Dear Fellow Trader,
I hope you had a great weekend.
In a moment, let’s check in with what’s been going on in the markets… and what’s in store for this week.
First, why not take a moment to book a place at our free stock trading session… click here to register.
You’ll learn more about how we’re beating the Dow Jones with our Momentum Stocks strategy.
And given how markets are moving right now… it’s a great time to be trading stocks with positive momentum.
Let me show you what I mean.
Stock markets bounce back
This coming Wednesday marks the end of H1.
With US stock markets posting record highs and with other markets benefiting from the reflation trade, it’s been an extraordinary first half of the year.
Investors continue to enjoy great returns as companies recover from the effects of the pandemic.
Let’s look at last week’s moves.
Following a poor performance, the previous week, US equities had their best week since February following the infrastructure spending deal announced by the Biden administration.
Forget about the Fed and inflation, all eyes were on this infrastructure spending bill worth $1.2 TRILLION.
The announcement pushed up financial, energy and industrial stocks resulting in record closes across major US indices.
The S&P 500 and the Nasdaq both hit all-time highs on Friday…
And the Dow Jones is homing in on its own record set on 10th May.
That creates news for our Momentum Stocks strategy that focuses on Dow stocks and rides them for bursts of momentum.
NOTE: Check out how we’re trading Dow stocks in our FREE webinar on this stock market trading strategy. Register here.
Review of last week’s key action
FTSE +118 +1.69% DOW +1,143 +3.44% NASDQ +330 +2.35% DAX +167 +1.08% NIKKEI -651 -2.2%
So, US indices made record highs last week with both the Nasdaq and S&P closing at record levels on Friday.
Remember how inflation was all that mattered a couple of weeks ago...
But that been put aside for now as central banks expect this inflationary spike to be transitory.
And so investors bought US stocks like crazy.
Other global indices responded although in more muted fashion.
The spreading Covid Delta variant could well put a dampener on some of the economies where the vaccine roll-out has been slow.
UK shares also had a better following the MPC update on Thursday.
Some speculation built about rate rises early next year.
But this balloon soon burst as the MPC regarded current price pressures as temporary and likely to subside by year end.
Much the same as the Fed, then.
This seems to be the common view amongst central bankers now.
Let us hope they are right.
Sterling slipped on the news – falling against both the Euro and the USD almost immediately following the MPC’s statement, which is what you might expect.
EURUSD +0.72 +0.6% GBPUSD +0.69 +0.5% USDJPY +0.57 +0.52%
The US Dollar slipped on exchanges last week following the Fed’s calm response to the spike in inflation which the bank regards as temporary – for another few months before price rises ease into the year end.
As just mentioned, Sterling lost ground it made earlier in the week following the MPC statement.
Gold +17 +1% UK OIL +2.88 +3.9% US OIL +2.56 +3.6% Bitcoin -3,886 –10.87%
Gold made little headway last week despite the modest fall in the US Dollar.
The precious metal fell sharply the previous week but did not even manage a dead cat bounce.
Perhaps comments from the Fed about the transient nature of the inflation spike left little good news for Gold to focus on. Typically, gold is regarded as a hedge against inflation.
The world’s oil markets continue to surge higher as the world’s markets continue to recover post pandemic. Speculation continues to mount about $100 per barrel as supplies remain tight whilst demand continues to pick up.
Last week’s data from the Energy Information Administration showed another large draw down in stocks – a situation that has been developing since early April.
Bitcoin continues its roller coaster ride, with some big moves last week.
It was down 16% over Monday and Tuesday.
The cause this time was the announcement from China clamping down on Bitcoin mining activities and cryptocurrency trading.
Despite the news, Bitcoin and other Cryptos have recovered some of this lost ground over the weekend.
Cryptos remain one of the most exciting markets for traders and that doesn’t look like changing any time soon.
Data / events for the week ahead
There will be much focus on the end of the week.
We have the first Friday of the new month which means it’s US employment data release – or Non-Farm Payroll as we call it.
Monday
No impactful data today
Tuesday
US Conference Board release of consumer confidence. Another bounce…
Wednesday
China Manufacturing PMI. Holding above 50 but activity slowing.
Eurozone Flash Consumer Price Index (CPI) readings. May’s jump was the first time inflation had exceeded the ECB’s target in 2 years.
Price pressures have continued to build and will do so for the remainder of the year… with the usual caveats about a potential 3rd wave with the Covid delta variant.
The ECB, in common with other central banks, seems happy to accept higher prices and higher wages, in the belief that price pressures will wane with inflation expected to fall back to 1.4% in 2023.
ADP Nonfarm employment change.
Thursday
OPEC. Regular OPEC – JMMC policy meeting. Smugness all round.
US ISM Manufacturing PMI. Still hot…
UK BoE Governor Bailey speaking at Mansion House. Could be interesting for comments on inflation.
Friday
US Non-Farm Payroll. Data over the last two months has been surprisingly weak and well below the consensus.
The question is, will the pace of job creation accelerate in June?
Consensus is for another 700K new jobs. The market seems so resilient and seemed less concerned about the lack of jobs growth in April and May. Perhaps an overly strong report will worry those inflation hawks?
Average hourly earnings starting to tick up? The fed will be keen to see how earnings growth develops which could lead to inflation down the road.
So, that’s about it for the week ahead.
I’ll be back in touch with more news and views on trading the markets…
In the meantime, check out our free stock market trading webinar.
It’s free to attend and there are different times to choose from.
Click here to get your place.
Regards,
Jerry Miller
Managing Director
Trendsignal
