Markets Update Monday 16/08/2021

Frankfurt – 16/08/2021

Before the Storm?

Weak economic data from China initially weighed on Wall Street, among others. But in the day, the indices recovered strongly and even set new records. In the Middle Kingdom, data on retail sales and the state of industry were weaker than expected, for which rigid corona measures were cited as one of the reasons. Apart from these measures, including the closure of large container ports due to very few Corona cases, the strict regulatory frenzy of the Chinese authorities has increasingly unsettled investors recently.

In addition to the weak China data, investors naturally focused on the interest rate policy of the Federal Reserve (Fed). Experts have recently expressed the expectation that a tightening of monetary policy is likely to be on the Fed’s agenda sooner rather than later. Above all, rising inflation has recently led to a deterioration in consumers’ assessment of the all-important consumer climate.

US Markets at a glance

After a weak, cautious start, the bulls on the US stock market came back.

The Dow Jones opened lower, but the US leading index was able to end the day 0.31 per cent higher at 35,625.40 points. The NASDAQ Composite shook off some of its significant losses and eventually went into the close down 0.2 per cent at 14,793.76 points.

In addition to the rising number of new corona positive tested people in numerous countries worldwide, disappointing economic data from Asia also weighed on the markets. China’s retail sales and industrial data came in weaker than expected. Another weighing factor was the Taliban’s recapture of Afghanistan on a geopolitical level. Ex Potus Donald Trump even calls for Joe Biden to resign as he had failed Americans on many levels.

Fears of an imminent end to the Fed’s loose monetary policy also remained in the back of investors’ minds at the beginning of the week.

Far East Markets at a glance

At the start of the week, the majority of the Asian stock exchanges fell. 

The Japanese benchmark index Nikkei ultimately fell by 1.62 per cent to 27,523.19 points on Monday. On the Chinese mainland, the Shanghai Composite finally traded marginally 0.03 per cent higher at 3,517.35 points, while the Hang Seng lost 0.80 per cent to 26,181.46 units by the end of trading on Hong Kong’s Stock Exchange.

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Market participants attributed the sharp declines in Japan to the rising yen, which worsened the export prospects of Japanese companies. The data from the USA before the weekend was uninspiring. In addition, the geopolitics surrounding the development in Afghanistan caused restraint.

European Markets at a glance

European markets also remained under pressure on Monday. The EuroSTOXX 50 started the day with a negative sign and maintained it. At the closing bell, it was 0.64 per cent lower at 4,202.44 units.

The DAX in Frankfurt began the trading day already in the red and subsequently also traded in red territory. In the end, the leading index ended the day 0.32 per cent lower at 15,925.73 index points. After the German benchmark index managed to jump above the 16,000 point mark for the first time last week, experts say the chances are good that the DAX will be able to set new records in the new trading week. The TecDAX ended the day 0.12 per cent lower at 3,819.95 points, having already trended below the zero lines at the start of trading.

The latest economic data from the USA and China weighed on the European markets. In China, July retail sales figures and industrial production came in worse than expected. The reporting season is slowly drawing to a close and is providing little new impetus. Geopolitically, Afghanistan was the focus of investors in Europe too.

Forex, gold, oil and crypto

The euro weakened slightly against the dollar and was last traded at 1.1776 US dollars. The euro exchange rate had risen significantly on Friday, following the gloomy US consumer climate. The foreign exchange market had also expressed relief that inflation in the US may have peaked,

The weak China data are fuelling fears on the oil market of a faltering economic recovery and thus a decline in demand for oil from the world’s largest oil importer. Leading Brent and WTI crudes fluctuated sharply, with Brent crude last down 1.25 dollars at 69.36 US dollars per barrel. The price of WTI fell by 1.30 dollars to 67.12 dollars.

Given the dark clouds over the economic sentiment, gold is appreciated today to trade above $1,786 per troy ounce.

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 Cryptocurrencies consolidated somewhat after many of the most important digital assets pumped hard over the weekend. Today, Bitcoin came down 4.1 per cent to $45,700, while Ethereum shed 5.7 per cent to $3,136. XRP, after having risen a lot in the past seven days, dropped 10 per cent back to $1.16. However, the digital coin is still up more than 42 per cent on the weekly chart. 

Corporate and world economic news

Economic data

Retail trade and industry in China developed weaker than expected in July. In addition, investments in fixed assets also fell short of expectations. Production in industry rose by 6.4 per cent compared to the previous year, the statistics office announced in Beijing on Monday. In June, production had increased by 8.3 per cent. Experts had expected a slight slowdown, but only a decline to growth of 7.9 per cent. The situation is similar for retail sales. This rose by 8.5 per cent year-on-year in July after an increase of around twelve per cent in June. Economists had expected an increase of just under eleven per cent in July. Investment in fixed assets from January to the end of July rose by 10.3 per cent, after having increased by 12.6 per cent by the end of June. Here, too, economists had expected a stronger increase.

Japan’s economy grew slightly in the second quarter of this calendar year. As the government announced on Monday on a preliminary basis, the gross domestic product (GDP) of the world’s third-largest economy ahead of Germany rose by 1.3 per cent over the year. In the first quarter, there had still been a decline. Compared to the previous quarter, GDP grew by 0.3 per cent in the second quarter.

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