In following poor economic data which came out on the previous week, the ASX 200 started the week by suffering its day in over a week, dropping 1.8% – while this was mostly recovered on the following day, rising COVID cases in Australia’s largest city caused further jitters as speculation of lockdowns increased.
US markets recorded their best week in 4 months, starting off a low base on the previous Friday. After a brief period of hawkishness from the Feds, the dovish tone resumed, which eased investors fears in a shortening in the interest rate hike timeline. Negotiations about President Biden’s infrastructure stimulus bill received bipartisan support – which opens the door for further bipartisan deals.
The Euro Stoxx 600 came back close to record highs, with the ECB echoing the sentiment of the Feds that inflation would be purely transitory. As such, European investors responded positively to strong European PMI figures, which suggests that the strong recovery is still on track.
The Asian majors’ all experienced green weeks, with China’s CSI 300 the clear outperformer, rising 2.7%, followed by the Hang Seng which rose 1.7%. The Japanese Nikkei 225 underperformed by rising 0.4%, as it remains more affected by COVID than the other major Asian nations.
Precious metals experienced a week of tentative gains, as the Federal Reserve continued to deliver mixed signals – though the messaging of the Fed doves seemed to win out, with fears of interest rate hikes eased. Fronting Congress, Federal Reserve Chair, Jerome Powell confirmed that the Feds wouldn’t increase interest rates too soon and will instead look at a wide variety of economic gauges before increasing rates.
Oil markets reached levels which haven’t been seen in almost 3 years last week, as WTI Crude recorded its 5th straight week of gains. Brent crude rose 3% for the week, with both benchmarks reacting well to the largest drop in oil inventories since April. Also news that the US infrastructure bill had received bipartisan support boosted oil’s prospects, as is the ongoing brightening prospects of international travel.
In an ongoing theme, iron ore prices rose despite China’s attempts to spook iron speculators by announcing that it would launch an investigation into malicious speculators and that it would ‘severely punish’ any wrongdoers. Despite the threats, iron rose as data revealed that Australian iron ore sales to China rose 20% in May.
Copper prices rebounded after it was revealed that the release of copper reserves from China’s National Food and Strategic Reserves Administration would only be a tenth of what was first feared, with 20kt of copper set to be publicly auctioned. Adding to positive copper sentiment was the bipartisan support for the US infrastructure bill, as well as data which showed that copper exports from China rose for the third straight month, while supply continues to struggle.