world markets weekly review

World Markets Weekly Review 26-30/07/2021

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World markets volatility was on the rise this week. A tsunami of corporate results, conflicting economic economic data, a US Federal Reserve meeting, and further regulatory crackdowns by Chinese authorities on major industries, notably tech and education, made the last week of July the busiest one so far this summer. Federal Chair Jerome Powell on Wednesday indicated that the central bank would wait further to taper stimulus but investors appeared to keep a close eye on lingering supply chain problems preventing growth, while doubts about the wider economic recovery mount.


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AMERICAS

CANADA

The Canadian market gained 0.49% in the week. A report from Statistics Canada said the  economy likely grew by 0.7% in June, after shrinking by 0.3% in May. Another data from Statistics Canada showed the industrial product price index in Canada was flat month over month in June, compared to initial estimates of a 0.4% fall. Year-on-year, industrial producer prices increased 16.8%, higher than initial estimates of a 16.2%, but easing from 16.9% in May. Raw materials prices index increased 3.9% from a month earlier in June, rising for a ninth straight month.

U.S.

U.S. stocks posted losses on a weekly basis, during the busiest week of the second-quarter earnings season, with companies topping estimates at record levels. Investor sentiment was boosted after the Senate voted on Wednesday to take up a $1 trillion bipartisan infrastructure bill.  The proposed framework would be the largest investment in American infrastructure in nearly a century.

Real Q2 GDP grew at a 6.5% annualized rate, below economists’ 8.4% forecast, according to an advance estimate from the US Bureau of Economic Analysis. The drag came as supply-chain disruptions and labour shortages continued to temper growth despite a big boom in consumer spending.
Orders for durable goods climbed 0.8% in June, falling well short of expectations
Economists polled by the Wall Street Journal had forecast a 2% uptick.

Personal spending rose more than expected in June (1.0%), compared to the prior month’s negatively-adjusted 0.1% dip.

LATAM

In Brazil, the benchmark Bovespa index returned -3% for the week. Brazil’s unemployment rate stands at 14.6%, reaching 14.8 million Brazilians, data come from the Continuous National Household Sample Survey (Pnad), released Friday by the Brazilian Institute of Geography and Statistics (IBGE) showed. In June, the country’s gross public debt was 84.0% of GDP, while net debt was 60.9% of GDP. the Central Bank said. More positively, the confidence of the services sector in Brazil reached in July the highest level in more than seven years.

In Peru, the S&P Lima General index plunged 4.70% this week. Pedro Castillo was sworn in as president on Wednesday.  His inauguration took place on the 200th anniversary of Peru’s independence from Spanish colonial rule.  In his inauguration speech, the former teacher mentioned that his priority is economic recovery and predictability to promote private investment.
He has also announced a series of reforms, including drafting a new Constitution.

EUROPE

EUROZONE

Markets in Europe concluded the week mostly lower as regulatory measures in China continued to weigh on sentiment in the Old Continent. Optimism thanks to strong corporate earnings and upbeat economic data also evaporated. Eurozone’s GDP jumped 13.7% in the second quarter, compared to the same period a year earlier, topping estimates. GDP was forecast to grow 13.2%.Growth in France, Italy and Spain came in stronger than expected but in Germany, Europe’s biggest economy, the expansion of 1.5% compared to Q1 showed a weaker rebound than expected.

Eurozone’s inflation accelerated more-than-expected in July, rising 2.2%, lifted by higher energy prices, its highest rate since October 2018 and above the European Central Bank’s 2% target. In Germany, the annual consumer price inflation jumped 3.1% in July, its highest since August 2008.

CEE

In Poland, the WIG20 returned 0.49% for the week. Higher-than-expected flash July CPI data (5% y-o-y) raised expectations of tightening in the country where the central bank has not raised rates yet. Counterparts in Hungary and the Czech Republic tightened policy last month. The Hungarian central bank also raised its benchmark base rate by 30 basis points to 1.2 percent on Tuesday, a level not seen since March of 2016 and more than market expectations of a 20 bps increase. In Romania, the BET index closed down 0.28% this week. Financial analysts expect the Romanian leu to depreciate to an average of 5.0261 units to the euro in the next 12 months , while see inflation averaging 4.11% during the same period.

ASIA/PACIFIC

JAPAN

Japanese shares hit over six-month lows on Friday amid earnings disappointments and concerns over the economic recovery. Meanwhile the state of emergency in Tokyo and Okinawa has been extended from August 22 to August 31. The au Jibun Bank Flash Japan Manufacturing Purchasing Manufacturers’ Index (PMI) dropped to 52.2 in July from 52.4 in June, although it remains above the boom-or-but line of 50 that separates expansion from contraction.
The Services Flash PMI also fell from 48 to 46.4. More positively, Japan’s industrial production climbed 6.2% in June, beating expectations for an increase of 5.0% while retail sales advanced 3.1%.  The country’s unemployment rate dipped to 2.9% last month.

CHINA

Mainland Chinese equities slumped amid the intensified crackdown by China on big business, notably the tech, education and ecommerce industries. The large-cap CSI 300 Index plunged 5.5% in its worst weekly drop since February, according to Bloomberg. For July, the benchmark returned -7.9%, its biggest monthly drop since October 2018. Chinese regulators upend the $120 billion private education industry with new measures, much tougher than investors had expected. Under the education policy changes, Beijing requires tutoring and education services firms to convert to nonprofit status, bans core-curriculum tutoring during weekends and vacations, and forbids foreign curricula or hiring foreigners outside of China to teach remotely.

AUSTRALIA

Australian investors finished the week marginally lower, but the ASX MANAGED TO carve out a tenth straight monthly gain. The ASX fell 0.3 per cent on Friday and closed the week marginally lower, though July marks a tenth straight monthly gain for the index, even with much of the population in lockdown. New Covid-19-related restrictions are tipped to send the economy backwards in the September quarter. Meanwhile, export prices in Australia spiked 13.2% on quarter in the second quarter of 2021, accelerating from 11.2% in the previous three months. On a yearly basis, export prices jumped 26.0%,  the Australian Bureau of Statistics said.

AFRICA

In Kenya, the NSE 20 index returned -0.38% for the week. The Central Bank of Kenya on Wednesday kept the benchmark policy rate at 7%, the ninth such ‘hold’ decision in a row. The bank’s monetary policy committee said inflation pressures are expected to be elevated in the near term mainly driven by increases in food and fuel prices, and the impact of the recently implemented tax measures.
In Nigeria, the NSE All Share Index fell 0.31% for the week. Meanwhile the Central Bank affirmed a crypto ban as e-Naira is set to launch in October and will be operated on the Hyperledger Fabric Blockchain. In Ghana, the central bank’s Monetary Policy Committee kept its policy rate unchanged at 13.5% citing an increase in public debt stock and inflation. Ghana’s public debt hit 76.6% of GDP in May 2021.


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