The ASX200 saw a strong rebound, following data which suggested the continuation of a reviving global economy. This was despite projections from the RBA that the Australian economy would see a COVID-induced contraction in the September quarter, and a worsening slump in iron ore prices, which some of the ASX’s largest companies.
The US markets enjoyed a positive week, with the Dow Jones and S&P 500 ending the week close to record highs. The end of the week saw US non-farm jobs increase by 953k, comfortable beating expectations and stoking fears of interest rate hikes being brought forward. Although the Nasdaq reacted negatively to these fears due to its tech-heavy composition, it still outperformed the two other majors.
The Euro Stoxx 600 enjoyed 5 consecutive days of gains last week to record its best performance since March. This result came on the back of strong corporate earnings reports, and positive economic data – though gains were somewhat limited as positive results in the US strayed out of the Goldilocks zone.
The Asian majors experienced their first positive week in three weeks, with strong economic data helping to start the month positively, with the CSI, Kospi and Nikkei all rising in the region of 2.0%. The HSI rose 0.8% as investors remained cautious about Chinese regulations, which the CSI peeled off from mid-week highs as the government-imposed restrictions and tariffs which are expected to harm Chinese manufacturing.
Gold looked set to eke out a minor loss for the week before coming under heavy selling pressure on Friday. Friday saw the Vice President of the Federal Reserve hint at tapering this year, as well overly positive economic data increase fears of interest rate increase, both of which decreases the lustre of precious metals. Silver fell further, as the prospect of a slow-down in Chinese manufacturing increased.
The global oil benchmark fell 7.0% last week, while WTI Crude fell 7.7%, with further spreading of the Delta COVID variant causing further concerns for investors. Not helping matters is an ongoing dispute between Saudi Arabia and the UAE, which increases the potential for OPEC non-compliance, which would see an oversupply of oil. Capping losses, however, were tensions between Iran and non-producing Israel, with speculators looking at the potential for Israel to attack Iranian oil facilities.
Iron ore continued its slump, having now dropped 22.0% since mid-July. Last week saw another large drop as Beijing told major steel producers in 7 key provinces to cap production to 2020 levels. Beijing also raised export tariffs on some steel products and removed rebates on cold-rolled steel products, to further artificially dampen iron ore sentiment.
Copper slipped this past week as Chinese manufacturing data slowed for a second consecutive month, with factory activity slipping to a 15-month low. Still, losses were capped as workers at mines in Chile, the world’s largest copper producer, voted to strike, which will affect Escondida, the world’s largest mine, along with two other major mines. Copper was also boosted by expectations that the US Senate will pass a bi-partisanship $1tn infrastructure deal this week.