• CAPITAL MARKETS OVERVIEW:
European stock markets closed at a new high on Monday, led by autos, banks, and construction companies. Investors were dismissive of weaker-than-expected economic data from Germany and China as they waited for the ECB's policy meeting on Thursday. At the same time, German Chancellor Angela Merkel warned that the global semiconductor shortage might last at least until mid-2022, which makes Germany’s economic recovery more difficult. However, US Treasury Secretary Janet Yellen told Bloomberg News Said that President Biden’s $4 trillion spending plan would be positive for the United States, even if it will trigger a rise in interest rates. The finance ministers of the Group of Seven (G7) nations reached an agreement on Saturday on a landmark agreement to reform the global tax system. Traders are currently waiting for the G7 leader's summit and the US CPI report later this week. The CAC40 index closed at 6544 points on Monday, increasing 28 points, or 0.4%, a record high in the past 21 years. Supported by the rise in the automotive industry and other cyclical industries, investors continued to bet on the economic recovery driven by the stimulus plan. However, before the ECB monetary policy meeting on Thursday, trading volume was still low. On the corporate side, Air Liquide has signed a long-term oxygen supply agreement with steel manufacturer Severstal. At the same time, after UBS reiterated its "buy" rating on Michelin, Michelin's stock price rose 1.4%. Last weekend, the Group of Seven (G7) reached an agreement on a 15% minimum tax rate for global companies. The UK's FTSE 100 Index rose slightly to 7077 on Monday. Following the generally positive sentiment in Europe, investors digested the optimistic UK housing price data, the weaker-than-expected Chinese export data, and the US Treasury Secretary Janet Yellen's hawk on the reduction Pai speech and an agreement on a 15% minimum tax rate for global companies In terms of economic data, the latest housing price index released by the mortgage lender Halifax confirmed that supported by the government stamp duty holiday, the UK real estate market remained strong in May; while the export growth of the world’s second-largest economy slowed. The amplitude exceeded expectations. In addition, U.S. Treasury Secretary Janet Yellen told Bloomberg that President Biden’s $4 trillion spending plan would benefit the United States, even if it would trigger a rise in interest rates. Investors are currently waiting for the Group of Seven (G7) leaders' summit to start on Friday and the US CPI report scheduled to be released on Thursday. The Dow Jones Index rose slightly on Monday. The S&P 500 Index and the Nasdaq Index were near the flat line after approaching record levels last week. Investors are waiting for new CPI data to digest Treasury Secretary Yellen’s comments and the world’s lowest corporate tax rate. The annual inflation rate in the United States is expected to jump to 4.7%, which will be the highest level since September 2008, further exacerbating concerns that the Federal Reserve will soon reduce its stimulus plan. The Shanghai Composite Index rose 7.7 points or 0.21% on Monday to close at 3,59.54 points, close to a 4-month high. It fell 0.27% last week. After traders digested local trade data, exports increased by 27.9%, and imports increased by 51.1%. Traders also welcomed the agreement reached by the Group of Seven countries to reach a minimum corporate tax rate of at least 15% while awaiting further approval from the entire G20. According to Bloomberg News, U.S. Treasury Secretary Yellen stated in the United States that President Biden’s $4 trillion spending plan would be beneficial to the United States, even if it will lead to higher inflation and higher interest rates. Regarding COVID-19, China reported 30 new cases of the mainland virus on Sunday, up from 24 cases the day before. Of the new cases, 23 were imported. At the same time, the Hang Seng Index fell 184.64 points, or 0.64%, to a low of 28733.46 points in the past two weeks. The Nikkei 225 index rose 77.72 points or 0.27% on Monday to close at 29019.24 points. It fell 0.7% in the previous week. Investors were optimistic about risk assets. Earlier, the US employment data released on Friday was weaker than expected, eased some economic concerns. The Australian Stock Exchange 200 Index fell 13.30 points or 0.18% to close at 7282.10 on Monday, closing only slightly below the new high reached in early trading. Due to the deterioration of the domestic coronavirus situation and the cooling of market sentiment, the country’s financial crime regulators The investigation has also weakened risk appetite. The Australian Anti-Money Laundering Commission has launched a separate investigation into a small number of companies suspected of violating anti-money laundering laws. Affected by this news, NAB fell 3.24%, Crown Resorts fell 1.42%, and Star Entertainment fell 1.89%. Victoria reported 11 new cases on Monday, the biggest increase in a week in terms of coronavirus.
• REVIEWING ECONOMIC DATA:
Looking at the last economic data:
- EUR: The Italian stock market rose 254 points. The upward momentum came from United Credit (3.47%), Italy Post (2.20%), and Pirelli (1.96%). The biggest losses are STMicroelectronics (-1.37%), Saipem (-1.06%) and Mediobanca (-0.05%).
