Chart of the Day

Risk-off sentiment swept through markets yesterday, with most equity indices declining and oil prices falling sharply by over 7%. That took the S&P 500 energy sector down by 3.6% and means it has now fallen by over 10% in the past week. Other cyclical sectors have also performed poorly, as the drop in yields weighs on financials and growth concerns weigh on materials and industrials. Markets seem to be taking their queue from Covid fears, with the Delta variant causing cases to surge in the UK, despite the high vaccination rate and suggesting it is only a matter of time before similar situations arise in other countries.

Macro

In the US, NAHB homebuilder confidence decreased to 80.0 in July. At that level, it suggests housing starts could decline (data out today).

Russian GDP growth is rebounding, but its mostly only because of base effects so far.

Markets

After a weak day yesterday, WTI is down by 9.8% in the past month, and gasoline prices are down by 3.9%.

Moves in stock markets yesterday ranged from a fall of 3.3% for the Italian MIB to a fall of 0.8% for the Australian ASX.

The UK’s FTSE has performed especially badly, losing ground against the S&P 500 in recent weeks.

The main emerging market indices have all lost ground against the S&P 500 in the past month, but China’s index as well as India’s have done relatively well the past couple of days.

Copper and iron have held up relatively well.

But the 10-year yield suggests copper could soon break down too.

The real 10-year yield continues to fall.

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