William John Market Report 29-07-21
William John analyses the Western capital markets and the most recent edition of the Federal Open Market Committee meeting this week
William John, bonds, equities, capital markets, monetary policy, federal reserve
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William John Market Report 29-07-21

William John Market Report 29-07-21

Category: Reports

This week, Western capital markets remained relatively untouched. The major Western equity indices: the S&P 500, FTSE 100 and STOXX 600 have all steadily climbed over the past week or so:

Source: William John Analytics, Yahoo Finance

Whilst in the bond markets, the yield on the 10-year Treasury bond, which moves inversely to its price and sets the benchmark for commercial interest rates in the United States and interest rates on financial instruments worldwide, has creeped downwards by 0.03 percentage points from 26/07 to 28/07. 

Steady gains in both markets highlight a slight increase in investor confidence in Western economies in a period of uncertainty for the pandemic era. The delta variant, vaccine efficacy and confidence, inflation and many other COVID-19 related issues discussed in prior editions of these reports underpin market directions this summer. 

On these issues, the most recent Federal Open Market Committee (FOMC) meeting finished on Wednesday. At the two-day meeting, the Committee agreed to hold its interest rate close to zero and would not taper its asset purchase programme until re-evaluating the U.S. economy at the end of the year. The key takeaway from the meeting, however, was not an adjustment of monetary policy stance that usually investors keep their eyes peeled for. It was the admission from Federal Reserve Chairman Jay Powell that economic conditions have “strengthened” on the back of a strong vaccination programme and appropriate monetary policy stance that has reinforced the stabilisation of capital markets so unfamiliar just 12-18 months ago.

Furthermore, the Dollar Index (which measures the strength of the dollar against a basket of other major trading partners’ currencies) rose 0.3 per cent higher on 28/07 relative to 27/07. It is nearing its strongest level since early April. 

Having observed the capital markets over the past few weeks, depending on how economic reopening’s progress in Western economies with the U.K. pioneering the effort as a “test case”, the Western markets appear to be gaining momentum and confidence towards establishing a pre-pandemic investor state of mind once more.

Any opinions expressed in these documents are those of William John and are provided for information only. E&OE.