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Renewed COVID Concerns and China Cybersecurity Crackdown Weigh On Markets

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Stock markets around the world have gone into retreat overnight after Tokyo announced a new state of emergency running through to August 22nd, blaming increasing COVID cases in the region. The Nikkei fell 0.9% on the news. This also appears to have sparked concerns that a new wave could slow down the reopening recovery. In Europe, the Dax is down 2.2% while the FTSE is down 2.0%. US index futures are under pressure this morning with Dow Futures down over 500 points and all three main contracts diving 1.6%-1.7%.

The impact of this week’s Chinese cybersecurity crackdown, particularly on some of its companies interlisted in the US continues to widen. Overnight the Hang Seng plunged 2.9% while Shanghai lost 0.8%. Recently listed ride sharing company Didi Global, which was at the epicenter of this debacle, is down another 5.7% premarket today after dropping 5.4% yesterday.

Capital appears to be starting to rotate away from risk markets into defensive havens. The VIX volatility index and the Japanese Yen have both started to creep back upward. Meanwhile, gold is up 0.6%. US bond prices have also started to rise with the 10-year treasury note yield falling below 1.30%.

In economic news today, the European Central Bank changed its inflation target from a cap of 2% to an average of 2% allowing overshoots, which brings it closer in line to the practice of other major central banks. US jobless claims were similar to last week but slightly worse than the street had hoped (373K vs street 350K and previous 371K). Tonight inflation numbers are due from China. Tomorrow morning brings Canada’s June employment report. Analyst expectations (jobs street 195K vs previous -68K, unemployment rate street 7.7% vs previous 8.2%) suggest that the street is expecting June reopenings in some provinces to have a positive impact.  

Disclaimer: SIA Wealth Management Inc. (SIAWM) specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIAWM nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.

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At SIA Wealth Management everything we do is based on Relative Strength Analysis. We evaluate the Relative Strength between asset classes giving us insight into money flows on a large scale, and from this select top ranked investments.

Colin Cieszynski, Chief Market Strategist
Market Commentary:

Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

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