The recovery story is still doing the rounds even though it looks like England will not be restriction-free for a few more weeks. In early trading, the FTSE 100 hit a 16-month high and Germany’s DAX 30 eked out a fresh record-high but the benchmarks are off the highs of the session. When the UK government was mapping out its plans to end the lockdown, it hoped to remove the final restrictions hanging over England on 21 June, but it now looks as if that deadline will be pushed back by four weeks. Although, it is not great news from an economic recovery point of view, it is not that bad at the same. New variants of the coronavirus, combined with rising case numbers prompted chatter in recent weeks that England might have to postpone it plans to ditch the last batch of restrictions. Airlines, transport and hospitality stocks are suffering as a result of the news regarding restrictions, but the declines are modest. The UK’s vaccination scheme is one of the best in the world, and most sectors are operating fully so overall the mood in still reasonably positive.
The bullish sentiment that circulated around Wall Street last week has faded a little as the major indices are in the red. The S&P 500 set a record close on Friday but it seems that profit taking has set in ahead of the Fed’s meeting on Wednesday, the US central bank are predicted to their keep policy on hold but it will be their commentary in relation to inflation that will be in focus. Last week, it was confirmed that CPI is 5%, the highest level since 2008, but in recent weeks, central bankers have been stating that any inflationary pressures will only be short-lived. Dealers will be wondering if the bank will stick to the same rhetoric or will they express concern for the high inflation level.
One of the reasons behind the surge in CPI is that commodity prices have undergone a major rally in 2021. Today, oil hit a new two year high as the recovery story is still helping the energy. At the end of last week, the IEA announced that they expect demand to return to pre-pandemic levels by late 2022, which would be sooner than previously predicted. Gold experienced a lot of volatility today, it fell to its lowest level since mid-May but has since recovered the bulk of the losses. The metal was dragged around by the US dollar as the inverse relationship between the two markets remains strong.