Weekly Feed5 Mins Read
Asian stocks and US futures are down early today on concerns about elevated inflation and Covid-19 outbreak fears.
Headline this week:
Despite soaring inflation, Fed Chair Powell said the economic recovery right now does not justify removing accommodation but that did little to help the market sentiment as major indexes finished in red last week.
Solid bank earnings results from last week could not prevent the equities sell-off which seemed to move more with the economic and sentiment data releases. In terms of US macro numbers, last week was a busy one with inflation once again coming in hot with a CPI YoY reading of 5.4%, the highest rate since 2008 with used car prices being the major culprit. MoM June CPI number was 0.9%, well above estimates of 0.5%. Home and rent prices are up by 14.3% and 8.4% respectively in recent prints, punishing home buyers and renters.
US initial jobs claims which came out on Thursday fell to 360,000 while continuing claims increased to 3.2mm in the week before last. Meanwhile, US industrial production decreased to 9.8% YoY in June. However, the annual rate is mainly being dictated by base effects from last year because production was barely changed in MoM terms. MoM retail sales had a solid showing with a rise of 0.6% as against the forecasted -0.4%.
On a weekly basis, the S&P 500 Index dropped by 1% following last Monday’s fresh all-time highs. Growth outperformed value sectors with energy, materials, industrials, and financials all down for the week. Energy was most heavily hit as it posted a 7.9% loss last week. In another sign of concerns about the outlook, the more cyclical European indices have underperformed the S&P 500 over the past month.
After weeks of back-and-forth talks, OPEC+ have struck a deal to push more oil in the global economy. The deal will allow for a monthly supply increase of 400,000 barrels per day. OPEC+ is expected to be closer to pre-pandemic production levels with these hikes. If covid concerns become rampant, oil could stand to drop further given the increased supply. Crude oil September futures were trading at $ 71.81 on Friday, down around 2%.
Corporate earnings will likely be the primary market catalyst in this data-sparse week. Netflix, JnJ, Twitter and Snap are among the major companies that will be reporting earnings this week. Asian stocks and US futures are down early today on concerns about elevated inflation and Covid-19 outbreak fears. Treasuries have climbed with 10-year yields below 1.3%. Elsewhere, the pound seems to be holding steady as the UK government is about to lift remaining virus curbs in England.
Key Events this Week
- RBA meeting minutes on Tuesday
- European Central Bank rate decision on Thursday
- Bank Indonesia rate decision on Thursday
- Tokyo Summer Olympics begin on Friday.
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