It was a good week for financial markets with most equity bourses climbing higher to end the week in positive territory. While the pandemic has continued to wreak havoc on global economics, the better than expected economic data flowing out of the US boosted sentiment. Gold stole the limelight when it breached USD2,000 per ounce and stayed above that level for the rest of the week.

 

In the News

  • Without a vaccine, pandemic cases continued to spread rapidly across the globe. There are now close to 20 million infection cases, and more than 729,000 deaths. The highest number of infected cases remain in the US, with more than 5.15 million cases and 165,000 fatalities. 
  • Fears of a resurgence were momentarily cast aside when investors’ sentiment improved after better than expected economic data were reported. The US’ job market seem to be on a steady path to recovery, whilst quarterly earnings have not been as bad as anticipated. Manufacturing data also beat analysts expectations, given the equity market a boost.
  • The US’ S&P 500 Index enjoyed its 5th straight week of positive gains, whilst the Nasdaq leaped ahead on the back of stronger earnings being reported by tech giants. The NYSE FANG+ Index spiked 1.35% with the support of strong price performance from Apple Inc, and Facebook Inc which both rose 3.47%, and 4.52% respectively in local currency terms. The stronger performance of these tech giants led the 0830EA to rise 7.04% over the week.
  • Debate on the unemployment benefits came to a deadlock when both parties failed to reach an agreement, leaving millions of unemployed Americans without benefits after the earlier assistance of USD600 a week ended at the end of July. The President was quick to tweet his instruction to continue assembling an executive order for to country’s payroll tax cut, eviction protection, unemployment extensions, and student loan repayment options.
  • Tensions between the US and China continue to loom over global financial markets as the US put in place more restrictions on China based companies. China’s social media networks, such as TikTok and WeChat faced a barrage of restrictions imposed on them by the Trump administration. Fearing that it might face similar restrictions, video-conferencing company, Zoom, said that it would halt its direct sales to China, and only provide its services through 3rd party partners.
  • Casting aside the tensions, China’s major equity indices were relatively resilient, supported by the confidence that its economy is already on track for a recovery as exports returned to pre-pandemic levels. The China bond market also saw record inflows worth USD 24 billion in July, close to double the value from June.
  • The S&P New China Ex A Share Index outpaced its peers with a 0.86% gains as the Shanghai Composite Index gained 0.19%, whilst the CSI300 Index slid 0.85% in MYR terms over the period. The 0829EA has now recorded a YTD gains of 20.95% in MYR terms. 
  • The domestic KLCI continue to see pockets of opportunities as share price of glove-centric stocks, and Gold jewellers spike. The strong momentum of glove-related stocks have only heightened as fears of a resurgence increased. While the KLCI dipped 1.6%, the Dorsey Wright Technical Leaders Malaysia Index spiked 1.09% higher, contributing to the stronger performance of the 0836EA.
  • Despite the upbeat data, little has changed surrounding the pandemic fears. Whilst improvements have been seen, economies are expected to see much slower pace in growth at a much slower pace this year.
  • This environment has made it conducive for Gold price, which reached a record high last week after breaching the USD2,000 per ounce mark. The LBMA Gold Price Index rose 3.12% over the week, contributing to the 0828EA’s performance of 37.58% on a YTD in MYR terms. 

 

On the Economic Data Front

  • US posts encouraging economic data to boost sentiment:
    • ISM Manufacturing Index jumps to 54.2 in July, from 52.6 in June – beating Wall Street’s estimate of 54, and the 3rd straight month that the Index has risen.
    • Factory orders rose more than expected – climbing 6.2% in June, the 2nd monthly increase.
    • ISM factory activity surprised on the upside when it reached its highest level since early 2019.
    • 1.2 million jobless claims were filed last week
    • 1.76 million jobs were added in the month of July – pulling down the unemployment rate from 11.1% to 10.2%.
  • Stronger activity seen in the EU:
    • Business activity strengthened to its fastest growth rate in 2 years when the manufacturing and service output index leaped to 54.9 in July.
    • Industrial production in Germany also showed signs of recovery, rising 8.9% MoM in June, from the 7.4% reading in May – a far cry from its production from a year ago.  Industrial production is down 11.5% YoY.
    • ECB notes that the level of economic uncertainty remains high, signalling the possibility of expanding the Pandemic Emergency Purchase Program in September.
    • The BoE had also released its forecast – anticipating the UK economy to contract by 9.5% this year. This is an improvement from the -14% it has predicted in May. The UK had maintained its interest rates unchanged at 0.1%, and continues to assert its bond-buying program at GBP745 billion.
  • China’s economic data remains encouraging:
    • July’s manufacturing PMI climbed to near decade highs with a reading of 52.8 – rising from the 51.2 in June. 
    • Exports also improved, leaping to 7.2% in July from a 0.5% gain in June - benefitting as more ports open to accept delivery of goods.

 

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A look at the performance of the TradePlus ETFs, and major global indices

 

 

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