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Weekly Market Update: 10th of May 2021

Weekly Market Update: 10th of May 2021

Julius Zondag

Weekly Market Update: 10th of May 2021

Domestic Markets | S&P/ASX200 up 47pts (0.7%)

CBA up $4.45 (5.0%)
FMG up $0.27 (1.2%)

Australian markets edged higher, with strong results from the banks as they reported and a buoyant iron ore price boosting the iron miners. Tech companies continued to be hammered after a mid-week sell-off in the Nasdaq, while travel stocks also suffered as COVID cases in Sydney caused the Trans-Tasman bubble with NSW to be paused.

Global Markets | Dow Jones up 887pts (2.7%)

S&P 500 up 40pt (1.2%)
Nasdaq down 286pts (1.5%)

The Dow and S&P set new record closes, despite disappointing payroll data out of the US on Friday, which eased worries about the Fed tightening monetary policy any time soon.  The Nasdaq was down reflecting continued underperformance in the tech sector off the back of proposed antitrust laws and the prospects of a robust economic recovery which has funneled a rotation to value-oriented stocks.

Europe | Euro Stoxx 50 up 55pts (1.4%) 
European stocks continued to rally, with the German DAX30 closing around 15,400 on the back of upbeat economic data which saw a surge in German industrial production and better than expected exports and import figures throughout March.

The Asian majors had mixed results, as South Korea’s KOSPI climbed 1.6% and Japan’s Nikkei 225 rose 1.2% despite concerns surrounding rising COVID cases in Japan. China’s CSI300 fell 1.5% despite a pickup in trade activity last month with export growth topping expectations and Caixin Services PMI showed activity expanding at a faster than expected pace.

Commodities | Gold rose 64.21USD/oz (3.6%)

Silver rose 0.62USD/oz (2.3%)
Copper rose 0.29USD/lbs (6.4%)
Iron Ore rose 20.00USD/t (10.7%)

Precious Metals | Gold, Silver
Precious metals enjoyed a positive week with gold experiencing its strongest weekly gain since November, while silver also rose 2.3%. The strong performance was due to a number of factors, with Indian and Japanese worsening COVID cases driving increased safe-haven related demand, while a weakening US dollar has also been a common theme in recent weeks. The other noteworthy driver from gold came for the disappointing US payroll report on Friday – while an employment rise of 990k was forecast, only 266k new jobs were found, which caused the unemployment rate to rise 0.1% rather than fall, which had been expected. This adds uncertainty to the market and indicates that Federal Reserve will remain accommodative, both of which are good for precious metals.  

Oil | WTI Crude, Brent
Both Brent and WTI crude enjoyed positive weeks, rising 1.3% and 3.1% respectively. Acting as tailwinds for oil was optimism over easing restrictions in the US and Europe, a drop in US oil inventories and strong economic data out of China. Limiting gains, however, was the poor jobs reports out of the US and the soaring cases in India, the worlds 3rd-largest oil importer, as well as OPEC+ starting to introduce more supply to the market, as previously announced.

Iron Ore
Iron ore prices reached $207/t on Friday, which broke the record of $200/t which was set in November ’07. This strong weekly performance came on the back of strong demand for iron ore from China after steel production rose 19% in April, and as steel mills defy governmental environment regulations to increase output. Also serving as a tailwind, iron producing giants Vale, BHP and Rio Tinto reported operational challenges and weather difficulties caused them to struggle with matching Chinese demand.

Copper prices reached fresh record highs this week, reaching $4.77 as inventories reached lows not seen in 15 years, with demand boosted by major pieces of economic stimulus from the US, while economic data from China also added to the bullish case for the red metal. Given that copper is expected to remain in high demand as the world increasingly moves towards using green energy.

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