Morning Update Note
Wednesday 23rd June 2021
- Wall Street stocks closed higher on Tuesday after the Dow Jones Industrial Average turned in its best performance since March a day earlier.
- At the close, the Dow Jones Industrial Average was up 0.20% at 33,945, while the S&P 500 was 0.51% firmer at 4,246 and the Nasdaq Composite saw out session 0.79% stronger at 14,253.
- The Dow closed 68.61 points higher on Tuesday, adding to the considerable gains recorded by the index in the previous session.
- Tuesday’s main focus was testimony from Federal Reserve chairman Jerome Powell before the House of Representatives, where he discussed the central bank’s response to the Covid-19 pandemic.
- Powell’s remarks supported the expectation that the Federal Reserve will shortly look to discuss removing a number of the unprecedented stimulus measures it put into place as a result of the pandemic.
- While the Fed head acknowledged that inflation has “increased notably” in recent months,” he also noted that the majority of these increases appear to be only temporary in their effect and that inflation should settle back to 2% over the long term.
- Also in focus, bitcoin fell below $30,000 to its lowest level in over five months and pushing into negative territory for the year on the back of intensified efforts to crack down on the cryptocurrency in China.
- On the macro front, the Federal Reserve Bank of Philadelphia’s non-manufacturing diffusion index for current general activity at the firm level rose sharply from 22.1 in May to 56.7 in June, its highest reading since March 2012.
- Elsewhere, existing home sales fell 0.9% in May to a seasonally adjusted annual rate of 5.80m, according to the National Association of Realtors, a fourth straight monthly decline as low inventory pushed out many potential buyers and builders were unable to deliver houses due to an increase in the expensive of lumber.
- Lastly, the Richmond Fed’s manufacturing index showed activity across the central Atlantic region picked up further steam in June, with the Fifth District Survey of Manufacturing Activity’s composite index coming in at 22 in June, up from 18 in May.
- European shares finished mostly higher on Tuesday and at their best levels of the session, helped by positive comments from the European Central Bank chief and the continuing advance on Wall Street.
- The pan-European Stoxx 600 was ahead 0.37% to 456, alongside a rise of 0.29% on the German Dax to 15,648.
- In the background, investors were still unsure over a recent more hawkish tone from US Federal Reserve officials over the pace of inflation and the timing of possible interest rate rises.
- Nevertheless, in prepared remarks released ahead of his testimony, Powell reiterated that the Fed was not unduly concerned that high inflation readings were permanent.
- In equity news, shares in Irish building materials group Kingspan topped the Stoxx, up almost 5%, after reporting that first-half profit and sales are set to be ahead of the previous year and 2019 as the momentum reported in April has continued into the second quarter.
- Shares in Melrose Industries gained after the turnaround specialist said signs of recovery were in sight for its GKN aerospace division and that it was returning £730m in cash to shareholders from the sale of the Nortek business in April, with further payouts on the way.
- DS Smith fell after reporting that the current financial year had started well as the packaging company posted a sharp drop in annual profit caused mainly by higher costs and lower prices during the early stages of the Covid-19 pandemic.
- UK commercial property landlords British Land and Land Securities were also higher, on recovery hopes as the former confirmed plans to start construction on a new tower block in east London. Shopping centre owner Hammerson’s shares were up on a read across, as were those of housebuilder Beazley.
- Shares in consumer internet company Prosus fell despite posting strong operating profit and revenues.
- Asian stock markets followed Wall Street higher on Wednesday after the Federal Reserve chairman said higher US inflation probably is temporary, helping to calm fears central bankers might feel pressure to roll back economic stimulus.
- The Shanghai Composite Index rose 0.4% and Tokyo’s Nikkei 225 gained 0.1%. The Hang Seng in Hong Kong advanced 1.3%.
- The Kospi in Seoul was 0.4% higher while Sydney’s S&P/ASX 200 shed 0.3%. Stocks gained in New Zealand, Singapore and Taiwan, while Indonesia’s benchmark was flat.
- 10yr and 30yr US treasuries are currently trading at 1.47% and 2.10% respectively.
- 10yr UK gilts trade with a yield of 0.78%.
- German 10yr bund yields trade at -0.16%.
- 10yr Italian and Spanish bond yields trade at 0.90% and 0.46% respectively.
- The WTI crude oil price is $73.06
- Brent crude is $75.25
- The gold price is $1,781.44
- The silver price is $25.96
- The COMEX copper price is $4.26
- The Yen is trading at 110.80 against the US dollar.
- The pound is trading at 1.39 against the US dollar.
- The pound is trading at 1.17 against the Euro.