Markets Update Tuesday 17/08/2021

Frankfurt – 17/08/2021

Uneasy

Weak retail sales data and concerns about a further economic recovery in the United States have pushed the US stock markets off their record course. Unlike yesterday, when initial losses were recovered, they closed significantly weaker. Many other stock exchanges also fell, in some cases significantly. 

In addition to lower-than-expected sales by retailers, the corona crisis also moved back into the stock market’s focus. Chairman of the US Federal Reserve, Jerome Powell, claims that it’s uncertain if growing Corona infection numbers would have a big impact on the economy. “Covid is still with us … and that should continue for a while,” Powell said. The pandemic continues to cast a pall on economic activity. 

US Markets at a glance

The Dow Jones started the trading session lower and subsequently lost further ground. In the end, it ended Tuesday 0.79 per cent lower at 35,345.72 points. The NASDAQ Composite also started in the red and later slipped further into the red. The NASDAQ Composite ultimately ended the day 0.93 per cent lower at 14,656.18 index points.

After new records the previous day, today’s market enthusiasm was not particularly high. On the international equity markets, market commentators reported a generally pessimistic attitude. This led to a somewhat stronger demand for fixed-income securities. Globally, concerns about the coronavirus remained in focus. Economic data from the USA were mixed. US retail sales fell sharper than expected in July. US industrial data, on the other hand, rose more than previously expected. However, weak economic data from the retail sector could also alleviate investors’ concerns that the Fed could soon end its loose monetary policy.

Far East Markets at a glance

On Tuesday, the bears dominated the Asian stock markets. Japan’s leading index, the Nikkei, was ultimately 0.36 per cent lower at 27,424.47 points. On the Chinese mainland, the Shanghai Composite fell by as much as 2 per cent to 3,446.98 points, while the Hang Seng in Hong Kong lost 1.66 per cent to 25,745.87 units by the end of trading.

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After the markets in the Far East had already posted mostly losses the previous day, they also went south on Tuesday. Disappointing economic data from China was published the day before. In addition, the geopolitics surrounding the development in Afghanistan caused restraint.

European Markets at a glance

The European stock markets also suffered losses on Tuesday. The EuroSTOXX 50 ended the trading day 0.14 per cent lower at 4,196.40 points.

The DAX opened in the red and remained in the red for most of the day. In the end, the leading index ended the trading day marginally 0.02 per cent lower at 15,921.95 index points. The TecDAX also started the day lower but quickly made the leap into the green territory and was ultimately able to close 0.88 per cent firmer at 3,853.49 units.

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Rising corona positive figures, weaker economic data and low turnover on the stock exchanges had a negative effect. Investors later focused on the US economic data, which were mixed and did not provide much impetus. In the evening, statements by Fed Chairman Jerome Powell are also expected. These could give indications of the possible reduction in securities purchases by the Fed expected by the market.

Forex, gold, oil and crypto

The euro exchange rate weakened somewhat in late US foreign exchange trading on Tuesday. The euro and other important currencies were burdened by robust data on industrial production in the US. This rose more strongly than expected in July despite continuing material shortages. In New York trading, the euro fell to 1.1712 US dollars. At the daily low of 1.1708 dollars, the euro threatened to fall to its lowest level since November last year.

Oil prices stabilised on Tuesday after their recent losses. A barrel of North Sea Brent cost 24 cents more than the previous day at 69.75 US dollars. WTI oil climbed 8 cents to 67.37 dollars. Goldman Sachs, a US financial bank, does not predict a long period of declining oil prices and believes the present slump is only temporary. Oil prices are expected to climb due to a lack of supply on the global market, according to analysts. They assume that the quotation for Brent oil could rise to 80 dollars per barrel in the next quarter.

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The gold price stabilised at $1,784 per troy ounce and is set to take back the $1,800 mark. 

Cryptocurrencies consolidated some more but remained on high levels. Many altcoins touched the .702 Fibonacci retracement level recently, a level known where many professional traders typically take profits. Bitcoin ultimately fell by 3 per cent to $44,700, while Ethereum and the rest of the altcoin market posted sharper price drops. Ether lost 5.6 per cent to $3,000, while Cardano dropped 8.2 per cent to $1.92, and XRP was losing 8.4 per cent to $1.08.  

Corporate and world economic news

Economic data

In Great Britain, the situation in the labour market has surprisingly improved. The unemployment rate for the three months to June fell from 4.8 to 4.7 per cent, as the ONS statistics office announced in London on Tuesday. Analysts had on average expected the rate to remain unchanged. Since the turn of the year, the situation in the British labour market has tended to recover. At the end of 2020, the unemployment rate was still at 5.2 per cent. According to the ONS, the employment rate from April to June rose by 0.3 percentage points quarter-on-quarter to 75.1 per cent. 

The eurozone economy grew strongly in the second quarter of 2021, with the southern European countries outperforming Germany and France. As the statistics authority, Eurostat announced in a second publication, the gross domestic product (GDP) rose by 2.0 per cent compared to last quarter. This confirms the first estimate of 30 July, which economists surveyed by Dow Jones Newswires had also expected. For the year as a whole, GDP growth in the second quarter was 13.6 (preliminary: 13.7) per cent.

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