The ASX traded in a tight 122-point range this week, as investors reacted cautiously to the end of financial year and continued spread of the Delta variant around the country – at one point, around 50% of Australians were in some form of lockdown. Adding to mixed performance this week was a number of the Big 4 banks and the majority of the property sector going ex-dividend.
All three of the major US indices set record closing highs on Friday, with the release of data which sat in the so-called ‘Goldilocks zone’, with data indicating strong recovery, though not strong enough to push inflation and subsequently interest rates higher. Although 850k new jobs were created, unemployment still rose 0.3% as labor force participation rose more than expected, keeping wage growth low.
The Euro Stoxx 600 experienced a mixed week, ending the first half of the year by dropping 1.1% as broader European PMI figures missed expectations, while investors also reacted negatively to the British economy contracting by more than expected in 1Q21. Still, European markets clawed back as investors responded favourably to strong European data.
The Asian majors all endured poor weeks, with the Hang Seng and the CSI 300 dragged down by financials and tech, while the Nikkei continued to suffer as the bad weather lashes the country and COVID figures suggest another spike could be underway. The Korean KOSPI outperformed its peers, but still fell 0.6%.
Precious metals continued their almost hesitant recovery the previous week to once again rise, though gold’s 7% drop in June was still it’s worst performance since November 2016. The gold struggled against an appreciating dollar and the possibility of the Federal reserve bringing forward its policy timeline, though its safe haven properties benefitted from the spread of the highly contagious Delta variant in Europe and the Asia-Pacific. Silver also benefitted from the prospects of increased industrial use.
All eyes in oil markets were on the outcome of the OPEC+ meeting at the end of last week, with talks still at an impasse, set to resume on the 5th. Although all members were in favour of adding 400k more barrels from August-December, though it still vetoed the deal, along with the extension of the current deal, in order to negotiate a better baseline quota for itself. If a deal isn’t struck, supply could remain low just as demand increases – though it could also see members of OPEC+ breach the current agreed quotas.
Iron ore stockpiles as Chinese ports saw their 4th straight week of declines as Chinese demand for iron remains strong despite Beijing’s various attempts to decrease prices, which briefly shook the market. Vale has announced that it has suspended production at one of its iron mines and partially suspended production at another, due to risks in regard to a nearby dam. This again tightens supply, and should be good for Australian iron miners, along with iron and steel prices in general.
Copper continued its general sluggish trend in recent weeks as high prices meant that Chinese factory output growth is slowing down, with the red metals high prices meaning that profits are growing at a decreasing rate. This slowdown in Chinese factory demand has seen copper inventories in London Metal Exchange warehouses reach their highest level since May 2020.