Government restrictions in China weigh on financial markets

Against the background of the continuing season of corporate reporting in the United States, major stock indices closed trading at record highs on Friday, with the Dow Jones Industrial Average breaking the 35,000 mark for the first time ever. According to the results of the week, the Dow Jones added 1.1%, the S&P 500 increased by 2%, and the Nasdaq - by 2.8%. The upcoming week is expected to be more intense with the Fed meeting and many important economic statistics. But most analysts expect the Fed to give a clearer picture of its plans to reduce the quantitative easing (QE) program at its annual conference in Jackson Hole in late August. Also, in the coming week, financial reports of a number of technology giants will be published, including Tesla Inc., Apple Inc., Alphabet Inc., Microsoft Corp., and Amazon Inc.

Eurozone stock indices closed in the green zone on Friday. The Stoxx Europe 600 overall index increased by 1.1%, Britain's FTSE 100 added 0.9% and Germany's DAX 30 increased by 1.0%. Friday's data on business activity (PMI) showed a positive trend and an acceleration in the pace of recovery in the EU. However, the new wave of the coronavirus pandemic could be a major challenge to maintain the current pace of recovery. More people in the UK are being forced to self-isolate under government regulations, but due to growing shortages in supermarkets, food retail staff won’t be quarantined for ten days. The European airline Ryanair raised its annual traffic forecast amid strong summer bookings.

The 10-year Treasury bond yield added 2.2 basis points on Friday but remained 1.4 basis points lower at the end of the week. Government bond yields and gold prices are moving in opposite directions.

The situation in the oil market remains the same. The global rise of COVID-19 cases makes the outlook for fuel demand worse. But thanks to an increase in demand for fuel in the summer, oil prices remain within the $70 a barrel range.

Asian stock indices are falling as fears of stricter regulation by Chinese authorities led to the fall of many Chinese stocks. China is tightening control over hidden local authority debt. China's blue-chip index, the CSI 300, decreased by 2.4% to its lowest level in 10 weeks as the education, real estate, and technology sectors are concerned about stricter government regulations. There is also a fall of Chinese companies observed on the US stock market. But many analysts are confident that delisting of Chinese companies is technically impossible, so there is no need to worry about it. Relations between the US and China remain tense as talks between the US Undersecretary of State Wendy Sherman and Chinese Foreign Minister Wang Yi have reached an impasse. Meanwhile, curfews are planned to be imposed in Thailand and Vietnam due to the growing number of Delta strain cases.

Main market quotes:

S&P 500 (F) 4,411.79 +44.31 (+1.01%)

Dow Jones 35,061.55 +238.20 (+0.68%)

DAX 15,669.29 +154.75 (+1.00%)

FTSE 100 7,027.58 +59.28 (+0.85%)

USD Index 92.91 +0.08 (+0.09%)

• – Germany Ifo Business Climate Index (m/m) at 11:00 (GMT+3);
• – US New Home Sales (m/m) at 17:00 (GMT+3).

by JustMarkets, 2021.07.26

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.