Frankfurt – 23/06/2021
House of Cards
Today was a relatively quiet day on the stock markets, and consolidations occurred for the most part. As a result, there were no significant movements today after the previous wild trading days.
The only overriding issue on the stock market continues to be inflation – and with it the worries about a tougher stance by the central banks. Economic data do not seem to play any role at all at the moment. The only data that is important is that on inflation. It seems to be all about the central banks feeding the market with cheap/free money. If the central banks would stop the money flood sooner than previously thought, the whole house of cards could collapse.
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US Markets at a glance
The US stock markets took a breather today. The Dow Jones opened the trading session marginally firmer and then hovered in a narrow range around the zero lines. It finally exited the trading session 0.21 per cent lower at 33,874.24 points. The NASDAQ Composite also started with little movement but ended the session 0.13 per cent up at 14,271.73 points.
Investors in the US markets continued to focus on central bank support and bet on economic recovery. Shortly after the opening, investors also focused on sentiment data from the manufacturing and service sectors. The markets were negatively impacted by the increasingly widespread delta variant of the coronavirus.
Yesterday evening, Fed Chairman Jerome Powell once again reassured the markets. According to him, the increase in inflation is only temporary. The strength in the markets could therefore prevail.
Far East Markets at a glance
The majority of the most important stock exchanges in Asia went up on Wednesday. In Tokyo, the Japanese benchmark index Nikkei was marginally lower at the end of trading, down 0.03 per cent at 28,874.89 points. Meanwhile, the Shanghai Composite on the Chinese mainland gained 0.25 per cent to 3,566.22 points. Hong Kong’s Hang Seng ultimately climbed 1.79 per cent to 28,817.07 units.
US Federal Reserve Chairman Jerome Powell signalled in his speech yesterday again that the central bank would be patient before tightening monetary policy. High inflation is still seen as temporary. This supported the markets in Asia. Moreover, according to Powell, the Fed is ready to use its tools if inflation proves to be more stubborn than expected.
European Markets at a glance
The majority of the European stock markets declined on Wednesday.
The EuroSTOXX 50 began the day with slight gains but then ended the day trading 1.14 per cent lower at 4,075.94 points.
The DAX also opened the session firmer before quickly giving up its gains and exiting 1.15 per cent lower at 15,456.39 points. The TecDAX also started the day stronger but closed 0.97 per cent weaker at 3,478.70 index points.
Market participants spoke of consolidation after the fluctuations of the past trading days. Support came from statements by US Federal Reserve Chairman Jerome Powell, who again signalled that the central bank would be patient before tightening its monetary policy and reiterated that the inflation trend was temporary in nature.
Investors also focused on the purchasing managers’ indices from France, Germany and Europe for June.
Forex, gold, oil and crypto
The euro’s recent recovery stalled in US trading on Wednesday. Robust sentiment data from the common currency area had initially supported the euro during the day. However, in the course of trading, disappointing economic data from the US followed, which initially weighed further on the greenback and gave the euro further impetus on the forex market before a countermovement set in. The euro exited trading at 1.1926 dollars.
Driven by the hope of economic catch-up effects after the pandemic, the rise in oil prices is currently unstoppable. Crude oil from the North Sea and the USA both reached their highest prices since 2018. A sharp drop in oil reserves in the USA recently provided a new boost to oil prices. Most recently, the price of a barrel of Brent North Sea oil rose 90 cents to 75.71 dollars. Earlier, the highest level since October 2018 was reached at 76.02 dollars. The price of US WTI climbed by 80 cents to $73.65, having reached $74.25 intraday, which was also the highest level since October 2018.
The price of gold, similar to stocks, remained widely unchanged in today’s sessions and exited at $1,778 a troy ounce.
Cryptocurrencies entered the next consolidatory phase after rebounding yesterday. The Bitcoin price ultimately dropped 3.2 per cent to $32,600 while Ethereum’s value fell by 4.4 per cent to $1,900. Other altcoins, such as XRP, Cardano and even Dogecoin, faired better and increased in value. Cardano added 2.7 per cent to $1,27, XRP grew 3.5 per cent to $0.6250, and Dogecoin even gained 7.1 per cent to $0.2270.
Corporate and world economic news
Economic data
With the increasing easing of the corona restrictions and catch-up effects in many sectors, the upswing in the German economy gained noticeable momentum again in June. According to data in the first release, IHS Markit’s composite index for production in the private sector – industry and service providers combined – improved to 60.4 from 56.2 points in the previous month. That’s the highest reading since March 2011, while the manufacturing purchasing managers’ index rose to 64.9 from 64.4 points the last month. Economists had expected a reading of 62.6. The index for the service sector rose to 58.1 from 52.8 points. The forecast had been for 55.5.
The growing recovery of the economy, eased corona restrictions, progress in vaccination campaigns, and increased confidence led to the strongest growth in the eurozone in 15 years in June. The composite index of output in the private sector – industry and services combined – rose to 59.2 points from 57.1 in the previous month, the IHS Markit Institute reported in its first release. This is the highest value since June 2006. Economists had only predicted an increase to 58.8 points. The purchasing managers’ index for the manufacturing sector remained at 63.1 points. Economists had forecast a decline to 62.0 points. The index for the service sector climbed to 58.0 points from 55.2 in the previous month.
Activity in the US economy slowed in June. IHS Markit’s composite index of private-sector production – industry and services combined – fell to 63.9 from 68.7 points in the previous month. The manufacturing purchasing managers’ index rose to 62.6 from 62.1 during the last month versus 61.5 expected by economists. The index for the service sector declined to 64.8 from 70.4 points. The forecast had been for 70.0.
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