Australian investors looked past the continued worsening in NSW’s COVID situation and the announcement snap 5-day lockdown in Melbourne, with positive economic data seeing the ASX 200 enjoy a positive week. The unemployment rate fell to 4.9%, a 8th consecutive fall, while consumer sentiment in July rose 1.5%.
The US market notched its worst week in over a month, as surging cases of the Delta variant in the US dragged on the market, along with continued fears regarding rising inflationary pressures. Comments by the Chair of the Federal Reserve tempered the falls though, as he continued to say that current inflationary pressures are seen as purely transitory.
The Eurostoxx also recorded its worst week in more than a month, as all of the major European bourses finished down on Friday. Energy, financials, and consumer discretionary were the hardest hit sectors, with rising COVID cases in Europe weighing heavily on the sectors which have outperformed recently.
The Asian majors outperformed global markets last week, having underperformed for much of the last month. The Hang Seng rose 2.4% to record the best performance, while the Japanese Nikkei 225 was the worst performer, only rising 0.2%. Much of the outperformance in Hong Kong was as a result of China cutting bank reserve requirements, which aided the financials-heavy Hang Seng.
Dovish comments regarding inflation, rising Covid-19 cases and stalling global economy from Fed Chair Jerome Powell saw gold notch a fourth consecutive week of gains whereas silver continued its slide. A strong dollar prevented further gains for precious metals despite rising price pressure in the US. Silver’s fall came as further Chinese data indicated that the industrial demand for silver would be tepid in the near-term.
Both oil markets posted their worst weekly performance since mid-March as the WTI declined 4% to $71.81/barrel whereas the Brent fell 3%, ending the week at $73.59/barrel. The finalisation of the OPEC+ agreement seems near as Saudi Arabia and UAE reached compromise, allowing the UAE to increase its baseline production to increase to 3.65m bpd. Meanwhile, the rapid spread of the Delta variant and renewed restrictions have curbed fuel demand in the short-term.
Iron ore prices increased following disappointing results from Rio Tinto as the mining giant indicated that its production results would be towards the lower end of guidance. Covid-19, labour shortages and cultural preservation efforts saw iron production fall 2mt. Meanwhile, steel demand remains buoyant in China as additional policy support is expected following stalling economic recovery.
Copper experienced an uneventful week as production levels and inventories stabilised following China’s auctioning of base commodities. It appears that these auctions have eased much of the speculative demand in the market – a promising development following strong quarterly performance in manufacturing for Europe counteracting these sales.