Markets Update Monday 12/07/2021 – New week, new records

Frankfurt – 12/07/2021

New week, new records

At the start of the new week, Wall Street once again broke records. The domestic DAX followed suit and also set a new all-time high. Ahead of the start of the US balance sheet season on Tuesday, investors are brimming with optimism and corona worries have been pushed aside for now. 

Investors eagerly await the start of the US accounting season, which will be kicked off by banks JPMorgan and Goldman Sachs tomorrow. Thanks to lower provisions for bad loans, strong profit growth can be expected, experts say. Analysts anticipate an average of 65.8 per cent profit growth for S&P companies in the second quarter, according to Refinitiv research.

US Markets at a glance

Wall Street got off to a flying start in the new trading week.

The Dow Jones started moderately lower but ultimately passed the psychologically important 35,000-point mark and ended the day 0.36 per cent higher at 34,996.18 points. The NASDAQ Composite extended its initial gains to end the session up 0.21 per cent at 14,733.24 index units.

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The reporting season, which starts on Tuesday, was already casting its shadow and caused some caution among investors. Market participants are also eagerly awaiting the inflation data to be published tomorrow. Inflation is expected to remain high. This, in turn, will influence the Fed’s monetary policy course. The Fed could decide to take action sooner than expected.

Far East Markets at a glance

The stock markets in Asia were mainly in the green at the start of the week. In Tokyo, the Japanese benchmark index Nikkei gained a significant 2.25 per cent to 28,569.02 points. The Shanghai Composite was also trending stronger on the Chinese mainland, closing 0.65 per cent higher at 3,547.03 index points. Hong Kong’s leading index Hang Seng also posted gains on Monday, gaining 0.62 per cent to 27,515.24 points.

In addition to the robust US data – new records were set on Wall Street on Friday – the markets in the Far East are also driven by dwindling concerns about the economic consequences of the Corona pandemic. In China, the central bank PBoC had announced monetary easing and lowered the reserve requirement for banks.

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Cyclicals are among the most popular stocks in Asia at the start of the week, thanks to hopes of an economic recovery. A weaker yen provided an additional tailwind for the stock market in Japan.

European Markets at a glance

European markets were also mostly firmer today. The EuroSTOXX 50, for example, started at around Friday’s closing level but then closed 0.62 per cent higher at 4,093.38 points.

In the second half of trading, the German benchmark index managed to gain again, and shortly before the close, it even set a new record high at 15,806.90 points. It exited trading at 15,790.51 points, an increase of 0.65 per cent. The TecDAX ultimately left the trading session 0.7 per cent stronger at 3,633.88 index units. Today was also a record day in Germany’s second tier of stock markets. The MDAX stormed upwards by 0.8 per cent. For the first time in its history, it surpassed the 35,000 point mark.

Impulses were initially scarce at the start of the week. Still, in the week, the reporting season in the USA will begin, which is also eagerly awaited by European stock traders.

Among the best-performing markets in Europe on Monday was the Milan stock exchange. The FTSE Mib rose by 0.9 per cent. The joy in Italy after the “Squadra Azzura” victory in the final of the European Football Championship apparently also gripped investors on the Milan stock exchange. The British FTSE 100, on the other hand, lagged and closed almost unchanged.

Forex, gold, oil and crypto

The euro moved little in US trading on the Forex market on Monday after a small up and downhill ride, hovering around the 1.1860 US dollar mark.

Oil prices declined at the beginning of the week. Brent crude from the North Sea fell by 0.7 per cent to 75 dollars, while US WTI traded 0.9 per cent lower at 73.89 dollars per barrel. Among other things, a dispute over the future production policy of the powerful oil alliance OPEC+ has caused uncertainty in the oil price.

The gold price briefly dropped to $1,790 a troy ounce before recovering to $1,807, ending Monday’s trading session almost unchanged.

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Cryptocurrencies started the week depressed after initially gaining strength. Bitcoin fell by 3.2 per cent to $32,900, while the second-most popular digital asset Ethereum plummeted 4.6 per cent to $2,040. The altcoin market also came under selling pressure, but various cryptocurrencies were affected differently. While XRP held strong at around $0.63, especially Defi platforms such as Uniswap, Polkadot and ChainLink dropped by 4-7 per cent. 

Corporate and world economic news

Economic data

Wholesale prices in Germany rose by 10.7 per cent in June compared to the same month last year. According to the Federal Statistical Office, this is the highest rate of increase since October 1981, when wholesale prices skyrocketed due to the second oil crisis. In May, wholesale prices had risen by 9.7 per cent and in April by 7.2 per cent. On a month-on-month basis, wholesale selling prices rose by 1.5 per cent in June. The most significant influence on the year-on-year rate of increase in June was the 37.7 per cent rise in the price of wholesale petroleum products.

According to ECB President Christine Lagarde, the Governing Council of the European Central Bank (ECB) will adjust its forward guidance to the changed monetary policy strategy during its deliberations on 22 July. “Given the persistence we have to show to fulfil our commitment, the forward guidance will certainly be reviewed,” Lagarde tells Bloomberg TV. Lagarde said in the interview there would be “some interesting variations and changes”. The PEPP could run at least until the end of March 2022, according to Lagarde. This could be followed by a “transition to a new format”. She was only cautiously optimistic about the recovery of the economy because of the Delta variant of the coronavirus. “We have to be very flexible and not create the expectation that the exit will happen in the next few weeks or months,” she said.

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