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Archinomics Weekly - Monday 26th July 2021

2 years ago



Equity markets whipsawed, as the spread of the Delta variant of Covid-19 rattled confidence. The major US indices fell sharply, then rebounded as bargain hunters stepped in to buy tech stocks. In Europe, the Stoxx 600 index had its worst day of the year, before recovering on corporate earnings optimism. Japanese indices fell on fears that the Olympic Games would worsen the spread of the Delta variant, while in China large cap indices underperformed slightly.


US government bonds responded sharply to growth fears, with yields falling early in the week, as prices rose, before recovering later. Yields on core eurozone bonds also fell. In the corporate bond markets, demand for investment grade new issuance remained strong, while high yield markets improved in line with equities later in the week.


The US dollar continued to shine, while the yen lost ground against all majors. The euro traded weaker against both the dollar and sterling, as the European Central Bank confirmed no move on interest rates.


Oil rebounded, after a sharp 8.7% dip on demand growth fears, to close the week marginally higher.

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Shell has appealed against the Dutch court order regarding a step up in the pace of emission cuts, claiming it has been unfairly singled out.


The European Central Bank meeting delivered a slightly more dovish tone, promising interest rates at or around current negative levels until inflation hits the target 2%.

Flash PMI reports presented a mixed picture, with the Eurozone composite index touching the highest level since July 2000, while the US composite index fell to a four month low of 59.7.

US Q2 earnings continued to match or beat high expectations, although Netflix was punished for a miss on subscriber numbers.

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The US Federal Reserve meeting is unlikely to bring a change from the recent stance of patience in the face of a ‘transitory’ jump in inflation.

Advanced estimates of US and Eurozone Q2 GDP will be scrutinised for any impact on the growth recovery from the Delta variant of Covid-19.

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