NEWS
July 2021 on the markets
In July strong corporate earnings and a continued economic recovery were overshadowed by concerns over Covid-19 Delta cases, calling into question if the economic growth momentum will be sustained. Even so, data continues to show the US economy as healthy. The FED acknowledged that the economy was making progress but that tapering (i.e. slowing the pace of asset purchases) would require additional improvements. Also inflation remains a risk but the FED maintained the view that this would be transitory. Earnings for Q2 were the main factor and the proportion of US companies beating earnings estimates for Q2 was far ahead of the five-year average. US stock indices closed July modestly in green with the S&P500, Dow Jones and Nasdaq Composite adding 0,60%, 1,26% and 1,16% respectively. The dollar was unchanged and closed at 1,1870 against the Euro.
Meanwhile in Europe Eurozone business activity grew at the fastest pace since 2000. The flash composite purchasing managers’ index reached 60,6, compared to 59,5 in June. Eurostat data showed eurozone GDP grew by 2,2% in Q2, after a 0,3% decline in Q1, while annual inflation ticked up to 2,2% in July versus 1,9% in June. The European Central Bank also tweaked its inflation target to 2% from below but close to 2%. Also European indices closed the month mostly in green. The Eurostoxx 50 gained 0,62%, the German DAX was practically unchanged with a 0,09% gain and the French CAC40 gained 1,61%. The Slovenian SBITOP index outperformed other European indices once again with a 3,70% gain.
The British FTSE on the other hand was slightly negative with a 0,07% drop while the Pound Sterling gained 0,41% against the Euro to 0,8536.
Asia and particularly China strongly underperformed the European and US markets after a crackdown by Chinese authorities on technology and education companies prompted a sharp sell-off. This increased concerns that regulatory investigations, which have previously impacted the internet sector, could intensify and be widened to other sectors also. The Japanese Nikkei index lost 5,24% and Hong Kong Hang Seng Index lost 9,94% as a result of the sell-off in the final week of July.
Commodities were mixed in June with oil adding 0,65% to 73,95 dollars per barrel. Gold gained 2,57% to 1817,20 dollars per ounce and silver dropped by 2,47%.
Rudy Marchant
Fund manager Primorski skladi d.o.o. Koper