Inflation worries weigh on tech stocks
14 May 2021Despite persistent reassurances from the US Federal Reserve (Fed) on its policy accommodation, the sharp increase in inflation is causing markets to worry about the Fed raising interest rates. The tech-heavy NASDAQ Composite Index has felt the weight of these concerns more this month and is down 5.4% (month to date as of 12 May). The S&P 500 Index is down around 1.4% over the same period.
Broad commodities and industrial metals dominate flows
07 May 2021Flows into global exchange-traded products this year have been dominated by broad commodities and industrial metals. According to Bloomberg data, global broad-based commodity flows have exceeded United States Dollar (USD) 7.7bn this year – a profound increase compared to last year while industrial metal flows are approaching USD 1.1bn with copper among the top assets in the category.
Earnings drive sentiment in the S&P 500
07 May 2021US equities have been invigorated by encouraging first-quarter earnings. According to FactSet, analysts are foreseeing the second-highest increase in S&P 500 Index earnings per share estimates for Q2 2021 since 2002. The S&P 500 Index is up almost 11% year to date as of 05 May, with energy still being the top-performing sector.
Inflation expectations continue to rise as realised inflation ticks up
07 May 2021The annual inflation rate in the US jumped to 2.6% in March – up from 1.7% in February (source Trading Economics). In the meanwhile, inflation expectations have continued to rise. 10-year US breakeven inflation rates have risen from 1.98% at the end of December 2020 to 2.40% at the end of April.
Copper hits new record high
30 Apr 2021Front-month copper futures have hit a new record high as strong cyclical and structural demand continues to support the industrial metal. With nearly four times the amount of copper needed in an electric vehicle compared to an internal combustion engine vehicle, copper plays a crucial role in the ongoing energy transition.
Positive risk sentiment causes volatility to drop
30 Apr 2021The Chicago Board Options Exchange (CBOE) Volatility Index often termed the ‘fear index’, has experienced several smaller aftershocks after being jolted in March last year. It has, however, generally trended downwards and is now approaching its average level over 2019, which was around 15.
Technology stocks bounce back to deliver strong performance in April
30 Apr 2021Tech heavy sectors, including consumer discretionary, communication services, and information technology, are the top-performing sectors in the S&P 500 Index in April (as of 28 April). The tech-centric NASDAQ Composite Index has also bounced back in the month following weakness in the sector over the month of February.
Nickel's price dip appears inconsistent with long term prospects
23 Apr 2021Nickel prices retreated sharply at the start of March and remain considerably below their recent peak in February. Nickel prices fell when Tsingshan – a Chinese metal company – announced that it would be able to supply the market with nickel matte from nickel pig iron (a low-quality ferronickel) that will be able to meet battery-grade standard. This possibility eases some of the tightness that has propelled nickel prices in the last half-year. However, we still think that class I nickel supply (suitable for battery grade chemistry) remains very tight over the coming years.
Palladium's supply deficit could widen in 2021
23 Apr 2021In contrast to other precious metals, palladium has been on a winning streak since the start of March. Palladium has been in a supply deficit for at least six years running. Demand for the metal in gasoline autocatalysts outstrips its supply. In 2021, MMC Norilsk Nickel has experienced an accident at a concentrator and flooding at another mine. This company accounts for 41% of global production. They expect a 3 to 4 months period to get supply back to normal. Overall, their guidance is for 20% lower platinum group metal (PGM) production this year. That should result in roughly 570k oz of palladium taken off the market in 2021 (which is equivalent to 6% of the average palladium demand over 2015 to 2020). For a market that was already tight this will deepen the supply deficit. A combination of tight supply along with a rebound in auto sales this year bodes well for palladium.
US equities weighing positive macro backdrop with Covid concerns
23 Apr 2021Sentiment in US equities has largely been positive in April, with both S&P500 Index and NASDAQ Composite Index making gains. The pullback in US Treasury yields has eased some of the pressure from equities faced in the first quarter of the year. Improving economic data and talk of further stimulus still from policymakers is helping lift risk assets. Rising Covid cases in many parts of the world remain a concern. As of 21 April, information technology is in the lead among S&P 500 Index sectors this month.