Weekly Market Update: 24th of May 2021

Domestic Markets | S&P/ASX200 up 16pts (0.2%)

CBA up $1.47 (1.5%)
FMG down $0.49 (2.2%)

Although the ASX 200 experienced 4 positive days out of 5, the Australian benchmark only rose 0.2% over the course of the week. This came as investors followed the midweek lead of American investors as a sector rotation caused volatility in the US market.  

Global Markets | Dow Jones down 174 (0.5%)

S&P 500 down 18pts (0.4%)
Nasdaq up 41pts (0.3%)

Interestingly enough, the tech-heavy Nasdaq was the only one of the American majors to experience a positive week, despite news and data being released which would ordinarily serve as a headwind for tech. FOMC minutes revealed some policymakers are open to discussing tapering QE measures, which serves as a headwind for growth stocks, while economic data revealed strong growth in the services manufacturing sectors.

Europe | Euro Stoxx 50 up 8pts (0.2%)

European markets experience a week of mixed fortunes, with continental European stocks outperforming the British FTSE. Despite economic data from the UK outperforming other European countries, the FTSE still finished lower as the stronger-than-expected inflation data increased fears of the BoE increasing interest rates.

Asia | HSI, CSI, KOSPI, NIKKEI

The Asian majors all experienced positive weeks, Hong Kong’s Hang Seng the outperformer, rising 1.5%. The Hang Seng’s rise came in anticipation of changes to the index, changes which were announced after market on Friday. These changes will see the number of constituents rise from 55 to 58 on the 7^th of June, and each company receive a cap of 8%. The index is expected to grow monthly to reach 80 constituents in mid-2022, in an effort to better represent Asia’s second largest market.

Commodities | Gold rose $39.33USD/oz (2.1%)

Silver rose $0.13USD/oz (0.5%)
Copper fell $0.16 USD/lbs (3.6%)
Iron Ore fell $8.00USD/t (3.9%)

Precious Metals | Gold, Silver

Gold enjoyed a positive week, with 7 consecutive days of increases marking its longest winning run since July of last year. The fall of Bitcoin and other cryptocurrencies over the past few weeks has served as a positive for precious metals as the large crypto declines reduced their viability as safe haven commodities, with gold reacting the strongest to the news. While gold was more heavily bought, silver still rose 0.5% as industrial demand for the highly conducive metal grows.

Oil | WTI Crude, Brent

Both of the oil benchmarks experienced poor weeks, both falling almost 3% over the course of the week due to ongoing COVID concerns in Asian countries which are major buyers of oil, while signs of progress in US-Iran nuclear continued to cause concerns that more oil supply will soon be released to the market. Still, it wasn’t all bad news for oil, as strong vaccination campaigns in Europe and the US has led to increased travel, while a storm in the Gulf of Mexico raises the potential of short-term supply reductions from the US.

Iron Ore

Iron ore continued to slip as China’s Premier, Li Keqiang, announced more measures to curb excessive commodity prices, including punishing those who hoard base metals. Increased domestic Chinese production was also announced, though given the relatively low quality of Chinese iron, the country is still expected to rely on Australian and Brazilian iron. In terms of supply, BHP announced that its South Flank project will start producing 80mtpa, which will eventually replace their Yandi mine.

Copper

Copper also suffered as a result of Premier Li’s announcement that China will attempt to curb ‘unreasonable’ rises in base metals, with the red metal dipping to two-week lows. Mining giant Glencore also announced that it would resume production at its idle Mutanda mine in DR Congo, from 2022, which served as another headwind. Support was however provided by news that miners were potentially going to strike at the Escondida mine in Chile, which is the world’s largest copper mine. Given the strong expected demand, this dip in copper prices is only expected to be temporary.