Markets opened in risk off mode this Monday following a raft of Chinese data that showed a sharp slowdown in the retail sales, industrial production, and urban investment. There is also an added uncertainty with a sudden collapse of the Afghan government and Taliban preparing to take full control of Afghanistan. The delta coronavirus variant left cases near record highs in many Asian countries and is driving higher Russian deaths. The cases are also on the rise in Germany and US. After negative data from China this Monday, the focus this week will switch to the Fed Reserve minutes and the latest US retail sales data due on Wednesday and Tuesday respectively. New Zealand looks set to be one of the first world’s advanced economies to raise interest rates in the pandemic era on Wednesday. UK will release CPI data on Wednesday and Retail Sales on Friday, while Eurozone will also release CPI data on Wednesday.
US stocks climbed to another all-time high on Friday with S&P 500 adding 0.2% to 4468, clinching its 48th record close of 2021. Both Dow Jones and Nasdaq have gained slightly less than 0.1%. US equity rally slowed on Friday after data showed the University of Michigan’s preliminary sentiment index fell by 11 points to 70.2, the lowest since December 2011. Treasury yields have declined after the report and are currently around 1.26%. The dollar is trading near one-week low with DXY around 92.528, maintaining 0.5% tumble after the sentiment data. On Wednesday the Fed releases the minutes of July meeting, which will be scrutinized on when they plan to start scaling back the Fed’s monthly bond purchases, as well as their outlook on the economy. US Retail Sales data on Tuesday will be closely watched for further clues on consumer behaviour.
European stock markets have opened lower this Monday suffering from the weak sentiment in Asia following Chinese data releases that have missed the expectations. DAX Futures were 0.4% lower, while CAC Futures dropped 0.5% and FTSE 100 fell 0.5%. European stocks have been on the rise last week. While day-to-day gains have been muted during the summer lull, the Stoxx 600 has been hitting a series of fresh peaks not seen in such length since 1999, with a strong earnings season, offsetting investor concerns about a potential stimulus tapering and a rise in the delta coronavirus variant. In terms of data, the focus in Europe will be on CPI data in UK and Eurozone on Wednesday, as well as UK retail sales on Friday. In the corporate sector, HSBC will be likely in the spotlight after Europe’s largest bank by assets agreed to acquire AXA’s insurance business, which would make the combined business the seventh-largest life insurer. EURUSD is mostly flat at $1.1796 close to the one-week low of $.1805 reached on Friday.
Asian shares slid on Monday after Chinese figures on July retail sales, industrial production and urban investment all missed the forecasts. MSCI’s broadest index of Asia-Pacific shares outside of Japan lost 0.2%, while Chinese blue chips were hanging onto 0.2% gains in anticipation of a more aggressive policy easing. Japan’s Nikkei fell 1.7%, despite the fact that economic growth was better than expected in June. Worries about surging coronavirus infections in the region, as well as concern about the long-term impact from Afghan government’s collapse supported the negative sentiment. Japan, Thailand and Malaysia are among nations reporting several record daily new cases recently.
Oil prices fell more than 1% this Monday with Brent Crude down 1.1% at $69.84 and WTI also down 1.1% to $67.68. Oil weakness is likely triggered by weaker-than expected data from China this morning, which showed that refining output and economic activity slowed down. Fresh Covid-19 outbreaks are also a contributing factor, as well as floods that have disrupted the business.