Peaking Covid cases in China’s latest outbreak helps markets rebound following last week’s selloff
Equity markets and commodities recovered from last week’s selloff, as the current outbreak of Covid19 in China peaked, with the number of transmitted cased having declined for eleven consecutive days across the country. Momentum waned towards the end of the week, as investors awaited speeches from central bankers, including Federal Reserve (Fed) chairman Jay Powell, as to the likely next move in monetary policy, at the annual Jackson Hole Economic Symposium.
As of 12pm London time on Friday, US equities gained 0.6% over the week, whilst the US technology sector rose 1.6%. European and UK equities climbed 0.3% and 0.6% respectively, whilst Japanese stocks, which had sold off sharply last week, recovered by 2.6%. The Australian market rose by 0.4% and Emerging Markets were up 3.7%, supported by a weaker US dollar and rallying commodity prices.
Government bond yields rise ahead of Jackson Hole Central Banker Symposium speeches
The yield on government bonds rose ahead of the Jackson Hole meeting, with the 10-year yield on US Treasuries, which moves inversely to prices, rising to 1.34%. Whilst German bunds and UK gilts also sold off, with their respective yields rising to -0.41% and 0.60%. However, many commentators have voiced opinions this week that it is likely too early for the Fed to announce any tapering in their monetary policy, whilst the Delta variant of Covid19 hampers efforts for economies to return to some sort of ‘normal’.
Commodities boosted by weaker US dollar and hopes of a peak in China’s Covid cases
Crude oil recovered strongly, with Brent crude rising by 10.5%, now trading at $72.1 a barrel. Industrial metal prices also increased, with the Copper price rising 3.1%, trading at $9,315 and Iron ore up 13.5%. Whilst precious metals were relatively more range bound this week, with gold rising by 0.6%, now priced at $1,795 an ounce.