Delta variant concerns mount
Asian markets have opened mixed this Monday morning as corona virus cases spike in the region hurting the sentiment. Last week, global shares reached record highs with weaker-than-expected US inflation and news of a bipartisan US infrastructure agreement boosting the risk appetite. The main economic event this week will be the US Jobs report on Friday, as well as the OPEC+ meeting on Thursday. Wednesday’s euro zone inflation data will also be in focus. Other data releases include Pending Home Sales, ADP and ISM Manufacturing activity.
US stocks rallied to their best week since February, lifted by robust gains among shares from banks to oil producers and manufacturers. On Friday, the S&P 500 rose 2.7% for the week after data showed the inflation rose less than expected in May, easing fears of a sudden tapering in stimulus by Federal Reserve. A news of agreement on an infrastructure plan worth $1.2 trillion over eight years has also boosted the sentiment. US Dollar is slightly firmer with DXY at 91.84. 10-year treasury yields are back above 1.50%. The focus this week will be on the labour report on Friday with 675k new jobs added as expected and unemployment rate is down to 5.7% from 5.8%. Investors are hopeful to see signs of improvement in the labour markets after two months of slower than expected job growth.
European shares stayed just below record highs on Friday with a boost from the financial and materials sector. The STOXX 600 was 0.1% up ending the week with gains of 1%. This morning European markets opened down with FTSE 100 trading 0.3% lower, DAX 0.2% down, while CAC 40 has slipped 0.1%. The Euro zone will release June inflation figures on Wednesday, which could test the European Central Bank’s resolve to ignore short term price increases. The UK financial regulator barred cryptocurrency exchange, Binance Markets, in a move that extends regulatory crackdown on the crypto sector. In France both Macron and Marine le Pen delivered a disappointing set of results from the latest round of regional elections.
Asian shares have opened on a cautious note, as investors got concerned with a spike of corona virus cases. Australia’s most populous city of Sydney entered a two-week lockdown as authorities struggle to control an outbreak of the highly contagious Delta variant. Indonesia is battling record high cases, while Malaysia and Thailand are set to extend restrictions. MSCI Asia excluding Japan has lost 0.4% and Australia shares slipped 0.2%, while Chinese markets held steady with CSI300 index trading up 0.2%. Official factory activity is due from China on Wednesday, which is expected to slow to 50.7 from 51.
Oil is trading near two and a half year highs with Brent around $76.30 a barrel and US Crude at $74.18. Oil prices rose for a fifth week last week as fuel demand rebounded on strong economic growth. This week’s OPEC meeting is expected to result in another boost in output, as the demand outlook continues to recover. OPEC is likely to increase output by 500k bpd in August, which is likely to support higher prices.