Stocks shrug off hawkish Fed, pushing higher into late Q2


Macroeconomic/ geopolitical developments

  • Last week, global financial markets were still digesting the big event of the prior week with the US Federal Reserve signalling a more hawkish tone than the financial markets had anticipated.
  • Fed officials this past week have sought to calm markets and allay fears that they were about to start to tighten the current, very easy monetary policy stance.
  • This was highlighted when US Federal Reserve Chairman, Jerome Powell, testified to Congress on Tuesday, stating “We will not raise interest rates pre-emptively because we think employment is too high [or] because we fear the possible onset of inflation. Instead, we will wait for actual evidence of actual inflation or other imbalances.”
  • This has seen many markets reverse the price action from the prior week, with stock averages rebounding from losses and the US Dollar giving ups some of its gains.
  • The Bank of England (BoE) came into play last week with their interest rate decision, statement and press conference on Thursday.
  • They showed an acknowledgment of higher inflation, which is viewed as “transitory”, overall a less hawkish tone than markets had feared.
  • Joe Biden reached a bipartisan infrastructure deal after meeting with senators, which financial markets took as a positive.
Biden deal
  • The spread of the COVID-19 Delta variant in the UK and Europe is of concern, even though in many countries the high correlation between cases and both hospitalisations and deaths has diminished, due to the successful roll outs of vaccination programs.

Global financial market developments

  • Global stock averages rebounded from setback and in some cases (in the US) posted new record highs.
Nasdaq chart
  • Big Tech continued its rebound.
  • European averages have rebounded, but are still below cycle peaks
  • The US Dollar Index posted a modest correction of the mid-June surge from above key support.
DXY chart
  • EURUSD and GBPUSD have further reinforced topping patterns.
  • Gold stays weak after plunging lower with US Dollar strength.
  • Oil extends higher, again.
  • Copper starts to bounce.

Key this week

  • Geopolitics:
    • Still looking for further easings of lockdown measures, particularly in Europe.
    • Monitoring COVID-19 cases, hospitalisations and deaths globally, alongside the spread of the Delta variant in the UK and Europe.
  • Central Bank Watch:  No Central Bank activity of note.
  • Macroeconomic data: Data standouts this week are German CPI, UK GDP, global Markit Manufacturing Purchasing Managers Index (PMI) and the US ISM PMI, plus the always much-watched US Employment report on Friday.
DateKey Macroeconomic Events
28/06/21Nothing of note
29/06/21Japan Unemployment Rate; EU Consumer Confidence; German CPI; US Consumer Confidence  
30/06/21China Non-Manufacturing PMI; UK GDP; German Unemployment Rate and Change; EU CPI; US ADP Employment Change
01/07/21Global Markit Manufacturing PMI; US ISM Manufacturing PMI
02/07/21German Retail Sales; US Employment report

Editor in chief

Steve Miley is the Market Chartist and has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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