Markets Update Friday 20/08/2021 – Friendly Close

Frankfurt – 20/08/2021

Friendly Close

After the initial interest rate shock following the Fed Minutes, Wall Street recovered as the week progressed. After stabilizing yesterday, the leading US stock indices all ended trading today with gains. In Europe, too, the major stock market barometers were in a friendly mood. Only in the Far East was the mood dull.

Support came from statements by Fed Banker Robert Kaplan, Chairman of the Dallas Regional Federal Reserve and known within the Fed as a supporter of a relatively loose monetary policy. In a television interview, he said that monetary tightening should be reconsidered if the particularly contagious delta variant of the coronavirus affects consumer behaviour and corporate activity.

US Markets at a glance

On the last trading day of the week, US investors were more confident again. The Dow Jones was slightly firmer. As it progressed, it was able to extend its gains and then ended the trading day 0.65 per cent firmer at 35,120.08 points. The NASDAQ Composite also started the day slightly higher and subsequently gained further. In the evening, gains of 1.19 per cent to 14,714.66 points were still on the board.

Some concerns remained among US investors: fears of renewed government corona measures, in addition to the Fed’s very loose monetary policy, which is expected to end soon, and Beijing’s restrictions on the Chinese economy. 

Despite these concerns, the week ended on a conciliatory note in the United States. A generally very positive reporting season, which points to economic recovery, is still in the back of investors’ minds. In addition, the alternatives to equities are not very attractive, which is why price setbacks have recently been used more frequently as an entry moment. In particular, some large, highly weighted technology stocks stabilised the US indices on Friday.

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Far East Markets at a glance

On the last trading day of the week, the stock markets in Asia continued their downward trend. The Japanese benchmark index Nikkei ultimately lost 0.98 per cent to 27,013.25 points. In mainland China, the Shanghai Composite slumped 1.10 per cent to 3,427.33 points, while Hong Kong’s Hang Seng fell 1.84 per cent to 24,849.72 units.

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Asia’s stock markets again followed negative cues from Wall Street on Friday, falling deep into negative territory in some cases after a subdued start. The market spoke of economic worries because of the corona situation.

The Chinese stock exchanges, in particular, recorded heavy losses. In Hong Kong, there was another steep decline as technology stocks were sold off in a big way. Due to the government’s concern about too much power of the internet giants and uncontrollable handling of data, Beijing passed a law on the handling of private data, according to state media. This is one of the strictest in the world.

European Markets at a glance

Like the US, investors in the European market were also optimistic at the end of the week. 

The EuroSTOXX 50 started marginally firmer and then moved in a narrow range around the zero lines for a long time. By the close of trading, the EuroSTOXX 50 changed signs and went into the weekend with a gain of 0.55 per cent to 4,147.50 points.

The DAX opened the session slightly lower and then remained in the loss zone for a long time. In the afternoon, the leading German index managed to change the sign and record its first gains, finally leaving the trading session 0.27 per cent higher at 15,808.04 index points. The TecDAX started at around the previous day’s level but was then able to fight its way further and further into the profit zone and ended trading 0.93 per cent firmer at 3,877.66 points.

Unfavourable conditions from the USA on the previous day and Asia today weighed on the markets again at the beginning and put a damper on investors’ buying mood. In addition, the spread of the delta variant of the coronavirus caused concern among investors. Shares in the automotive sector, in particular, remain under pressure. For example, the chip shortage in the car industry is now also affecting VW production in Wolfsburg. Firmer US indices were able to influence investor sentiment shortly before the close of trading positively.

Forex, gold, oil and crypto

The euro has recovered somewhat on the foreign exchange market after falling to a new nine-month low. The common currency euro traded for 1.1698 US dollars in New York trading, slightly more than in European afternoon trading.

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Oil prices continued their downward trend of the previous trading days on Friday. In the evening, Brent oil from the North Sea cost 41 cents less than the last day at 66.04 US dollars. The price for West Texas Intermediate from the USA fell by 44 cents to 63.25 dollars. Oil prices continue to be burdened by Corona concerns and the recent rise in the dollar exchange rate. Prices have already fallen sharply several times in the past few trading days. Over the week, the price of North Sea crude oil fell by more than 5 per cent, and US oil has fallen by about 7 per cent since Monday.

The gold price is benefiting from investors’ flight to safe-havens. In the afternoon, the price of the precious yellow metal rose by 0.2 per cent to 1782 dollars. Yesterday, the effect of the strengthening dollar was still predominant.

Cryptocurrencies are on fire these days and continue to rise. Bitcoin even crossed the $49,000 mark for the first time in over three months. At the end of the day, one BTC was traded for $48,700, a plus of 3.3 per cent. Altcoins continued to appreciate as well, for example, Ether rising 1.1 per cent to $3,270, Cardano adding 1.8 per cent to $2.47, and XRP climbing 4 per cent to $1.26. 

Corporate and world economic news

Economic data

Producer prices in Germany rose strongly in July, significantly exceeding forecasts. Compared to the previous month, prices rose by 1.5 per cent, as reported by the Federal Statistical Office. Economists and market analysts had forecast an increase of only 0.8 per cent. Compared to the previous year, there was an increase of 10.4 per cent. This is the highest increase since January 1975, when prices had risen sharply in connection with the first oil crisis. Economists had forecast a rise of only 9.2 per cent. The main reason for this increase in producer prices was the price development of intermediate goods and energy. 

British retailers suffered a surprising setback in July. Compared to the same month last year, sales fell by 2.5 per cent, as the Office for National Statistics reported in London on Friday. Analysts, however, had expected a slight increase of 0.2 per cent. One reason for the weak performance in July was grocery sales. These fell in a monthly comparison after they had still risen significantly in June.

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