Markets Update Friday 09/07/2021 – Closing the Gap

Frankfurt – 09/07/2021

Closing the Gap

Following yesterday’s partially heavy price losses on most major stock exchanges, Friday painted a reconcilable picture, where the price gaps closed. The S&P 500 even broke another new record.

All markets received strong support, especially from Wall Street, where some bargain hunters struck. Investors are now eagerly looking ahead to the next approaching earnings season, which starts next week with the big banks. Analysts on average expect earnings growth of 65.8 per cent for S&P companies in the second quarter, according to Refinitiv. Experts say not just a few companies but representatives of most industries are likely to report substantial profits.

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Given the fulminant rally of the S&P 500, however, there are already more and more voices of warning. Higher interest rates, rising inflation rates and higher taxes are likely to limit the upside potential of the index.

US Markets at a glance

On Wall Street, the mood before the weekend was once again praiseworthy. The Dow Jones gained 1.30 per cent and closed at 34,870.16 points. The NASDAQ Composite also went up, ultimately rising by 0.98 per cent to 14,701.92 points.

In general, investors made a spirited grab at the end of the week after the recent setback in equities. This was particularly true for the shares of the large banks, which had recently been penalised. The market pointed to the fact that US government bonds, which had lately been in demand as a safe haven, were now experiencing profit-taking as support.

 For banks, higher interest rates are considered an advantage in everyday business, for example, with loans or fixed-interest securities. The securities of many other institutions were also boosted because the yield on ten-year US bonds, which runs counter to prices, rose again on Friday to 1.36 per cent. The previous day it had fallen to a five-month low of 1.25 per cent.

Far East Markets at a glance

Meanwhile, the stock markets in Asia were not all able to benefit from the friendly Wall Street. The Japanese benchmark index Nikkei in Tokyo slipped by 0.63 per cent to 27,940.42 points by the close of trading. On the Chinese mainland, the Shanghai Composite was able to cut its losses almost completely in the course of trading and closed only 0.04 per cent weaker at 3,524.09 points. The Hang Seng in Hong Kong went into the weekend up 0.70 per cent at 27,344.54 points. Market observers spoke of a countermovement here.

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Weak conditions in the USA – and a strong yen in Japan – from Thursday’s trading session weighed on most Asian stock markets at the end of the week. In addition, worries about the corona crisis and its economic effects increased again after a state of emergency was again declared in Tokyo. The Olympic Games are to take place without spectators.

European Markets at a glance

Gains were evident on the European stock markets on the last trading day of the week. The EuroSTOXX 50 started with a small plus and ultimately gained 1.91 per cent to 4,068.09 points.

The DAX already gained at the start and also showed firm tendencies in the further course. In the process, it regained the 15,500 and 15,600 point marks. It ultimately exited trading 1.73 per cent higher at 15,687.93 points. The TecDAX was still slightly higher at the opening but turned somewhat negative at times during trading. By the close, however, it had risen by 0.6 per cent to 3,607.16 points.

After Thursday’s slide, the leading European indices recovered on the last trading day of the week. According to stock market participants, the setback had brought money into the market, but the development in the corona new infections was viewed with more scepticism. 

Forex, gold, oil and crypto

The euro continued to gain on Friday after initial losses on the foreign exchange market. The last price of the common currency in New York trading was 1.1877 US dollars. 

Speculation of a supply shortage and a weakening dollar drove oil prices again today. Brent oil rose by 1.37 dollars to 75.49 US dollars, while light oil of the American type West Texas Intermediate rose by 1.56 dollars to 74.50 dollars.

The softening of the greenback also provided a tailwind for the precious metals market. Gold extended its weekly gains and closed well above the $1,800 mark at $1,808 per troy ounce.

Digital assets stabilised after the recent downward trend too. Bitcoin gained 2.2 per cent to $33,800, while Ethereum hovered around $2,140, almost unchanged. Both Cardano and XRP rose 1.5 per cent to $1.34 and $0.63, respectively. 

Corporate and world economic news

Economic data

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Producer prices in China did not rise as strongly in June as they did in May. However, with a plus of 8.8 per cent compared to last year, the increase in June was still very high. The main reason for this is still the sharp price increase in oil, iron ore and other metals. This is according to data published by the statistics office on Friday. In May, producer prices had climbed by 9.0 per cent, the strongest increase in 13 years.

According to the Federal Statistical Office, prices for new construction of conventionally manufactured residential buildings in Germany rose by 6.4 per cent in May compared to the previous year. This is the highest year-on-year increase in construction prices since May 2007, when the then increase in VAT from 16 to 19 per cent had contributed to the sharp rise in prices.

The economy in Britain reduced its growth rate in May. Compared to the previous month, the gross domestic product (GDP) rose by 0.8 per cent, the statistics office ONS announced in London on Friday. In April, growth had been significantly higher at 2.0 per cent. Analysts had forecast a slowdown to 1.5 per cent. GDP is still 3.1 per cent lower than before the start of the Corona crisis.

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