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Archinomics Weekly - Monday 28th June 2021

3 months ago

the
MARKETS

Equities

Financial markets recovered this past week in the aftermath of updated commentary from the US Federal Reserve (Fed). The S&P 500 rose 2.7% hitting an all-time high on Friday as President Joe Biden’s infrastructure stimulus plan boosted reflation optimism. Things were also looking rosy in Europe and the Asia Pacific region, where the pan-European Stoxx Europe 600 and China’s large-cap CSI 300 climbed 1.2% and 2.7% respectively.

Bonds

The US Treasury yield curve steepened, as markets attempted to price in reflation and higher longer-term inflation rates. The 10-year yield jumped to 1.5%, while the 2-year yield climbed more modestly. Core eurozone government bond yields ended the week marginally higher, lifted by record PMI data and business confidence readings. The high yield market was quietly stronger on more positive sentiment.

Currencies

Fed Chair Jerome Powell helped cool concerns over policy tapering, allowing the US dollar to slip back after a decent performance earlier in the month. The euro gained on the US dollar, posting a modest weekly advance. Meanwhile, the Japanese yen fell to its lowest level since March 2020 against the US dollar, on disappointing economic data.

Commodities

Oil prices rose for a fifth consecutive week, reaching their highest since October 2018, on expectations that demand growth will outstrip supply and that OPEC+ will proceed cautiously on production targets. Gold edged higher, up 3.3% after stagnant US consumer spending tempered bets for early monetary policy tightening by the Federal Reserve.

Responsible investing

An application to build the world’s biggest renewable energy project in an Australian desert has been rejected. The Australian government warned that the A$50bn green hydrogen export project threatened sensitive wetland areas and migratory bird species. The ruling means the Asian Renewable Energy Hub will need to significantly revamp their plans if the development is to go ahead.

MACROECONOMIC
UPDATE

Eurozone composite PMI data rose to 59.1 in June, the highest for 15 years, as the economy continued to re-open and the services sector played catch up with manufacturing.


President Joe Biden announced that a bipartisan group of Senators had agreed on a plan for roughly USD 1 trillion in infrastructure spending over the next five years.

on the
RADAR

US non-farm payrolls are expected to show a gain of 675,000, while other economies also report employment data and global PMI surveys will be confirmed.


The OPEC+ meeting on Thursday will be closely analysed for clues as to the oil cartel’s plans to unwind production cuts in response to growing demand.

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