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Daily wrap up 09 July 2021

9 Jul 2021 06:39 PM

The mood in the markets has changed a lot in the past 24 hours. Yesterday, stocks, energies and metals took a beating as dealers dumped assets that were perceived to be riskier. The sentiment in the markets was weak as there were concerns the Chinese economy is cooling. The second-largest economy in the world has outperformed in terms of its recovery but there are some signs that it is slowing down, and if a nation like China is coming off the boil, that is likely to impact other economies too. Today, there has been a significant shift in sentiment as traders have moved in to snap up relatively cheap assets. After much speculation, it was confirmed the Chinese central bank cut the reserve requirement ratio, this helped the rally in stocks that was already in play. European and US equities are on track to finish on a positive note.

The latest GDP update from the UK was a little concerning as it showed the economy expanded by 0.8%, which greatly missed forecasts as economists had predicted 1.5%. In addition to that, the reading for April was revised from 2.3% to 2%. As mentioned above, there are minor concerns that China’s recovery is moving down a gear, well it seems as if the UK is heading in a similar direction. That being said, sterling is holding up relatively well. If all goes to plan, England will be removing the last of its restrictions in over one week and it seems that prospect of a fully functioning English economy is assisting the pound.

The Canadian dollar has received a double boost today thanks to the rebound in the oil market and the impressive jobs report. Last month, 230,700 jobs were added in Canada, topping the 175,000 consensus estimate, it was in stark contrast to the 68,000 jobs lost in the previous month. It is tad concerning that over 33,000 jobs were lost and that nearly 264,000 part-time jobs were added, but overall, it is still positive.

Even though the US dollar has lost a little ground, gold has not cleared yesterday’s high. The metal typically outperforms when the dollar is in the red. It is possible that buying appetite for gold is low today as traders are ploughing their funds into higher risk assets such as stocks and industrial metals like copper – which is up over 2%.

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