Good data on the US labor market supported the stock market for the week - 21.5.2021

On Thursday, the US dollar index again dropped below 90 points, but there was no particular collapse. Now it is slightly adjusted upward. Investors believe that the first Fed rate hike will take place only in 2023, despite high inflation in the United States. The U.S. 10-Year Treasury Bond yield fell from 1.68% to 1.62%. It is possible that yesterday's unexpected recovery of the cryptocurrency market had a negative impact on the dollar rate. Bitcoin quotes soared nearly 40% from Wednesday's low. Like the US dollar, cryptocurrencies can be used to make payments and trade. Theoretically, at some stage of development, their competition is possible. Today, positive macroeconomic data on the increase in retail sales in April were published in Australia and Britain. In Switzerland, industrial production increased markedly (+ 4.8%) in the Q1. This information may support the Australian dollar, British pound and Swiss franc. The Central Bank of South Africa kept the rate (3.5%) despite the rise in inflation in April to 4.4% year-on-year and the increase in the number of patients with COVID-19 in the country. This can negatively affect the exchange rate of the South African rand.

On Wednesday, the US stock indices rose markedly. This was facilitated by good data on the US labor market for the week. The number of applications for unemployment benefits (Initial Jobless Claims) turned out to be the lowest since the beginning of the coronavirus epidemic and amounted to 444 thousand. This is better than the forecast of 450 thousand. The reduction in the number of unemployed has been observed in the United States for the third week in a row. The American index of economic activity CB Leading Index rose by 1.65 in April and also exceeded the forecast (+ 1.4%). An additional positive for the stock market was the belief of investors that the Fed will not raise rates over the next few years, but at the same time will keep monetary stimulation of the American economy and business. Today, the US will publish the indicators of business activity for May, including the most important - Markit Manufacturing PMI. In addition, data on sales in the secondary housing market for April (Existing Home Sales) will be published too. The forecast is neutral. Note that this morning both EU and Britain already released their Markit Manufacturing PMI indicators. They turned out to be better than forecasted, but so far this has not caused a strong growth in the European stock indices.

World oil prices dropped yesterday thanks to a statement by Iranian President Hassan Rouhani on the success of negotiations with the United States to lift anti-Iranian sanctions. Iran is currently producing 2.4 million barrels per day (bbl/d). The lifting of sanctions could allow him to increase oil production by another 1-1.6 million bbl/d. If this volume goes to the world market, then it may have a negative impact on quotes. OPEC predicts a recovery in global oil consumption in the Q4 of 2021 to 99.74 million bbl/d. This is close to the pre-2019 level of 99.98 million bbl/d. Accordingly, the continuation of the COVID-19 epidemic in any countries of the world, such as India, is another negative factor for oil prices. However, the investment bank JPMorgan believes that the global vaccination is likely to be successful and by the end of the year the price of Brent could reach $ 74 per barrel. If global demand soars to 103.6 million bbl/d, then Brent can rise to $100 per barrel. The drop in oil prices has stopped this morning.