Markets Update Tuesday 25/05/2021 – Undecided

Frankfurt – 25/05/2021

Undecided

Among other things, investors were encouraged by the Fed’s renewed commitment to its ultra-loose monetary policy. Director Lael Brainard also repeated the Fed’s mantra that the current rise in inflation is temporary. “However, this is a cat-and-mouse game,” warned Giles Coghlan, a chief foreign exchange analyst at broker house HYCM. 

As a downer came then the surprising deterioration in US consumer sentiment, as rising prices and still-high unemployment may have weighed on consumer sentiment, experts said.

In addition, due to shortages of lumber and other materials, home sales declined in April. At the same time, the figures for the previous month were revised downwards. The rise in house prices is therefore bringing the issue of inflation back into consciousness. 

US Markets at a glance

Investors on the US stock markets were undecided on Tuesday. At the start of trading, the Dow Jones was up 0.10 per cent at 34,428.66 units but then slipped into the loss zone, to close 0.24 per cent lower at 34,311.73 points. Technology stocks on the NASDAQ Composite started Tuesday’s trading 0.44 per cent stronger at 13,721.54 points, also hovering around its previous day’s level. In the end, it closed at 13,657.17 points with a marginal loss of 0.03 per cent.

The mood on the US stock markets had brightened the previous day because several Fed bankers were able to curb the fear of the current high inflation and thus alleviate investors’ worries. This puts a change in current monetary policy back in the future for now. “The Fed bankers told the market exactly what it wanted to hear,” said strategist Hugh Gimber of JPMorgan. However, this no longer had a price-supporting effect on Tuesday.

Far East Markets at a glance

Asia’s stock markets ended firmer on Tuesday. Japan’s benchmark Nikkei index rose by 0.67 per cent to 28,553.98 index points by the end of trading. Meanwhile, on the Chinese mainland, the Shanghai Composite rose 2.4 per cent to 3,581.34 points. Meanwhile, the Hang Seng gained 1.75 per cent to 28,910.86 points.

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The Asian stock exchanges were friendly, thanks to good news from the USA the previous day. Comments from US Federal Reserve circles had a calming effect on investors and supported the stock markets. Fed representatives, such as Fed President Esther George from Kansas City, emphasised the temporary nature of the currently high inflation data in the USA. Other central bank representatives were similarly dovish.

Meanwhile, the most important commodity prices recovered after the slide due to the Chinese verbal intervention in the commodity market the previous day.

European Markets at a glance

Investors on the European stock exchanges took advantage on Tuesday. The EuroSTOXX 50 ended Tuesday’s trading 0.12 per cent higher at 4,040.30 points, having started the day higher earlier.

The German benchmark index DAX exited trading with a moderate gain of 0.2 per cent at 15,465 points below the day’s high. The index was unable to defend initially higher gains in the day and followed a crumbling Wall Street downwards in late trading. Nevertheless, the closing price level is higher than ever before. At the peak of the morning, a new record high was marked at 15,568 points. The TecDAX also started higher and extended its gains until the end of trading, finally ending the day with a plus of 0.85 per cent and 3,397.68 points.

The latest inflation worries have recently faded into the background, and the corona crisis is also slowly subsiding. Air traffic is increasing again, holidays are being planned, and consumption should pick up significantly, as expected on the stock market, market observers expect.

Forex, gold, oil and crypto

Despite weaker economic data from Germany, the euro held its ground against the dollar and was trading around 0.3 per cent higher at 1.2255 US dollars in US foreign exchange trading. 

Oil prices recovered from interim losses on Tuesday and closed almost unchanged. A major topic on the oil market remains the ongoing negotiations on the Iranian nuclear programme. This had temporarily weighed on oil prices. At stake is the future of the agreement, which the USA had left under Donald Trump’s presidency and Iran subsequently only fulfilled in parts. If the agreement is revived, this could lead to the lifting of sanctions against Iran and an increase in oil supply from the Opec country. At last count, North Sea Brent cost 10 cents more than on Monday at 68.57 US dollars, while WTI oil closed almost unchanged at 66.04 dollars.

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The price of gold shot up during the NY session and is set to break through the $1,900 sound barrier. It closed with a daily gain of almost $20 at $1,899.50 an ounce.  

Cryptocurrencies consolidated after the strong recovery rally of the previous day. From a technical analysis point of view, it looks like a healthy recovery and important levels held, which means we should see further upward momentum in the coming days and weeks. Bitcoin still lost 3.5 per cent to $38,000, while Ethereum only lost 1.6 per cent to $2,676. Other altcoins, after rising sharper than BTC and ETH, retraced somewhat more. For examples, Binance Coin shed 6.5 per cent to $342, XRP dropped 7 per cent to $0.96, and Polkadot even lost 8.6 per cent to $21.90. Cardano, on the other hand, held better and only lost 2.5 per cent to $1.57. 

Corporate and world economic news

Economic data

The second Corona Lockdown slowed down the German economy at the beginning of the year somewhat stronger than initially expected. The gross domestic product thus shrank by 1.8 per cent in the first quarter of 2021 compared to the previous quarter, as the Federal Statistical Office announced on Tuesday. 

The mood in the executive suites in Germany developed a little better than expected in May. The Ifo Business Climate Index climbed to 99.2 points (April revised: 96.6), the Munich-based Ifo Institute reported after its monthly survey of around 9,000 managers. This is the highest level read since May 2019. 

US consumer sentiment weakened in May. The Conference Board reported that the consumer confidence index fell to 117.2, while economists had expected a reading of 118.7.

The rise in US house prices accelerated further in March from an already high level. According to the S&P/Case-Shiller index published in New York on Tuesday, prices in the country’s 20 major metropolitan areas rose by 13.3 per cent compared to the same month last year, according to the S&P/Case-Shiller index published in New York on Tuesday. Analysts had expected an average increase of 12.6 per cent.

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