world markets weekly review

World Markets Weekly Review 09-13/08/2021

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World markets were higher this week as investors focused on hopes about the economic recovery and shrugged off worries about U.S. inflation. The consumer price index in the world’s largest economy  is at a 13-year-high. However prices of goods and services rose less in July than they did in June on a month-to-month basis. But does this mean that Federal Reserve Chair Jerome Powell has been vindicated in his insistence that inflation isn’t sticking around? Continued optimism about corporate earnings helped too. The timing of when the US central bank will taper its bond purchases remains a key area of focus for the markets.

 


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AMERICAS

CANADA

The S&P/TSX Composite closed up 0.21% this week despite a lackluster performance on Friday (August 13) when investors largely stayed on the sidelines, looking for direction. Industrial product price index in Canada went up 16.2% in July, compared to the same month a year ago, data released by Statistics Canada showed. In politics, Canadian Prime Minister Justin Trudeau is planning to ask for an election on Aug. 15. to seek voter approval for the government’s costly plans to combat Covid-19 various media outlets reported. A tight five-week campaign is expected to follow, with Election Day on Sept. 20, two years ahead of schedule.

U.S.

The S&P 500 and Dow Jones capped off modest gains for the week. The eagerly-anticipated US consumer price inflation (CPI) report  highlighted the week’s economic calendar, which was otherwise quiet. The Labor Department said its consumer price index went up 0.5% in July, a deceleration from the 0.9% registered in June which reflected the biggest increase since June of 2008. Economists had expected consumer prices to rise by 0.5%. Core consumer price inflation, which measures the changes in the price of goods and services, excluding food and energy, came in at 0.3%. The CPI report showing price pressures abating in July, appeared to align with the prevailing narrative that inflation will prove “transitory”. However, things are not always what they seem; the first appearance deceives many.

SP500

Producer prices for final demand rose 1% for a second consecutive month in July, higher than market forecasts of 0.6%. And the University of Michigan’s preliminary report said. August’s consumer sentiment slumped to 70.2, from 81.2 in the previous month and well below market expectations of 81.2. It was the lowest reading for the key consumer sentiment index since 2011. More positively , the Labor Department said weekly jobless claims remained largely unchanged, at 375,000 in the week to 7th August, matching estimates and declining for a third straight week. But is this figure enough to add to the body of evidence suggesting that the US labour market continues to recover?

Meanwhile, the Q2 earnings season is heading toward the finish line and year-over-year earnings growth is expected to be 92.9%, according to Refinitiv. Of the 456 S&P 500 companies that have reported thus far, roughly 83% have topped revenue forecasts, and approximately 85% have beaten earnings estimates from Wall Street analysts, according to data compiled by Bloomberg.

In other news, following months of negotiations, the Senate approved a $1 trillion package to improve and modernize the nation’s crumbling infrastructure through a bipartisan 69-to-30 vote on Tuesday (August 10). The bill now moves to the House.

Just weeks before the U.S. is scheduled to end its war in Afghanistan,  the Biden administration  is rushing back 3000 troops to Afghanistan- with another 5000 on standby in Qatar and Kuwait- in order to facilitate the drawdown of personnel at the U.S. Embassy in Afghanistan’s capital Kabul amid a Taliban takeover of much of the war-torn country. The U.S. Embassy in Kabul had urged Americans on Thursday to leave Afghanistan immediately.

LATAM
In Mexico, the S&P/BMV IPC Index, returned 0.73%. In line with market expectations, the Bank of Mexico on Thursday (August 12) decided to increase the inter-bank rate by 25 basis points, to 4.5%, after a surprise hike in June that did little to rein in inflation which stood at more than 5.8% in June on an annual basis (far above Banxico’s target of around 3%). On this occasion, the central bank also adjusted its inflation forecast upwards.

In Brazil, the Bovespa closed down 1% for the week  amid the back-and-forth of the reforms in the Brazilian Congress.

In Chile, equities as measured by the S&P IPSA Index, returned 2.79%. Pinera’s center-right government announced $4.5 billion in additional stimulus spending to support households and create employment. More than 3 million Chileans last week asked to withdraw some of their pension funds as a law took effect allowing citizens to tap into retirement savings. Presidential elections will be held in November.

