Markets Update Thursday 17/06/2021 – Tech yay, Gold nay!?

Frankfurt – 17/06/2021

Tech yay, Gold nay!?

Despite the announced interest rate turnaround, there was no cooling on the stock markets today. Tech stocks were particularly in demand in this environment. 

The markets see it above all as positive that the money floodgates will remain wide open for the time being. The Fed wants to stick to its monthly dose of money injections amounting to 120 billion dollars for the time being. The big question now is when the central bank will start to reduce its securities purchases. Experts could imagine such a turnaround around the turn of the year. During the Corona crisis, the Fed’s ultra-loose monetary policy was the big price driver on the stock markets.

US Markets at a glance

The US indices on Wall Street took different directions today. After a small minus at the start, the losses in the Dow Jones increased in the course of trading. The stock market barometer ended the day at 33,823.71 points, down 0.62 per cent. The NASDAQ Composite index, on the other hand, was able to turn sharply positive, ending the day up 0.87 per cent at 14,161.35 points.

The prospect of interest rates rising again soon dampened the buying mood. While the US Federal Reserve had stuck to its loose monetary policy on Wednesday, as expected, the accompanying statements signalled that a rate hike might be realistic as early as 2023. Market observers remarked that the markets are being prepared for a tighter monetary policy.

Far East Markets at a glance

The markets in Asia were mixed on Thursday. The Japanese benchmark index Nikkei in Tokyo ultimately lost 0.93 per cent to 29,018.33 points. On the other hand, the Chinese markets were somewhat firmer: the Shanghai Composite on the Chinese mainland rose by 0.21 per cent to 3,525.60 points while the Hang Seng was up 0.43 per cent at 28,558.59 points in Hong Kong.

Asian stock markets reacted differently to the Fed’s decisions. The Fed’s turnaround on interest rates could come a little earlier than expected, but this does not seem to have caused much of a shock in either the US or Asian markets. The US Federal Reserve’s bond purchases remained unchanged for the time being, which led some market participants to continue hoping for rising prices.

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European Markets at a glance

The European stock exchanges trended sideways on Thursday. The EuroSTOXX 50 began the day with a small loss and continued to hover around the zero lines. Finally, it ended the day with a small gain of 0.15 per cent at 4,158.14 points.

The DAX also remained in positive territory. In the end, it closed with a small gain of 0.11 per cent at 15,727.67 points. The development of the TecDAX was very similar: after a weak start, it ended the day with a plus of 0.26 per cent at 3,507.96 points.

Investors in Europe were only slightly unsettled following the latest decisions by the US Fed. The loose monetary policy of the US Federal Reserve will continue, but investors were prepared for a tighter pace in the future.

Forex, gold, oil and crypto

The euro continued its slide on the foreign exchange market. At its low, the common currency fell below the 1.19 dollar mark to 1.1892 US dollars. This was the lowest level since mid-April. The euro last cost 1.1912 dollars, around two cents less than on Wednesday. 

Oil prices fell noticeably on Thursday, taking prices away from the recent multi-year highs. North Sea Brent last cost $1.02 less than the previous day at $73.35. A barrel of WTI oil from the United States fell by 1.01 dollars to 71.14 dollars.

The Fed decision also moved prices on the commodity markets. The strengthening dollar put pressure on the price of copper in particular. The industrial metal price fell by up to 2.6 per cent to $9,415 per tonne, the lowest price in almost eight weeks. The gold price also dropped sharply and slipped far below the $1,800 mark, closing at $1,773 per troy ounce.

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The cryptocurrency market continued its consolidation, and many major digital assets declined a little further. A Bitcoin currently trades for $38,000, 1.1 per cent less than on Wednesday at the same time, while Ethereum costs 0.8 per cent less at $2,380. XRP, on the other hand, increased slightly to $0.84, while Cardano fell by 1.2 per cent to $1.48.

Corporate and world economic news

Economic data

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The RWI – Leibniz Institute for Economic Research has slightly increased its forecast for German economic growth for this year from 3.6 to 3.7 per cent. It expects a plus of 4.7 per cent instead of 3.0 per cent for the coming year, the institute announced in Essen. The unemployment rate in Germany is expected to be 5.8 per cent this year and 5.2 per cent next year, and inflation 2.5 per cent this year and 1.9 per cent next year. According to the economists’ calculations, the deficits of the public budgets are expected to amount to 160 and 68 billion euros respectively this year and in 2022.

Against the backdrop of a strong increase in inflation, the Brazilian central bank has once again raised interest rates and held out the prospect of further interest rate steps. As a result, the key interest rate rose by 0.75 percentage points to 4.25 per cent, as the central bank announced in Brasilia on Thursday night. On average, analysts had expected the interest rate to rise by this amount. This is the third time the central bank has raised interest rates this year. In addition, the central bank signalled a further rate hike of 0.75 percentage points at the next interest rate meeting in August and did not want to rule out more decisive interest rate steps in the future. In March, the key interest rate in the important emerging market country was only 2.0 per cent.

The Swiss National Bank (SNB) is not touching interest rates in the corona crisis and is thus continuing its very expansionary monetary policy. Specifically, it is leaving its key interest rate and the interest rate on sight deposits at minus 0.75 per cent. The SNB also emphasised its intention to continue intervening in the foreign exchange market if deemed necessary. It still sees the franc as “highly valued”. The monetary watchdog expects a significant recovery of the Swiss economy in the current year. It anticipates an increase in the GDP of around 3.5 per cent. In March, economic output was only expected to grow by 2.5 to 3 per cent.

The number of initial claims for US unemployment benefits increased in the week ending 12 June, contrary to expectations. According to the US Department of Labour, the number of claims rose by 37,000 to 412,000. Economists surveyed by Dow Jones Newswires had predicted a decline to 360,000.

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