Market Update and expectations
By: Ahura Chalki
Market analyst – IFC Markets
VIX started falling since last week from June 21 hit at 22.30 to yesterday’s low at 18.11 and still trading around the same number, 19% lower than a week ago. However, the Delta COVID-19 variant continues spreading in the UK, Australia, and Southeast Asian countries and paused the decreasing as fears in the market increased.
On the other hand, after a slight rebound in the US 10-year bond yields, it fell five basis points to 1.48% overnight from its yesterday high.
The decline of these two important indicators has a mixed signal about the Fed’s early interest rate hike.
Lowering the interest rates will also help increase the valuation of technology stocks. It happened yesterday to send the Nasdaq, which is heavily invested in technology equity, continued its rally, closing at 14,510 overnight and testing a new record high before a slight decrease in the past hours. The index rebounded from below mid-May low of 13K and then maintained its upward trend for the 6th week in a row. The previous peak was 14,077, seen in April. On the other hand, S&P 500 and USA30 recorded increases of 3.62% and 4.47%, respectively, last week.
After these reports and data, we can see some changes in the markets. As in the currency market, the US dollar index, with a 0.6% rebound from Friday low, tested the 92.00 earlier and now trading at 91.97, above the PP (91.80). US 10-Year Bond Yields dealing with no daily change at 1.478%.
The Euro lost ground against the stronger USD among other leading currencies, flirting around the 1.1900 level. Commodity-based currencies were also weakening as lower numbers have been seen in the commodity markets. Kiwi, the New Zealand dollar, and Aussie, the Australian dollar, both ended the 5 Daily gains, declined 0.68% and 0.47% to 0.7038 and 0.7565 yesterday. Today both currencies holding their weakness and 0.6990 and 0.7520, respectively. The Canadian dollar also weaker Oil and Stronger USD, supporting the uptrend in the USDCAD chart.
As I mentioned earlier, commodities have been falling since this week for two reasons, Stronger USD and the latest worries about the virus spreading. WTI lost 3.4% to $71.80 after touching a multi-year high at $74.25 in early Monday trading hours. Gold finally could breach its lowe band of the trading range at 1,770, now trading at 1,699 with a 0.6% daily loss.
In the earlier published data, we had increased in Japanese Retail Sales, and the Spanish CPI number was in line with Market expectations at 2.6% for June. Eurozone Climate change and consumer confidence, also with no surprise, confirmed the market estimates. And while British Nationwide HPI (YoY) (Jun) increased to 13.4%, but lower than expectations, it seems like we should not worry too much about inflation in Europe. Later today, US consumer confidence and Mrs. Lagards’ speech will be in the spotlight.
In the stock markets, so far today, Dow Jones futures were up 105 points, or 0.3%, S&P 500 futures and Nasdaq 100 futures trading around the opened level area with not many changes. Yesterday, most of the leading indices closed higher. S&P 500 gained 0.2%, its third consecutive record close, and the tech-heavy Nasdaq Composite gaining was up, almost 1%, also a new all-time high, supported by solid gains of Facebook. On the other hand, Dow Jones Industrial Average, however, dipped 0.4%.
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