22nd of March 2021
Domestic Markets | S&P/ASX200 down 59pts (0.9%)
CBA down $1.78 (2.1%)
FMG down $1.25 (5.9%)
The ASX200 fell 59 points as positive data came with a negative spin. The markets barely reacted to the Australian unemployment dropping 0.5% more than expected on Thursday, as potential optimism instead led to bond yields spiking and a further rotation out of equities.
Global Markets | Dow Jones down 151pts (0.5%)
S&P 500 down 30pts (0.8%)
Nasdaq down 105pts (0.8%)
The Dow Jones finished the week down after the Federal Reserve made the surprise decision on Friday to not extend the SLR exemption for banks, which served to cause both banks to slide, and bond yields to rise as the lapsing of the SLR meant that banks would hold less Treasury bonds.
Europe | Euro Stoxx 50 up 4pts (0.1%)
The European markets had a very choppy week with no consecutive days of wins or losses as they finished flat. The Bank of England provided an optimistic outlook on British recovery but maintained that they would keep interest rates flat for 2021.
Asia | HSI, CSI, KOSPI, NIKKEI
Although the Nikkei 225 rose for the week, the big news out of Japan was that the Bank of Japan decided to end a program by which they had become the largest single holder of Japanese stocks by purchasing in Japanese ETFs – though this announcement means that the BoJ will simply stop buying more stock rather than sell it off en masse. In other markets, the Hang Seng were up while the CSI 300 and KOSPI were down.
Commodities | Gold rose 18.05USD/oz (1.0%)
Silver rose 0.31USD/oz (1.2%)
Copper fell 0.04USD/lbs (1.0%)
Iron Ore fell 10.50USD/t (6.1%)
Precious Metals | Gold, Silver
Gold and silver increased this week as a worsening outlook on the COVID situation in Europe, and prospects for increased inflation drove the demand for precious metals. These prospects were boosted by the Federal Reserve indicating that it wouldn’t increase interest rates until 2024 and saw gold rise despite bond yields and the US dollar also rising – a trend we haven’t often seen in the past month.
Oil | WTI Crude, Brent
Brent Crude fell 6.8% this week while WTI crude fell 6.4% as a new wave of COVID infections across Europe triggered new lockdowns and dampened the outlook for any material increases in oil demand in the short term. Adding to the bearish sentiment for oil demand was the slowdown in the European vaccination rate as a number of European nations suspended use of the AstraZeneca vaccine due to potential health risks, while US data saw 4 consecutive weeks of oil inventory increases.
Iron ore continued to drop away from decade highs as short-term demand continued to look murky, with rumours that current production limits in China’s top steelmaking city, Tangshan, could be extended for any producer that that continue to fail pollution targets. On the supply side, Brazilian giant Vale’s long-term outlooks look more positive, as plans for a large new iron-dedicated port advanced.
While the outlook for copper remains positive, it declined slightly in the past week as a continuing rise in US Treasury yields caused a rise in the US dollar as investors sought to gain access to attractive yields, with the rise in US dollar weighing on copper prices. Given the importance of copper in infrastructure, manufacturing and green energies, which will be stimulated as the global economy recovers, the dip in copper prices gives investors a buying opportunity in a commodity which has run hard in recent months.