- EUR: In April 2021, German factory orders unexpectedly fell by 0.2% month-on-month. The previous increase in March was 3.9%, while the market forecast was a 1% increase. Domestic orders fell by 4.3%, and foreign orders increased by 2.7%. Among them, orders from the Eurozone increased by 0.7%, and orders from other countries increased by 3.8%. Orders for intermediate goods fell by 1%, while orders for capital goods (0.2%) and consumer goods (1.4%) increased. Compared with February 2020, new orders increased by 9.9% in the month before restrictions were imposed due to the coronavirus pandemic.
- RUB: In May 2021, consumer prices in Russia rose 6.0% after rising 5.5% last month, faster than market expectations of 5.8%. The latest data is still far higher than the central bank's 4% target, the highest inflation rate since October 2016, mainly driven by food prices (7.4%), non-food prices (6.7%), and service prices (3.3%). From a monthly point of view, the consumer price index rose 0.7%, following the 0.6% increase in April, compared with the expected increase of 0.6%.
- USD: U.S. Treasury Secretary Janet Yellen once again expressed support for President Biden’s $4 trillion spending plan on Monday and said that interest rate hikes would benefit the United States. The yield on the 10-year U.S. Treasury rose slightly to 1.58% on Monday. Last Friday, the benchmark yield fell to a two-week low of 1.56% after the May employment report showed that the US economy added fewer jobs than expected. The CPI data released this week will further reflect price pressures. At the same time, the US Treasury Department will auction $58 billion in 3-year Treasury bonds, $38 billion in 10-year Treasury bonds, and $24 billion in 30-year Treasury bonds this week.
- CNY: China’s foreign exchange reserves increased from US$3.17 trillion in March to US$3.198 billion in April 2021. This is the first increase in four months and is in line with the forecast of US$3.2 trillion. At the same time, gold reserves increased from 110.73 billion U.S. dollars to 119.02 billion U.S. dollars.
- CNY: In May 2021, China's imports increased by 51.1% year-on-year, while the market generally believed that the growth rate was 51.5%. After an increase of 43.1% a month ago due to increased domestic demand and soaring commodity prices.
- CNY: In May 2021, China's exports increased by 27.9% year-on-year, lower than the 32.3% increase in April and lower than the 32.1% generally expected by the market. In the context of improving global demand and rising commodity prices, this is the 11th consecutive month of growth in exports.
- CNY: In the context of improving global demand and rising commodity prices, China’s trade surplus in May 2021 was US$45.53 billion, lower than market expectations of US$50.5 billion, compared with a surplus of US$61.9 billion in the same period last year.
- GBP: In May 2021, the UK's Halifax house price index rose 9.5% from the same period last year, the largest increase in the past seven years, and the market expects house prices to rise by 10%. The government’s stamp duty holiday continues to boost property market activities. Prospective buyers are racing to complete their purchases before the June deadline to enjoy the highest tax cuts, after which the full tax rate will be restored in stages. The current housing price strength also shows that as buyers’ expectations for new and post-pandemic lifestyles change, housing prices will undergo more profound and lasting changes. Last month, except for the Northeast, the year-on-year increase in house prices in all UK regions accelerated. Wales again recorded the strongest growth (11.9%), followed by the Northwest and Yorkshire & the Humber.
- JPY: Japan’s index of leading economic indicators is an indicator that measures economic conditions in the coming months. It is compiled using data such as employment opportunities and consumer confidence. The index rose to 2021 from a downward revision of 102.4 last month. 103.0 in April of the year. This is the highest reading since March 2014 because the US economy is recovering strongly from the coronavirus crisis.
- JPY: Preliminary data show that in April 2021, Japan's economic indicator index for the same period, composed of a series of data such as factory output, employment, and retail sales, rose to 95.5 from a downward revision of 92.9 a month ago. This is the highest reading since November 2019 because, with the accelerated launch of the COVID-19 vaccine, people are hopeful that the pandemic will end.
- AUD: The Australian Performance of Services Index (Australian Performance of Services Index) fell from last month's nearly three-year high of 61.0 to 59.0 in May 2021, indicating a slightly slower expansion of the service industry.
• LOOKING AHEAD:
Today, investors will receive:
- JPY: Average Cash Earnings y/y, Bank Lending y/y, Current Account, Final GDP Price Index y/y, Final GDP q/q, 30-y Bond Auction, and Economy Watchers Sentiment.
- GBP: BRC Retail Sales Monitor y/y and MPC Member Haldane Speaks.
