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daily market warp 06-07-2021

6 Jul 2021 11:10 AM

Stock markets are showing moderate losses as we draw near the close of trading in London. Indices came under pressure this morning and the mood has not really changed much during the day. Traders were caught by surprise when the German ZEW economic sentiment report was published, as the reading was 63.3, missing the 75 forecast. It was a big drop off from the 79.8 posted in June. The latest services and manufacturing reports from Germany were very impressive but the sharp fall in the economic sentiment survey could be as a result of rising Covid-19 cases, the delta variant is provoking fears. It is worth noting that Germany’s DAX set a record high in the middle of last month, but the market has failed to retest the level, this could be a sign investment confidence has faded.

US markets initially got off to solid start as the S&P 500 and the NASDAQ 100 registered new all-time highs, but they have since turned lower. The ISM non-manufacturing PMI update for June slipped to 60.1, the lowest reading since February, which is a little worrying as it suggests that activity is cooling. The finer details of the update showed the employment component of the sector fell into contraction territory – which points to an overheating of the industry.

WTI and Brent crude saw a lot of volatility as OPEC+ abandoned output talks as the group could not reach an agreement. Saudi Arabia and Russia are some of the major players in the group, and they expressed desire to increase output by 400,000 barrels per day from August, but this proposition was opposed by the UAE. Disagreements among members is common among OPEC+ but it is unusual for a meeting to be abandoned because a compromise could not be reached. Earlier today, oil jumped to a high last seen in 2018 but it has since turned lower.

In late June, gold dropped to its lowest mark in over two months but since then it has been driving higher. Today it hit its highest level in almost three weeks. For most of the session, the dollar has either been flat or in the red and that helped gold but the commodity is off the session highs as the greenback has rebounded. Other metals like platinum, silver, and palladium are showing gains too. The fact that industrial metals are rising suggests that traders are banking on a global recovery.

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