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Markets take a breather while still close to record highs

Markets take a breather while still close to record highs

Headline this week:

The S&P 500 closed out the week marginally below the 4,400 level as Amazon's earnings falling below expectations led to a general risk-off sentiment on Friday. Concerns around the spread of the Delta variant, both in the US and in parts of Asia have intensified and growth estimates are beginning to be revised lower. The Hang Seng Index (HSI) of Hong Kong was down 5% on the week - this after making up for some of the more severe losses from China's regulatory crackdown earlier in the week.

Market Updates:

Following China's action against its online tutoring firms in the 'Edtech' space, the SEC retaliated by implementing stricter disclosure measures on Chinese firms looking to IPO in the US, in order to prove no undue influence of the state. This, along with other measures designed to reduce the flow of American capital to Chinese companies, has led China's regulators to call for talks with the SEC looking to resolve the issue. Chinese regulators also had to organize a meeting with major global banks last week to reassure them that the move was one-off and to persuade them to maintain existing financing arrangements.In the US, the bipartisan USD 550 bn infrastructure bill looks all set to pass the Senate this week as reports surfaced that the text had been finalized. It would then proceed to the House where it faces stiff opposition from the liberal faction of the Dems, who think it doesn't go far enough to boost green investment. Fauci also addressed the recent spike in cases with an optimistic tone by pointing out the effectiveness of vaccines against the new variants and saying future lockdowns would be unlikely, which bodes well for economic activity in general. And speaking of vaccines, Pfizer and Moderna renewed their contract with the EU, covering 2.1 bn doses through 2023. Pfizer also took the opportunity to increase the cost of a shot from EUR 15.50 to EUR 19.50, given recent trials which indicate higher efficacy than its rivals.The UK has declared that 88% of its adult population has had their first shot while about 70% have been fully vaccinated. The British pound (GBP) was also the best performing currency last week, gaining close to 2% ahead of the UK removing quarantine requirements today for vaccinated travellers from the EU and America. Ahead of this week, we have a strong pipeline on economic data with the global Manufacturing PMIs out today to kick off the month, followed by the services PMIs two days later. Rate decisions from Australia (Tuesday), the UK (Thursday) and India (Friday) are expected to largely maintain the status quo as well. The headliner for the week will be the Non-Farm Payrolls (NFP) data from the US on Friday, where 900k jobs are expected to have been added in July (following June's 850k) and the unemployment rate is expected to fall to 5.7% from 5.9% the prior month.

By

Kristal Advisors

August 2, 2021

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