- AUD: NAB Business Confidence.
- EUR: German Industrial Production m/m, French Trade Balance, Italian Retail Sales m/m, ZEW Economic Sentiment, German ZEW Economic Sentiment, Final Employment Change q/q, and Revised GDP q/q.
- USD: NFIB Small Business Index, JOLTS Job Openings, and Trade Balance.
• KEY EQUITY MARKET DRIVERS:
- China's May trade surplus smaller than expected.
- European stock markets closed at a new high on Monday, Gold higher as the US dollar slips to start the week.
- FR40 rises to a 20-year high of 6,538 points.
- The European Union's top 50 rises to an 11-year high of 4102.
- DE30 rose to a record high of 15,706 points.
- IT40 rises to a 12-year high of 25609.
- European stock market futures opened lower on Monday. Investors digested lower-than-expected factory orders in Germany in April and China's trade data in May. In April, the demand for manufactured goods in Germany fell by 0.2%, lower than the market's expected growth rate of 1%. The world's second-largest economy's import and export growth in May was lower than expected. In addition, the finance ministers of the Group of Seven countries reached an agreement on Saturday on a landmark agreement to reform the global tax system, expressing their support for a minimum tax rate of at least 15% for global companies. At present, traders worldwide are waiting for the Group of Seven (G7) leaders' summit to start on Friday and the US CPI report scheduled to be released on Thursday.
- US stock market futures fell slightly on Monday but not far from historic highs, and the trading environment was turbulent. Data show that US factory orders fell 0.6% month-on-month in April, the first decline in a year, and traders were cautious. At the same time, the US economy created 559,000 jobs in May, which was higher than the 278,000 jobs that were raised in April but were lower than market expectations of 65,000 jobs. According to reports, U.S. Treasury Secretary Yellen stated that President Biden’s $4 trillion spending plan would benefit the United States, even if it would lead to higher inflation and higher interest rates. Elsewhere, the Democrats will begin preparing an infrastructure bill on Wednesday to vote in the House of Representatives, regardless of whether they receive Republican support. Finally, attention will turn to Thursday's US consumer price report, where risk is again high. Last week, the Dow and the S&P 500 index rose 0.7% and 0.6%, respectively, marking the second consecutive week of gains, while the Nasdaq index rose 0.5%, marking the third week of gains.
• STOCK MARKET SECTORS:
- High: Health Care, Utilities, Real Estate.
- Low: Technology, Financials, Industrials, Materials.
• TOP CURRENCY MARKET DRIVERS:
- GBP: The pound fell to $1.41 on Monday, and the market is concerned that the UK economy, which is scheduled to reopen on June 21, may be postponed due to a surge in cases of the new coronavirus variant (now called Delta) detected in India for the first time. British Health Secretary Matt Hancock said last weekend that it is too early to say whether restrictions will proceed as planned. In terms of economic data, the latest housing price index released by the mortgage lender Halifax confirmed that the UK real estate market remained strong in May, supported by the government's stamp duty holiday.
EUR: After Germany announced bad economic data, the euro exchange rate against the dollar remained almost unchanged on Monday, at $1.216. Europe's largest economy announced a 0.2% drop in factory orders in April, which was lower than market expectations for a 1% increase. On the political front, German Chancellor Merkel’s party repelled a challenge from the extreme right in the state elections held on Sunday, which is regarded as the last major test for German parties before the national vote in September. Last month, the euro hit a more than a four-month high of US$1.2265, thanks to the general weakening of the US dollar and the hope of a strong recovery in the European economy thanks to the acceleration of vaccination and the gradual reopening of the eurozone economy.
• CHART OF THE DAY:
In the early Asian market on Monday, the US dollar index changed little at 90.102 points. Investors weighed the weaker-than-expected economic data against the prospect of rising interest rates. Data show that the United States added 559,000 jobs in May, higher than the 278,000 after the increase in April, but lower than the market expected 65,000. In addition, factory orders in April fell by 0.6% month-on-month, the first time in 12 months. Last weekend, the Finance Ministers of the Group of Seven (G7) supported a historic US proposal that requires global companies to pay at least 15% of income tax. As a result, the local 10-year interest rate dropped to 1.567%. At the same time, U.S. Treasury Secretary Janet Yellen pointed out that U.S. President Joe Biden should advance his $4 trillion spending plan, even if these plans trigger inflation and higher interest rates that last until next year. Later this week, the Federal Open Market Committee (FOMC) meeting will focus on attention, and the Fed is expected to say that it has not made substantial progress in achieving its goals.• US dollar index (DXY) - D1, Resistance (consolidation) around ~ 90.60 Support (consolidation) around ~ 89.95