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Daily Wrap Up 17 August 2021

17 Aug 2021 04:46 PM

FTSE 100 outperforms, Wall Street hit by retail data

It has broadly been another bearish day for equities as a combination of Covid-19 concerns, tighter regulation in China, and disappointing data from the US, soured sentiment. In recent months, the Beijing authorities have been introducing tighter regulation on certain sectors, and overnight tougher rules were revealed for the tech industry. It seems to be a sweeping trend for the second largest economy in the world, and some dealers feel that more sectors will be in for similar treatment.

The news from China ensured that most European markets got off to a negative start, even though some of the major indices are in the red, they are all off the lows of the session. The UK unemployment rate dipped to 4.7%, its joint lowest mark in eight months. Until the furlough scheme ends, we will not get a clear picture of the jobless rate. The number of job vacancies jumped to 953,000 - a record level – so that is a clear sign that employers are open for business. Average earnings on a three-month basis increased by 8.8%, up form 7.4%. It appears that companies have to offer higher wages in a bid to attract staff. When workers earn more, they typically spend more but that will feed into inflation. The FTSE 100 is outperforming its continental equivalents. Sterling is lower across the board despite the well-received jobs data.

US stocks are in the red as the latest retail sales data was worse-than-expected. The report for July, showed a drop of 1.1%, while economists were expecting a fall of 0.2%. On the bright side, the June report was revised up from 0.6% to 0.7%, but it is still concerning that there was a sharp decline in activity between the two months. At the end of last week, the Michigan consumer survey shocked traders as it was very disappointing. It might be the case that US consumers are reining in their spending. The S&P 500 is down over 0.5%.

AUD/USD fell to a nine-month low after the Reserve Bank of Australia (RBA) admitted that it would consider cutting interest rates to new historic lows should the Covid-19 crisis continue. The government’s tough stance against the virus had brought about multiple localised lockdowns, which is hampering the economy. The RBA’s mildly dovish update comes at a time when there is growing speculation the Federal Reserve might start using more hawkish language in the months ahead.

WTI and Brent crude have rebounded as bargain hunters have boosted the price. The energy was offside earlier as there is speculation that OPEC+ will not rush to increase output anytime soon. Concerns about Covid-19 cases are still lingering.

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