Market Update

After a rocky commencement, markets finished the week on a high note, with most primary indices showing an upward trend.
Early concerns about the Delta variant briefly shook the markets. However, focus soon shifted to the European Central Bank’s (ECB) July assembly. Although the ECB's leader, Christine Largarde, didn't introduce substantial modifications to the monetary stimulus, she emphasized prudence due to the Delta variant potentially affecting the recovery rate. The ECB confirmed that its current monetary stance would persist, aiming to control temporary inflationary factors. This strategic move ensures market expectations are stabilized without the urgency for immediate policy tweaks which could inadvertently escalate inflation pressures. With the ECB's inflation goal set at 2%, and given the current inflation push due to Covid and fiscal policies, Lagarde accentuated inflation's fleeting character. The ECB is poised to retain lenient policies and low rates till the 2% inflation mark is achieved. The market's confidence was further boosted by the revelation of robust PMI data on Friday, which surpassed forecasts at 60.6, indicating economic expansion.
On another note, after China's 0.5% RRR reduction a few weeks prior, there were speculations that the PBOC (People’s Bank of China) might lower the Loan Prime Rates to infuse more funds into the economy. But the PBOC remained prudent, opting to monitor the Delta variant's repercussions and the potential economic boost from the RRR reduction, especially in light of recent positive Chinese economic data.
This week unveiled several critical datasets. Japan's inflation data was released on Tuesday, with the CPI slightly above the standard at 0.2%. The majority of the data, however, was published today. UK's retail sales and consumer sentiment outpaced projections, and while UK's PMI was a tad below expectations, it confirmed economic expansion. Both Europe and the US disclosed their PMI figures, which also suggested significant economic growth as industries reboot post-pandemic restrictions.
As the Tokyo Olympics inaugural event kicks off today, it’s not only the athletes we’re eyeing for standout performances in the upcoming weeks! The next week is lined up with major corporate earnings announcements for Q2 from giants like Alphabet, Astra Zeneca, and Facebook. A pivotal event to watch next week is the US FOMC monthly gathering, with emphasis on the US Federal Reserve's judgments on various economic parameters, including their perspective on inflation.