The last week was not a pretty one for equities with almost all markets in the red outside of North Asia. Japan led the way once again, driven by speculation that the next PM will keep the QE taps running at full flow. China and HK notched up another positive week as the market comes to terms with China's newfound focus on equitable distribution of gains. And also prioritizing what the Party sees as social welfare, above firms' market power or investor sentiment. The majority of the decline in the S&P500 came in Friday's session, though there was no big trigger on the data front. The Real Estate sector led the decline over the week but still remains the top gainer year to date, at 28%.
Commodities have had a tough time of late too. Precious metals and the related mining complex has been in decline over the last two weeks. Palladium in particular has seen a sharp correction from close to the 2500 level to 2150 levels now. Gold has been mostly sideways and unable to find momentum of any kind. Energy gained on the week as WTI rose in the last session to close above the 70 levels. Natural Gas and Coal saw substantial gains over the last week too. Uranium has seen a run-up in recent weeks too as it benefits from various factors. The factors being the clean energy drive, increased buying in the physical market & reduction in the pace of mining. Potentially positive news on the US-Iran Nuclear deal this week could prove to be another tailwind.The US dollar was stronger but there wasn't any clear direction in US Treasuries. The medium-term maturities (5Y-7Y) saw declines while the wings (2Y & 30Y) saw modest gains on the week. Equity volatility picked up with declines as the VIX traded back above the 20 levels. We're light on data events this week with inflation and employment data out of the US and Europe likely to impact price action the most. Proposals on increases to the US Tax rate are scheduled to be tabled in the House today. Though the increases are lesser than what the White House had asked for, it could still keep a lid on sentiment in the near term.Crypto could trade heavily too as stablecoins are reportedly being considered for an investigation by the Financial Services Oversight Council. The potential fallout here could include increased scrutiny and aggressive monitoring should that be the case.
September 23, 2021
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