Markets Update Tuesday 18/05/2021 – Minutes

Frankfurt – 18/05/2021


Positive corporate balance sheets, especially from Walmart, could only temporarily cheer the markets today. Meanwhile, the spectre of inflation continues to haunt investors’ minds and is more present than ever.

Against this backdrop, stock exchange traders eagerly await the publication of the latest Fed minutes on Wednesday, known in the jargon as “meeting minutes”. They allow one of the few insights into the inner workings of the world’s most powerful central bank and are accordingly much observed on the global trading floors. 

More and more investors assume that the Fed will stick to its ultra-loose monetary policy despite rising inflation. This outlook is currently burdening the US dollar, which continued to fall to its lowest level against a basket of major currencies today. 

US Markets at a glance

After an initially friendly start, Wall Street’s stock markets suffered significant losses in Tuesday’s trading. The Dow Jones Industrial Index lost 0.78 per cent to 34,060.53 points. The tech index NASDAQ Composite also lost ground, closing 0.56 per cent lower at 13,303.64 points.

Investors hoped that easing the corona restrictions in many parts of the world would drive economic growth. However, this optimism supported the stock markets only temporarily today. On the other hand, worries about virus outbreaks in parts of Asia and monetary tightening weighed on the overall sentiment.

Far East Markets at a glance

Contrary to the general trend, the most important Asian stock exchanges rose on today’s trading day. The Japanese benchmark index Nikkei ultimately gained 2.09 per cent to 28,406.84 points. China also saw an upward trend. On the Chinese mainland, the Shanghai Composite climbed by a slight 0.32 per cent to 3,529.01 points, while in Hong Kong, the Hang Seng was also 1.42 per cent firmer at 28,593.81 index points.

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Despite negative US sentiment, the Asian markets were on the rise. In Japan, investors were not shocked that the country’s economic growth in the first quarter of the year was slightly lower than previously estimated. Instead, there was confidence that more easing may come soon. The gains in Hong Kong came with market participants’ belief that the restrictive monetary policy is unlikely to accelerate.

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European Markets at a glance

The European stock exchanges came under some pressure but only fell slightly. The EuroSTOXX 50 was ultimately unable to defend its early gains and finally went into the evening with a small minus of 0.04 per cent at 4,005.34 points.

The DAX started trading with a plus of 0.77 per cent at 15,514.72 points and thus immediately set a new record. It improved this all-time high again in the further course so that the best level is now 15,538.01 points. However, the leading index then fell back and closed with a slight loss of 0.07 per cent at 15,386.58 points. The TecDAX also started on a positive note but ultimately ended the day with a small minus of 0.11 per cent at 3,332.62 points.

The mood on the trading floors changed in the day, and investors acted rather indecisive. The market remained caught between hopes for a further economic recovery on the one hand and inflation concerns on the other. Tomorrow’s release of the Fed meeting minutes also reminded investors to stay cautious.

Forex, gold, oil and crypto

On the foreign exchange market, the king dollar remains under pressure and lost ground against many other currencies. Against the euro, the greenback fell today to its lowest level since February at 1.22 US dollars.

After initial price gains in early trading, a countermovement set in on the commodity markets during the day, with oil quotations recently coming under strong pressure. Market observers referred to a media report on progress in the Iran talks. At 67.80 US dollars per barrel, Brent crude cost a whopping 1.66 dollars less than on Monday. WTI light oil from the USA even fell by 1.70 dollars to 64.57 dollars.

Meanwhile, precious metal prices continued to trend higher. Gold increased by almost $5 to $1,870 per troy ounce. 

Cryptocurrencies, on the other hand, remained under pressure during the US session. Earlier, prices of many major digital assets had improved. During US trading, Bitcoin fell 7.4 per cent to $41,500, while Ethereum dropped 4.1 per cent to $3,260. Only XRP, currently sitting on the number 4 spot of all cryptocurrencies, was able to post gains and rose 2 per cent to $1.55.

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Corporate and world economic news

Economic data

Purchasing managers in both the service and manufacturing sectors in the United Stated expect the economic recovery to continue for the rest of 2021. “Expectations for the remainder of 2021 have strengthened somewhat compared to December 2020 on hopes that the pandemic is over,” writes the Institute for Supply Management (ISM) in its semi-annual economic outlook. Both the manufacturing and services sectors signalled expansion. Manufacturing sales are forecast to grow 7.2 per cent this year (December: 6.9). For the services sector, the turnover growth of 5.4 (1.6) per cent is forecast.

New home construction activity in the US weakened significantly in April. The number of groundbreakings decreased by 9.5 per cent compared to the previous month to an annualised figure of 1.569 million. Economists had forecast a decrease of only 2.2 per cent. The number of building permits issued in April climbed 0.3 per cent from the previous month to an annual rate of 1.76 million. A plus of 0.8 per cent had been forecast. The previous month’s revised increase was 1.7 per cent to an annualised rate of 1.755 million. Building permits are often considered a leading indicator for future construction activity.

The eurozone economy entered a technical recession in the first quarter of 2021 as restrictions to control the coronavirus pandemic took their toll in many countries. As the statistics authority, Eurostat announced in a second publication, the gross domestic product (GDP) shrank by 0.6 per cent compared to the previous quarter. Year-on-year, GDP was 1.8 per cent lower in the first quarter, also confirming the first release. The German economy, in particular, slowed down the eurozone in the first quarter. German GDP fell by 1.7 per cent quarter-on-quarter, while French GDP grew by 0.4 per cent despite the lockdown. The Italian economy also entered a technical recession with a minus of 0.4 per cent, and the Spanish economy shrank by 0.5 per cent.

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