Weekly Market Commentary | 12 September 2021

Thought Of The Week

U.S Jobless Claims, ECB Meeting, Flat Markets

Initial unemployment claims, a proxy for layoffs, moved lower to 310,000 from 345,000 the prior week as the labour market continues toward a full recovery. Claims have trended lower since mid-July, a sign that employers are holding on to workers despite a rise in the Delta variant cases and weaker-than-expected August job report released last Friday. 235,000 jobs were added last month, falling far short of economists’ estimates for 720,000 with gains coming from leisure and hospitality while retailers cut jobs. With the aid programs ending on 6 September and people returning to workforce, it is better to grasp the real situation of the job market in November (Oct NFP) and December (Nov NFP).

Meanwhile, ECB President Christine Lagarde said that it would conduct bond purchases under its emergency program at a “moderately lower pace” over the next three months but added that did not herald a winding down in stimulus with the delta strain still posing risks. Investors took the ECB’s move in stride with European stocks making modest gains after the monetary policy decision. The eurozone economy has expanded strongly in recent months, driven by higher household spending as social restrictions aimed at containing the virus were rolled back.

Markets are relatively neutral this week as investors continue to evaluate the spread of the coronavirus and the increasingly adversarial relationship between President Joe Biden and China’s Xi Jinping.

Global Supply Chain Imbalance

Supply chain disruption has been making headlines since the pandemic struck and rising Delta variant cases are adding fresh uncertainty. Although some products have seen reduced supply, global manufacturing output is near an all-time high. On the supply side, blockages caused by the pandemic are forcing businesses to invest in new production facilities while pent up consumer spending on goods instead of services is leading an extraordinary level of goods demand.

U.S consumer spending on durable goods (excluding cars) is about 25% above trend, resulting in a supply-demand imbalance rather than a supply crisis. However, global companies are rushing to spend new plants and machinery. According to Morgan Stanley, global investment will reach 121% of pre-recession levels by end of 2022 which will support long term growth as productivity improves. As savings are used up and people shift back to spending on services, it will be important to distinguish the investments that will benefit from supply chain diversification and automation from those that may not be as productive as it looks.

Chart Of The Week

Important Information and Disclosure

Equity Price Level and Returns: All returns represent the total return for stated period. MSCI ACWI: Global equity index provided by Morgan Stanley Capital International (MSCI). S&P 500: Market capitalization index of U.S stocks provided by Standard & Poor’s (S&P). Dow Jones: Price-weighted index of U.S stocks provided by S&P. NASDAQ: Market capitalization index of U.S stocks provided by NASDAQ. Stoxx 600: Market capitalization index of stocks listed in European region. MSCI Asia Ex Japan: Asia excluding Japan equity index provided by MSCI. MSCI EM: Emerging markets equity index provided by MSCI. SSE: Capitalization weighted index of all A-shares and B-shares listed on Shanghai Stock Exchange. STI: Market capitalization index of stocks listed on Singapore Exchange. SREITLSP: Market capitalization index of the most liquid real estate investment trusts in Singapore.

Fixed Income Yield and Returns: All returns represent total return for stated period. Global Aggregate: Global investment grade debt from both developed and emerging markets issuers. U.S. Aggregate, U.S Corporate, High Yield provided by Bloomberg Barclays Indices, ICE Data Services & WSJ. SBIF: ABF Singapore bond index fund provided by Nikko AM.

Key Interest Rates: 2-Year U.S Treasuries, 10 Year Treasuries, Bloomberg. 1-month, 3-month SIBOR: Singapore Interbank Offered Rates provided by Association of Banks in Singapore (ABS). Oil (WTI): Global oil benchmark, Bloomberg. Gold: Gold Spot USD/Oz, Bloomberg. DXY Index: U.S. Dollar Index, Bloomberg. VIX: Expectation of volatility based on S&P index options provided by Chicago Board Options Exchange (CBOE).

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