June, the UK’s services PMI fell from 62.9 to 62.4, which was up from a prelim 61.7.

At the end of the week, industrial and manufacturing production, GDP, and trade figures for May were in focus.

The UK economy grew by an average 3.6% in the 3-months to May, accelerating over the same time period to April.

In the month of May, however, growth slowed from 2.0% to 0.8%

Manufacturing and industrial production figures also failed to impress. Manufacturing production slipped by 0.1% after having stalled in April. Industrial production rose by just 0.8%, partially reversing a 1.0% decline from April.

Trade data was somewhat better, with the UK’s trade deficit narrowing from £10.96bn to £8.48bn. Imports were on the decline, while exports were on the rise in May.

Of significance was a 5th consecutive month where imports from non-EU countries overshadowed imports from the EU…

Away from the economic calendar, concerns over the continued spread of the Delta variant added further downward pressure on the Pound.

In the week, the Pound rose by 0.56% to end the week at $1.3901. In the week prior, the Pound had fallen by 0.40% to $1.3824.

The FTSE100 ended the week down by 0.02%, following a 0.18% loss from the previous week.

Out of the Eurozone

It was another busy week.

Early in the week, service sector PMIs for June were in focus, with the stats skewed to the positive.

For the Eurozone, the services PMI increased from 55.2 to 58.3 in June, which was up from a prelim 58.0.

For June, the Composite PMI came in at 59.5. This was up from a May 57.1 and a prelim 59.2.

According to the finalized survey,

  • The private sector economy expanded at the fastest pace for 15-years in June.
  • Support came from a marked increase in output across both service and manufacturing.

By Country,

  • Ireland ranked 1st, with a 2-month low Composite PMI of 63.4, followed by Spain. In June Spain’s Composite PMI surged to a 256-month high 62.4.
  • Germany ranked 3rd, with a 123-month high 60.1, following by Italy and then France. Both saw their respective composites reach 41-month highs at the end of the 2nd

The rest of the stats in the week were skewed to the negative, however.

Economic sentiment for Germany and the Eurozone waned. The Eurozone’s ZEW Economic Sentiment Index falling from 81.3 to 61.2.

Stats from Germany also disappointed in the week.

Significantly, factory orders and industrial production both fell unexpectedly in May, with Germany’s trade surplus narrowing.

The numbers raised question marks over the resilience of the economy recovery.

On the monetary policy front, the ECB meeting minutes were also in focus. A shift in the ECB’s inflation target to 2% was the only headline.

For the week, the EUR rose by 0.09% to $1.1876. In the week prior, the EUR had fallen by 0.59% to $1.1865.

The CAC40 fell by 0.36%, while the DAX30 and the EuroStoxx600 ended the week up by 0.24% and by 0.19% respectively.

For the Loonie

Ivey PMI and employment figures for June drew interest ahead of the Bank of Canada’s monetary policy decision next week…

The Ivey PMI jumped from 64.7 to 71.9 delivering mid-week support.

More significantly, however, employment data impressed at the end of the week.

Employment surged by 230.7k in June, leading to a fall in the unemployment rate from 8.2% to 7.8%. The fall in the unemployment rate came in spite of a rise in the participation rate from 64.6 to 65.2%.

In the week ending 9th July, the Loonie slid by 1.01% to C$1.2447. In the week prior, the Loonie had fallen by 0.24% to C$1.2322.

Elsewhere

It was another bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 9th July, the Aussie Dollar fell by 0.50% to $0.7488, with the Kiwi Dollar declining by 0.57% to $0.6986.

For the Aussie Dollar

It was yet another quiet week. Finalized retail sales and building approvals were in focus.

In May, building approvals slid by 7.1%, following a 5.7% decline in April.

Retail sales rose by 0.4%, however, which was up from a prelim 0.1% increase.

On the monetary policy front, the RBA was also in action on Tuesday.

In line with market expectations, the RBA left monetary policy unchanged. The RBA continued to project a hold on interest rates until 2024, pegging the Aussie Dollar back early in the week.

For the Kiwi Dollar

It was a particularly quiet week.

Business confidence was in back focus mid-week.

In the 2nd quarter, the NZIER Business Confidence Index increased by 7%, partially reversing a 13% decline from the 1st quarter.

The pickup in business confidence was not enough to prevent a Kiwi Dollar slide against the Greenback, however.

For the Japanese Yen

It was a relatively busy week.

Finalized service sector PMI and household spending figures were in focus.

The stats were mixed in the week.

While service sector activity contracted at a slower pace, household spending fell in May.

Month-on-month, spending fell by 2.1%, reversing a modest 0.1% increase from April.

Risk off sentiment late in the week, however, was the key driver for Yen demand.

The Japanese Yen rose by 0.82% to ¥110.140 against the U.S Dollar. In the week prior, the Yen had fallen by 0.27% to ¥111.050.

Out of China

Service sector and inflation figures for June were in focus, with the stats skewed to the negative.

In June, the Caixin Services PMI fell from 55.1 to 50.3, which followed disappointing manufacturing numbers from the previous week.

Inflationary pressures also eased, with China’s annual rate of inflation softening from 1.3% to 1.1%. While wholesale inflationary pressures also abated, the annual rate of wholesale inflation remained heighted at 8.8% in June.

In the week ending 9th July, the Chinese Yuan fell by 0.09% to CNY6.4790. In the week prior, the Yuan had fallen by 0.26% to CNY6.4730.

The CSI300 and the Hang Seng ended the week down by 0.23% and by 3.41% respectively.