After moving sideways for most of the last two months, the S&P 500 had its best week since February, reaching a new all-time high, suggesting that the market’s anxiety regarding the Federal Reserve’s hawkish tilt earlier this month has eased. Similarly, the technology-heavy Nasdaq Composite index recorded new all-time highs.
Federal Reserve Chair Jerome Powell’s testimony to Congress on Tuesday, in which he restated policymakers’ belief that the recent spike in inflation will prove temporary, seemed to reassure investors with the U.S. Dollar giving back some ground this week, whilst commodity prices bounced off recent lows.
Weekly economic data may have also helped calm fears about economic overheating and inflation with U.S. data showing a healthy expansion, albeit below market expectations. Initial jobless claims eased to 411,000, lower than the market’s expectation of a drop to 380,000.
President Joe Biden announced on Thursday that a bipartisan group of 10 Senators had agreed on a plan for USD 973 billion in infrastructure spending over the next five years. The bill has however yet to be drafted, with many expecting it to face resistance from both ends of the political spectrum.
U.S. banks are set to announce a deluge of dividend increases and stock buybacks after the industry passed the Fed’s stress test. Lenders can announce their plans for distributing capital after the market closes on June 28. The regulator placed restrictions on dividend payments and share repurchases last year due to Covid-19. Early estimates indicate the six biggest U.S. banks, including JPMorgan Chase, Bank of America Corp. and Citigroup Inc., could return more than $140 billion to shareholders.
The number of Covid-19 cases in the UK rose to more than 16,000, the highest since February, mostly due to infection by the delta variant of the coronavirus. Meanwhile, the Bank of England voted to keep the key interest rate at 0.1% and to maintain the asset purchase program until the end of the year.
Ivermectin, a drug used to treat parasite infections in humans and livestock will be investigated as a possible treatment for Covid-19 in a large U.K. study at the University of Oxford. Its preliminary study has shown that the drug can reduce viral load, the amount of virus in the respiratory tract, and the length of symptoms in those with a mild infection, according to a statement from the university.
Bitcoin fell below $30,000 on Tuesday as China cracks down on crypto currencies. China summoned officials from its biggest banks to a meeting to reiterate a ban on cryptocurrency services. Bitcoin has lost more than 50% of its value from its mid-April high of almost $65,000.
It was a strong week for global equities with major indices posting decent weekly gains. In the U.S., the Dow Jones (+3.44%), S&P 500 (+2.74%) and the Nasdaq (+2.35%) all ended the week stronger. Similarly, in Europe, the Euro Stoxx 50 (+0.91%) and FTSE 100 (+1.69%) posted positive returns, along with China’s Shanghai Composite Index (+2.34%), whilst Japan’s Nikkei 225 (+0.35%) was more muted.
Market Moves of the Week
Two South African brothers have vanished with $3.6 billion of bitcoin in what could be the biggest crypto heist in history. Ameer Cajee and his younger brother, Raees Cajee, founded Africrypt in 2019. The siblings, along with 69,000 bitcoins worth roughly $4 billion (R56 billion) at their April peak, are nowhere to be found. The Financial Services Conduct Authority (FSCA) has reiterated that crypto assets are currently not regulated in terms of any financial sector law in South Africa and consequently the FSCA is not in a position to take any regulatory action.
South African headline inflation increased to 5.2% on a year-on-year basis in May, in line with market expectations. The increase was mainly driven by higher fuel prices. In April year-on-year inflation was recorded at 4.4%.
Residential vacancy levels in Cape Town increased to 28.8% in the second quarter, according to data from TPN. These unprecedented levels pushed up the province’s vacancy rate to 14.4%, the first time this has been in double digits.
The JSE All Share Index ended the week up +0.88%, with the resource sector (+5.09%) leading the market higher compared to the industrial (-1.78%) and financial (+0.66%) sectors that were mixed. By Friday close, the rand was trading at R14.15 to the U.S. Dollar, strengthening against all major developed currencies this week.
Chart of the Week
The number of births in the United States fell by 4% in 2020, with 3.6 million babies born during the year. This is a decrease from about 3.75 million births in 2019 and 3.8 million births in 2018 and marks the largest annual decline in the number of births since 1973. Births had been falling by about 2% a year already, but the 2020 coronavirus pandemic brought a greater decline, as reported by the CDC's National Center for Health Statistics.