Weekly Market Wrap 09-Aug to 13-Aug 2021

Marius Paun | London, UK | Senior dealer |Friday 13th August 2021

Gold Drops Below $1700 Mark

The ongoing strong earnings season in the US continued to lift stock markets this week. Yesterday, the Dow, S&P and Nasdaq all closed in the green and in the process, the Dow and S&P made new all-time highs (third week in a row). At the same time, economic data continues to impress on the positive side. Concerns regarding the Delta variant are still making headlines. We had inflation numbers this week and US July CPI came in at +5.4% y/y vs +5.3% expected. Excluding food & energy, the rise was 4.3% vs 4.3% estimated. The Fed still saw those high readings as temporary and explained it was because of supply disruptions and worker shortages.

On a different note, the US Senate finally passed $1.2 trillion infrastructure bill. It did so in a 69-30 vote which shows bipartisanship can be achieved at least sometimes as almost 20 Republicans supported the bill. It will now go to the House but with no clear timeline.

China has reported on its inflation figures as well. July CPI came in at 1% vs 0.8% expected and PPI 9.0% Y/Y vs 8.8% predicted. It also reported its highest new Covid-19 count since January, 143 early in the week, with lockdown restrictions clearly on the up.

Eurozone industrial production for June declined 0.3% vs +0.2% anticipated. Supply bottlenecks, particularly in Germany seemed to be the main culprit. The increase in output in France by 0.4% and in Italy by 1.0% could offset only partially the monthly drop of 1.0% seen in Europe’s biggest economy – Germany.

In the UK, preliminary data showed GDP rising by 4.8% q/q versus +4.8% expected. It was a solid improvement in economic activity for the second quarter due to the easing of Covid restrictions which in turn fuelled pent-up demand. It is agreed that getting to pre-pandemic levels will take time especially when the outlook for Q3 is less encouraging given the recent self-isolations measures.

The US oil prices slipped early in the week after the White House called on OPEC+ to increase oil output in an effort to stop rising gasoline prices. However crude prices pared losses during the next sessions as OPEC released its latest monthly report. It raised forecasts for world economic growth in this year (to 5.6% from 5.5%) and the next.

Gold prices nosedived sharply this week to a low of $1677 as a strong US dollar following last week’s non-farm payrolls report took its toll on the commodities market. Strangely enough gold should rise in inflationary times but it seems investors are buying into the transitory story so far. Also, the precious metal does well in a low interest rates environment but central backs seem on the verge of considering tapering followed by rates hikes.

On the other hand, Bitcoin showed signs of renewed strength reaching 46,700 on Friday afternoon. Although it might be too early to talk about a comeback in the cryptos ecosystem the impressive rally was nevertheless welcome by the community.