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State restrictions in China put a strain on the financial markets

In light of the ongoing season of corporate news coverage in the US, major stock indices closed trading at record highs on Friday, with the Dow Jones Industrial Average breaking the 35,000 mark for the first time. According to the results for the week, the Dow Jones was up 1.1%, the S&P 500 was up 2% and the Nasdaq was up 2.8%. The coming week is expected to be more intense with the Fed meeting and many key economic statistics. Most analysts, however, expect the Fed to deliver a clearer picture of its plans to reduce its quantitative easing (QE) program at its annual Jackson Hole conference in late August. Also, financial reports from a number of technology giants will be released in the coming week, including Tesla Inc., Apple Inc., Alphabet Inc., Microsoft Corp. and Amazon Inc.

The stock indices of the euro zone closed on Friday in the green zone. The overall Stoxx Europe 600 index rose by 1.1%, the British FTSE 100 by 0.9% and the German DAX 30 by 1.0%. Friday’s business activity (PMI) data showed a positive trend and an acceleration in the pace of recovery in the EU. However, the new wave of the coronavirus pandemic could pose a major challenge to maintain the current pace of recovery. More and more people in the UK are being forced to self-isolate due to government regulations, but with increasing scarcity in supermarkets, grocery retailers are not being quarantined for ten days. The European airline Ryanair has raised its annual traffic forecast in view of strong bookings in the summer.

The 10-year government bond yield gained 2.2 basis points on Friday but remained 1.4 basis points lower at the end of the week. Government bond yields and the price of gold are moving in opposite directions.

The situation on the oil market remains unchanged. The global surge in COVID-19 cases is worsening the outlook for fuel demand. But thanks to the rising demand for fuel during the summer, oil prices remain in the $ 70 per barrel range.

Asian stock indices fall as fears of stricter regulation by Chinese authorities drove many Chinese stocks down. China tightens control of hidden local government debts. China’s blue-chip index, the CSI 300, fell 2.4% to its lowest level in 10 weeks as the education, real estate and technology sectors worried about tighter government regulations. A decline in Chinese companies can also be observed on the US stock market. However, many analysts are confident that delisting Chinese companies is technically impossible, so there is nothing to worry about. Relations between the US and China remain strained as talks between US Secretary of State Wendy Sherman and Chinese Foreign Minister Wang Yi have reached an impasse. Meanwhile, curfews are expected to be imposed in Thailand and Vietnam due to the growing number of Delta tribe cases.

Main market rates:

  • S&P 500 (F) 4,411.79 +44.31 (+1.01%)
  • Dow Jones 35,061.55 + 238.20 (+ 0.68%)
  • DAX 15,669.29 +154.75 (+1.00%)
  • FTSE 100 7,027.58 +59.28 (+ 0.85%)
  • USD index 92.91 +0.08 (+ 0.09%)

Important events for today:

  • Germany ifo business climate index (male / female) at 11:00 (GMT + 3);
  • US New Home Sales (m / m) at 17:00 (GMT + 3).

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