Geopolitical risks and virus developments have remained in focus and add to the cautious backdrop. Trading has been very muted, with investors clearly holding back ahead of the Jackson Hole weekend.
The Market Week – August Week 4
Jackson Hole remains the main focus for markets this week, even if expectations for an early tapering announcement have faded amid concern that the rapidly spreading Delta variant will at the very least dampen the recovery. This weighed on the Greenback turning it to a 1-week low.
Treasuries posted modest losses as Wall Street rallied. Bonds were also heavy amid the weight of the $183 bln in supply. A stellar 2-year auction helped the front end rebound and gain some ground.
Major stock indexes are narrowly mixed. Key equity indices in both the US and Europe stalled at month highs with the exception of the USA100 and USA500. The USA30 holds near 35,500, the UK100 is stuck at the 7,100 area, while the GER30 is shy of 16,000.
USA100 and USA500 hit new highs as well, with the former breaking the 15,000 level. The rally was supported by solid earnings once again but also as tech shares have outperformed, as shares of beaten down China stocks recover on hopes for more clarity from Chinese regulators.
The full approval of Pfizer’s Covid vaccine on Monday has helped stocks as well, in hopes vaccination rates in the US will now rise.
In the currency market, the EURUSD peaked at 1.1765, as dollar weakens after the market priced in a push back for QE tapering. The USDJPY has continued to ply a narrow range in the mid-to-upper 109.00 range. Cable flirts with 1.3750, retaining a neutral-to-bullish outlook, even though incoming data are showing a moderation in the pace of economic growth.
Safe haven gold fell in tandem with the broad increase in risk appetite, with XAUUSD pulling back to $1,791 from $1,809.50.
USOil bounced quite sharply to $67 highs, up from 4-month lows of $61.46 as the hopes for a demand recovery helped sentiment, following the full FDA approval of Pfizer’s vaccine.
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Andria Pichidi
Market Analyst
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