world markets weekly review

World Markets Weekly Review 02-06/08/2021

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World markets were buoyed by upbeat earnings reports this week and a better-than-expected labor report out of the U.S. with investors gauging the pace of the recovery. Denmark’s Maersk, the world’s largest container shipping firm, posted a 200% increase in profits from a year ago amid skyrocketing shipping rates. In the U.S. employers added 943,000 jobs in June, well above consensus estimates but questions quickly arose over the possible impact the report could have on the Fed’s tapering decisions.


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AMERICAS

CANADA

The Canadian market finished higher for the first week of August. The benchmark TSX gained 0.92%. In economic news, Canadian exports rose by 8.7% to a record C$53.76 billion in June,  the biggest increase since July 2020. Canada is a major exporter of auto parts and commodities, including oil and copper. The value of crude oil exports increased by 25.7% on higher volumes while exports of motor vehicles and parts rose by 14.9% but remain more than 8% lower than in June 2020. The Bank of Canada expects the economy to grow 6% this year.

US
Stocks touched new highs again as stronger than expected jobs data added to economic optimism but also raised concerns about the outlook for monetary policy. The Labor Department released a
a closely watched monthly report showing that the U.S. economy added 943,000 jobs in July, after surging by an upwardly revised 938,000 jobs in June. The job growth was partly due to sharp increases in employment in leisure and hospitality and local government education, which shot up by 380,000 jobs and 221,000 jobs, respectively. The unemployment rate slid to 5.4%, below the estimate of 5.7%, falling to its lowest level since March of 2020.  In other economic news, wholesale inventories were revised higher to a 1.1% month-over-month gain and consumer credit increased in June, for the second month in a row. The ISM’s service sector index jumped to 64.1, well above expectations of 60.5.

LATAM
In Brazil, equities gained in a week marked by political and fiscal tensions. Brazil’s central bank on Wednesday announced its fourth interest rate hike in 2021 and the biggest in almost two decades, raising the Selic rate by 100 basis points to 5.25%, after three successive hikes of 0.75 points proved insufficient to control inflation. Brazil’s consolidated Manufacturing PMI rose from 54.6 in June to 55.2 in July,  the strongest expansion rate in nine months, IHS Markit reported. Meanwhile the services PMI rose to 54.4 in July from 53.9 in June,  the fastest in eight and a half years.

In Mexico, the IPC closed the week with a moderate gain of 0.48% but the Mexican bechmark index has recorded an accumulated performance so far this year of 15.99%. Weekly gains were registered in 17 issuers, equivalent to 50% of the sample currently made up of 34 companies.

In other news, the flow of foreign direct investment (FDI) in Latin America dropped sharply in 2020, decreasing 34.7% compared to 2019, reaching US$105.48 billion,the lowest level since 2010, according to the Economic Commission for Latin America and the Caribbean (ECLAC). In Brazil, the country which receives the largest inflow of foreign investment in Latin America, the decline in FDI in 2020 was 35.4% ECLAC said.

ASIA/PACIFIC

JAPAN
Japanese equities rose as the markets received a boost from upbeat earnings reports, despite the expansion of the Covid quasi-state of emergency to eight more prefectures.
Sean Yokota, Singapore head of markets at SEB told CNBC’s “Squawk Box Asia” on Thursday that stocks are heading into a decline and Japanese markets could end up being among the hardest hit.
“For the next couple of months, I think you’re going to see some downside risk, especially going into the fall.” Yokota added that Japanese markets could “suffer the most in this environment” as the country struggles with lackluster inflation .

Japan’s core consumer prices rose 0.2% in June from a year earlier to mark the fastest annual pace in over a year, according to Reuters. The International Monetary Fund cut its 2021 growth forecast for Japan to 2.8%, the lowest among advanced economies. The downward revision reflects “tighter restrictions in the first half of the year as caseloads picked up,” the institution said. In Tokyo inflation sank 0.1% on year in July.

CHINA
Chinese stocks made gains over the week, after the previous week’s education selloff when
Beijing unveiled a massive overhaul of China’s $120bn private tutoring sector, under which all institutions offering tuition on school curricula will be registered as non-profit organisations.
In economic news, the services sector in the world’s second largest economy continued to expand in July, and at a faster rate, survey results from Caixin showed on Wednesday with a services PMI score of 54.9.

However, August’s PMI readings are expected to be less encouraging.  “The economy still faces enormous downward pressure, and we need to ensure business owners remain confident.”  Wang Zhe, a senior economist at Caixin Insight Group said. The manufacturing sector logged its weakest growth in more than a year in July largely due to a fall in new orders, survey data published by IHS Markit showed on Monday.

AUSTRALIA
The ASX200 had its best performance since May this week with a third straight record high. The Australian sharemarket was boosted by a slew of earnings season reports that confirmed the country’s biggest companies have had a strong year. Rupert Murdoch’s News Corp  declared a profit of US$330m (A$445m) for the year to the end of June, compared to a loss of US$1.26bn last year. According to its chief executive Robert Thomson it was the “most profitable year since we created the new News Corp in 2013”. The growth was driven by the company’s digital real estate services, book publishing and Dow Jones segments as well as higher streaming revenues at Foxtel.

Meanwhile,  the Reserve Bank of Australia (RBA) left its key interest rate and the yield target for government bonds unchanged, as widely expected, lowered its near-term growth forecasts, but upped those longer term. RBA Governor Philip Lowe signaled a willingness to respond if the Covid-19 situation worsens.

EUROPE

EUROZONE
European markets rose as earnings continued to drive sentiment. German insurance giant Allianz beat second-quarter profit expectations with a 2.225 billion euro ($2.6 billion) net income.
Germany’s industrial production fell unexpectedly by 1.3% in June, its second consecutive monthly decline, as supply shortages weighed on the manufacturing sector, Destatis revealed.
In France, private payroll employment grew for a second straight quarter in the three months to June, when 239,500 net job creations were recorded versus 91,400 jobs in the previous quarter, the statistical office INSEE said.

UK
The FTSE 100 returned 1.29% for the week. The Bank of England on Thursday left on hold all policy settings but said that “some modest tightening of monetary policy over the forecast period is likely to be necessary.” In economic news, UK house price inflation slowed for a second month in a row in July, rising 7.6 percent year-on-year following an 8.7 percent increase in June, survey data from the Lloyds Bank subsidiary Halifax showed.

SEE

In Romania, the BET index lost 0.72% this week. Romania’s central bank decided on Friday (August 6) to hold the benchmark interest rate at a record low of 1.25% as expected but said it will preserve tight control over money market liquidity as short-term inflation will be considerably higher than previously forecast.  In Athens, the general index was up 0.59% for the week as the country battles 154 wildfires, forcing thousands to flee by land and sea, and killing a volunteer firefighter on the fringes of the Greek capital. The Athens Stock Exchange has acquired a 10.24% stake in Belgrade Stock Exchange, the Greek bourse announced on Friday.

AFRICA

In Nigeria, the local stock market ended the week on an upbeat note with investors gaining N137 million. A total turnover of 989.593 million shares worth N8.183 billion in 19,617 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 1.374 billion shares valued at N11.823 billion that exchanged hands last week in 22,982 deals. The Financial Services Industry (measured by volume) led the activity chart, followed by the Conglomerates Industry and Consumer Goods Industry. In South Africa, the JSE TOP40 fell 0.55% for the week. Of note, foreigners remained net sellers of SA stock in the first half of the year , according to JSE’s latest financial results.


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