Markets Update Tuesday 22/06/2021 – Bye, Bye Inflation Fears

Frankfurt – 22/06/2021

Bye, Bye Inflation Fears

On Wall Street, interest rate fears eased significantly today, which benefited the Nasdaq technology exchange in particular. It remains the case that Wall Street is currently a rollercoaster for investors. Fears about interest rates alternate with new optimism about the economy and are causing movement on the trading floor. In contrast to yesterday, the main focus of interest today was less on the trading floor and more on the Nasdaq technology exchange.

Although the tenor of Federal Reserve Chairman Jerome Powell’s remarks before a House committee on the central bank’s corona policy had already been published in advance, they were nevertheless received with excitement.

According to Powell, despite the rapid rise in inflation in the USA, the central bank will remain patient. Like the data on the labour market and economic growth, the price increases were the result of the “unusual situation” in the fading pandemic, he said. The central bank would not raise interest rates pre-emptively for fear of inflation set in, he stressed. 

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He thus stuck to his mantra that the current price pressures are only temporary. The Fed chief also expects the labour market to make significant progress over the year. The Fed has given direction to maintain its $120 billion monthly doses of monetary injections until substantial progress is made on price stability and employment.

US Markets at a glance

Prices on the New York Stock Exchange rose significantly again today. 

The Dow Jones closed with a plus of 0.20 per cent at 33,945.71 points. The NASDAQ Composite was also firmer and even marked a new record high at 14,269.77 points. The NASDAQ was still up by a solid 0.79 per cent to 14,253.27 index points.

Attention was focused on a public hearing by Federal Reserve Chairman Jerome Powell before the US parliament. Powell said that inflation in the USA had recently risen more than expected. However, the central bank chief also repeated earlier statements that the price increase was probably only temporary. According to stock market experts, these statements tend to argue against earlier than previously expected interest rate hikes. Hence, bond yields came under corresponding pressure, and the prices of US government securities rose.

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Far East Markets at a glance

The majority of the most important stock exchanges in Asia went up in Tuesday trading. In Tokyo, the Japanese benchmark index Nikkei jumped 3.12 per cent to end at 28,884.13 points, while the Shanghai Composite on the Chinese mainland closed 0.8 per cent higher at 3,557.41 index units. Only the Hang Seng leading index in Hong Kong exited trading with a loss of 0.63 per cent to 28,309.76 points.

After the heavy losses of the previous day, there was a countermovement, for the most part, today, especially in Tokyo, where yesterday’s losses were almost made up. The Asian markets received a tailwind from Wall Street, where interest rate fears were largely replaced by economic optimism on Monday.

European Markets at a glance

The European stock markets presented themselves without a clear direction on Tuesday. The EuroSTOXX 50 started almost unchanged, but the European stock market barometer was able to end trading 0.26 per cent up at 4,123.13 index points.

The DAX started the day with marginal losses and slipped deeper into the red at times. Later in the day, the DAX changed hands and gained 0.21 per cent to 15,636.33 points. The TecDAX hardly moved at the start but could then fight its way into the profit zone and ended trading 0.37 per cent firmer at 4,127.44 points.

Several economic data were on the agenda today: the results of the EU Commission’s monthly consumer survey and figures from the US housing market were published. Investors also focused on further speeches by US Federal Reserve officials during the day. Powell’s speech did not yet affect European markets as it was on the agenda after the close of trading here.

Forex, gold, oil and crypto

The further course of the Fed is naturally also a topic on the foreign exchange market, as the euro has lost ground after the Fed’s latest interest rate decision. In US trading, the common currency left behind the 1.19 US dollar mark and was last quoted at 1.1936 dollars.

Oil prices fell slightly on Tuesday after reaching multi-year highs. In the course of the day, the production policy of the oil association OPEC+ played an important role. Initially, speculation about an increase in production in August was referred to. In the day, however, the fact that Saudi Arabia, as one of the leading oil states in OPEC+, is counting on an unchanged production volume came to the fore again. North Sea oil cost 20 cents less than the previous day at 74.70 US dollars. WTI oil from the USA fell by 65 cents to 73.01 dollars.

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Gold traded in a narrow range today and closed at $1,776 a troy ounce, minus approximately 8 dollars.

Bitcoin and the rest of the cryptocurrency market remained under intense selling pressure throughout the day before a countermovement started in late NY trading. At times, Bitcoin fell as low as $28,800, clearly breaching the 50-day moving average area before it returned above it again. At the end of Tuesday, a Bitcoin was even up 4 per cent to $34,100 on the daily chart. Ethereum also turned positive after a sharp drop, currently trading 2.9 per cent up at $2,012. Under the top 10 digital assets, only XRP remained in deep red, still trading 5.2 per cent lower at $0.59. 

Corporate and world economic news

Economic data

The median price for existing homes in the USA reached 350,000 US dollars for the first time in May. According to the National Association of Realtors (NAR), the price rose to exactly $350,000, up 23.6 per cent from the same month last year. According to NAR, a shortage of existing homes and low-interest rates led to double-digit monthly price increases in the spring. The sharp price increase held back more buyers, contributing to the fourth consecutive month of declining home sales, it said. Existing home sales fell 0.9 per cent in May from April to a seasonally adjusted annual rate of 5.8 million. Compared to a year ago, sales rose 44.6 per cent. In the same period last year, the corona-related lockdowns had led to a decline in home sales.

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