Markets Update Tuesday 20/07/2021 – Wall Street’s back!

Frankfurt – 20/07/2021

Wall Street’s back!

After the previous days’ sell-off, Wall Street rallied again in a powerful counter-movement. Above all, however, it was bargain hunters who drove the market.

Meanwhile, experts at US big bank JPMorgan believe investors’ fears of a possible end to the economic recovery from the pandemic are overblown. In the US, the ongoing economic recovery is fuelled by an improving labour market, consumers who are still financially well-off and healthy corporate fundamentals. In addition, the markets can continue to rely on the backing of the central banks, the analysts argue.

In their view, the latest growth data from the USA and Asia point to more sustainable development rather than an emerging downward trend. They, therefore, raised the year-end target for the S&P 500 Index from 4,400 to 4,600 points.

US Markets at a glance

The US stock markets were in recovery mode today. The Dow Jones opened the day almost unchanged but then posted substantial gains. At the close of trading, it gained 1.62 per cent to 34,511.86 points. The NASDAQ Composite started the day slightly higher and moved deeper into the profit zone as trading continued. In the end, it recorded gains of 1.57 per cent to 14,498.88 index units.

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Concerns around the corona and renewed lockdown measures had driven investors to profit-taking on Monday, and there was busy selling. The rising numbers for tested positive people led investors to doubt the rapid economic recovery. Fears around inflation were also not yet allayed among investors. However, the recent low yields on US government bonds reminded investors that there are currently few alternatives to equities, which is why setbacks were often seen as entry opportunities.

Far East Markets at a glance

Losses continued on Asia’s stock exchanges on Tuesday.

In Tokyo, the Japanese benchmark index Nikkei fell by 0.96 per cent to 27,388.16 points by the closing bell. On the Chinese mainland, the Shanghai Composite was able to cut its losses almost entirely by the close of trading. In the end, it still left the session with a small minus of 0.07 per cent to 3,536.79 units. The Hang Seng was down 0.84 per cent to 27,259.25 points by the close in Hong Kong.

More and more corona infection reports put the stock markets back into fear mode. Investors feared that the economic recovery could be thwarted again. Very weak data from the USA compounded this.

In Japan, core consumer prices rose at their fastest rate in 15 months in June. This was due to the sharp rise in energy prices.

European Markets at a glance

Europe’s stock markets recovered somewhat on Tuesday.

The EuroSTOXX 50 ended Tuesday’s trading 0.71 per cent firmer at 3,956.34 points. 

The DAX opened the trading session with decent gains, slipped back to the zero lines in the meantime, and then extended its gains again. In the end, the German benchmark index ended Tuesday’s trading 0.55 per cent firmer at 15,216.27 points. The TecDAX also started the trading day slightly stronger and was just about to hold these gains until the closing bells sounded. In the end, it closed with an increase of 0.08 per cent at 3,570.20 index points.

In addition to the seemingly eternal topic of the corona, concerns about excessive inflation also remained a topic after German producer prices rose more than expected compared to the previous month.

Forex, gold, oil and crypto

The greenback remained sought after on the currency market, as always in turbulent times, while the euro fell back. The euro was primarily burdened today by the mixed mood on the stock markets but stabilised somewhat in late US foreign exchange trading. The single European currency was last quoted at 1.1782 US dollars. During the European and Asian trading sessions, the euro had fallen to 1.1756 dollars, its lowest level since the beginning of April.

After a weaker start, other asset classes tended to rise again in the day. Brent North Sea oil costs a little over 69 per barrel in the evening, increasing around 50 cents or 0.8 per cent. West Texas Intermediate from the USA rose by 71 cents, or 1.07 per cent, to 67.32 US dollars.

Gold and other precious metals were not in great demand today, and prices declined. Gold traded for $1,809 a troy ounce after advancing to $1,825 in the afternoon.

The cryptocurrency market remained under pressure and lost 2.7 per cent to $1.21 trillion in overall market capitalisation. Bitcoin declined 3.1 per cent and fell under the $30,000 round-mark to $29,600, while Ethereum shed 1.7 per cent to $1,774. Other altcoins got hit even harder, and many dropped between 3 and 9 per cent. Especially Defi tokens, such as Polkadot, Uniswap or ChainLink, were hit hard and fell sharply. 

Corporate and world economic news

Economic data

The People’s Bank of China (PBoC) has left a key policy rate unchanged for the 15th consecutive month. According to the PBoC, the one-year reference rate (prime loan rate) for bank loans to enterprises and households remains at 3.85 per cent for the 15th consecutive month. The five-year loan prime rate was confirmed at 4.65 per cent.

Inflationary pressure at the producer level increased in Germany in June, as expected. According to the German Federal Statistical Office, producer prices rose by 1.3 per cent compared to the previous month and were 8.5 (May: 7.2) per cent above the level of the same month last year. This was the highest annual inflation since January 1982. 

The current account surplus of the eurozone fell again in May after an increase in the previous month. According to the European Central Bank (ECB), the seasonally adjusted current account balance showed a positive balance of 12 (April: 22) billion euros. The trade surplus remained at 25 billion euros, with exports increasing to 209 (204) billion euros and imports to 184 (179) billion euros. The balance of services was positive at 6 (9) billion euros.