ASIA/PACIFIC

JAPAN
Japanese stock recorded modest gains . Tokyo stocks extended their losing streak to a third day Friday, with investors increasingly wary about an envisaged state of emergency which is seen causing the economy to slow down. Technology-oriented shares in particular were hit hard by selling on a broad front. Wholesale price inflation accelerated in July. Producer prices in Japan rose by 5.6% y-o-y, beating market consensus, following a 5.0% increase in June. This was the fifth straight month of producer price inflation and the highest reading since September 2008, amid surging commodity prices and rising import costs.

CHINA
Chinese equity markets also registered modest gains even as investors kept their eyes on the government’s five-year and 10-point plan outlining tighter regulation of much of China’s economy.
On Wednesday, Beijing released a document signaling its intention to draft new laws covering
national security, technology innovation, monopolies, education and new sectors such as the digital economy, internet finance, artificial intelligence, big data, cloud computing. The planned measures will aim to “promote the building of a high-standard market that is unified, open, fair and orderly”, the state-owned Global Times said.

SSE Composite

AUSTRALIA
The ASX 200 gained 1.20% for the week. It was the market’s tenth weekly gain in the past 13 weeks, even with the country’s capital Canberra entering a week-long lockdown from Thursday (August 12).
Healthcare stocks, as well as massive gains for the dominant banking sector,  lifted the Australian sharemarket ahead of corporate earnings from heavyweights due next week. About 90 major companies, comprising about one third of the market’s capitalisation are set to report, according to The Syndey Morning Herald.

EUROPE

EUROZONE
European equities finished higher with the pan European Stoxx 600 extending gains to a fourth straight week. In Germany, the DAX surpassed on Friday the value of 16,000 points for the first time since its establishment in 1988. The index went up as Eurostat data showed Eurozone’s trade surplus amounted to €18.1 billion in June with significant annual rises observed in both the area’s imports and exports. Adidas gained nearly 2.5% on Friday after it agreed to sell its underperforming Reebok business to to US-based celebrity and clothing licensing group Authentic Brands, for up to €2.1bn.

Stoxx600

In France, the unemployment rate dropped to 8.0% in the second quarter of 2021 from 8.1 percent in the previous period , data released by the statistical office Insee showed. The rate was above market expectations of 7.9%. Eurozone industrial production fell by 0.3% from a month earlier in June 2021, as supply bottlenecks weighed on German factory output, Eurostat data showed.

UK
The FTSE 100 Index returned 1.34% this week as fresh data showed the UK economy expanded rapidly in the second quarter, as coronavirus restrictions were lifted. The quarterly rate (4.8%) was below the BoE’s forecast for 5% . Strong corporate earnings and the British pound’s decline relative to the U.S. dollar aided sentiment. UK stocks tend to gain when the British currency weakens because many of the FTSE 100’s constituent firms earn significant amounts of their earnings overseas, particularly in the US or somewhere that uses the US dollar as a trading or reference currency.

CEE/SEE
In Poland, the benchmark WIG index, went up 0.15% to an all-time high of 68,487.65 points on Monday (August 9) thanks to rallying stocks of Polish banks. Major lenders are seen servicing a credit boom and have posted positive second-quarter results with profits soaring.Polish central banker Jerzy Kropiwnicki  mentioned in a interview in Biznes24 TV that he would support a 15bps hike in November when the bank publishes its updated macroeconomic forecasts, assuming the outlook for economic growth was good. At this stage, the majority of the NBP board (including Governor Glapinski) still favors to keep rates low. Poland’s economic output rose 10.9% year-on-year in the second quarter.

In Romania, the BET index returned 2.44%. The country’s central bank raised its 2021 inflation forecast to 5.6%, a significant increase compared to the 4.1% estimated in May and to 3.4% in December 2022. Romania’s annual inflation rate increased to 4.95% in July  from 3.94% a month earlier. However, the total trading value on the Bucharest’s bourse broke the RON 10-billion ceiling in the first seven months of 2021, as the Romanian capital market went up by 25%.

AFRICA

In Kenya, the NSE20 dropped 0.68% this week. The monthly equity turnover at the Nairobi Securities Exchange (NSE) fell by a third in July, reflecting reduced activity on the large blue-chip counter that dominates trading at the market. In South Africa, JSE’s Top 40 index returned 1.22%. The Johannesburg Stock Exchange (JSE) and FTSE Russell have launched the FTSE/JSE Multi-Asset Composite Index, which offers investors a broad and integrated coverage of South African equities, fixed-income securities, listed property, and options that include global equities and fixed-income markets. In Nigeria, stocks appreciated for fourth straight day on Friday. The NSE All Share
Index closed up 1.86% for the week.


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