The Market Week – July Week 4
A big volatile week as Chinese regulators and virus concerns undermine confidence despite stellar earnings from the tech giants, yields sink again, and the USD & JPY gain safe-haven bids. All ahead of the event of the month – the FOMC announcement today – USD Q2 GDP (Thursday) and the FED’s preferred measure of inflation, the PCE Price Index (Friday).
Jobs and Unemployment remain very much in focus. The weekly US unemployment claims missed expectations again, coming in significantly higher at 419,000, with 382,000 expected this week. The data continues to trend lower overall, but it is a very choppy ride particularly for those long term unemployed.
The vaccine rollouts continue to drive sentiment, but the Delta variant remains a significant concern. Extended restrictions remain the norm in many places, with Sydney extending its lockdown for an extra 4 weeks and Tokyo recording its highest daily count as the Olympics came to town. Over 3.9 billion doses of vaccines have been administered globally but many low-income countries have less than 5% vaccination rates, and the death toll now exceeds 4.2 million.
This week FX volatility was evident again. The USDIndex rallied to test 93.00 on a safe haven bid before slipping back to 92.50. EURUSD tested the next support at 1.1750, before recovering the key 1.1800 handle, while USDJPY spiked up to 110.50, then slipped to 109.50 before recovering to 110.00. Cable rallied from 1.3700 to test the 1.3900 zone once again.
US stock markets posted more new all-time highs, following last week’s 2-day crash & recover. The tech and cyclical stocks led the latest move higher on the back of strong earnings. A third of all S&P500 companies report earnings this week, with over 85% outperforming so far. Asian stocks however, weighed by the crackdown in China, tanked to post 2021 lows.
The Gold price slipped a tad this week, oscillating around $1800 and posting lows of $1790 and highs at $1810, somewhat directionless. The 20-day moving average is back down to $1805.
USOil prices recovered following last week’s collapse under $65.00. Prices broke $70.00 and pushed up as high as $71.85 ahead of EIA weekly inventories later today.
The yield on the US 10-Year Treasury Note is very much in focus again, recovering from last week’s move below 1.13% to spike to 1.30% before settling under 1.25% (around 1.23%) ahead of the FOMC statement and press conference.
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Stuart Cowell
Head Market Analyst
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