Global shares hover near record highs as rising COVID cases and a slew of economic data leaves investors cautious

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  • Global shares remained near record highs despite COVID-19 cases continuing to rise.
  • US inflation, Chinese quarterly economic data and Jerome Powell’s semi-annual testimony to Congress are in focus.
  • Growth in Japan’s machinery sector boosted Asian stocks as it indicated sustained economic recovery.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Global shares were mixed on Monday, with economically sensitive sectors such as energy and banking under pressure, while more defensive parts of the market such as healthcare rose, as as COVID-19 cases linked to the delta variant continued to rise and bring renewed lockdowns.

Key data on US consumer inflation and regional manufacturing activity along with Chinese economic growth could provide a steer on how much the resurgence of COVID-19 is impacting the global recovery.

Federal Reserve Chairman Jerome Powell will also deliver his semi-annual testimony on the state of the economy to Congress this week, while the European Central Bank will revise its current monetary policies, which investors are expecting will provide them with guidance on growth and inflation in the eurozone.

US futures were a mixed bag, as Dow Jones futures dipped by 0.29% and S&P 500 futures were down 0.19%, while Nasdaq futures were up by 0.11% at 04:30 am E.T. on Monday.

“In the US, CPI data tomorrow will tell us whether we did indeed see the peak in inflation in May – our economists think we did, forecasting a slowdown in headline CPI from 5.0% to 4.8% in June, potentially putting a cap on Fed rate expectations for now.” ING analysts said.

The yield on the US Treasury 10-year note was last at 1.333%, down by 2.3 basis points, reflecting a degree of investor demand for so-called safe haven assets.

Rising COVID-19 cases linked to the Delta variant are also weighing on global markets as they signal a potential delay in post-pandemic economic recovery.

“We’re also seeing higher case counts in the UK, US and Europe, which could also add to the uncertainty,” Michael Hewson, chief market analyst at CMC markets said. “The lower vaccination rate in Europe could prove problematic in the days ahead,” he added.

European stocks dipped on Monday. Frankfurt’s DAX was last down 0.14%, while London’s FTSE 100 dipped by 0.56% and the EuroStoxx 50 index of top eurozone stocks was 0.25% lower.

The European Central Bank might announce revisions to its monetary policy at its meeting this week, but will not end its post-pandemic recovery program, ECB President Christine Lagarde said on Bloomberg TV.

Asian markets were boosted by Japanese machinery orders rising for the third consecutive month in May and the country posting higher than expected producer price index readings on Monday. The data releases boosted investor confidence in the economy recovering despite a rise in COVID-19 cases in the region.

Tokyo’s Nikkei 225 rose by 2.25% in response and pulled shares across the region up with it as the Shanghai Composite closed 0.67% higher and Hong Kong’s Hang Seng index rose by 0.65%.

The energy sector broadly declined on Monday. OPEC+ reached no agreement on production and abandoned a planned meeting last week, which has raised concern that the group could splinter and raise output at will. Brent crude futures were last down by 1.19%, trading for $74.65 per barrel, while WTI crude fell 1.17% to $73.69 a barrel. Natural gas was last trading 1.06% lower, while heating oil declined by 1.35%.

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How to brace your portfolio for a worst-case scenario in the Suez Canal, according to JPMorgan’s chief global markets strategist

Suez canal ever given
The Ever Given, trapped in the Suez Canal, Egypt, as of Thursday March 25 2021.

  • The massive cargo ship blocking the Suez Canal will send the price of oil skyrocketing, JPMorgan said in a note published Thursday.
  • If not resolved soon, investors can expect shipping rates to soar and energy commodities to further increase.
  • All these risks, however, can be hedged by buying oil, the investment bank said.
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The massive cargo ship blocking the Suez Canal and obstructing one of the world’s busiest waterways will send the prices of oil skyrocketing, JPMorgan said in a note published Thursday.

JPMorgan’s chief global strategist Marko Kolanovic said if this situation is not resolved soon, investors and consumers can expect shipping rates to soar, energy commodities to further increase, and global inflation to continue to rise

All these risks, however, can be hedged by buying oil and associated equities such as energy and shipping, Kolanovic said. The strategist highlighted his long-term positive view on oil and energy stocks and his opinion that a supercycle in energy commodities may be under way.

The vessel, called Ever Given, a nearly 200-foot-wide and 1,300-foot-long cargo ship that is taller than the Eiffel Tower, has been horizontally wedged in the waterway for more than two days, despite ongoing efforts to dislodge it. It was on its way to the port of Rotterdam in the Netherlands from China.

Oil prices on Wednesday rose after news of the cargo ship sparked concerns of fuel shortage. West Texas Intermediate crude futures and Brent crude futures surged to their highest since November. The Suez Canal, the second-biggest shipping channel in the world, is a key shipping route for crude and refined products, connecting Europe to Asia.

The incident has captured the news cycle and points to the fragility of the infrastructure that supports global trade.

“Around 10% of global trade shipments pass through the Suez Canal on an annual basis, including crude and refined oil and liquefied natural gas,” Phillip Braun, professor of Finance at Northwestern University, wrote in a note. “This adds one more issue to the global shipping sector on top of the current pandemic.”

Oil analytics firm Vortexa in a tweet on Thursday said: “If flows remain disrupted for more than a few days, some European refiners could run short, particularly of sour crude feedstocks and tighten an otherwise weak physical European market.”

With the blockage, hundreds of cargo ships are now unable to pass through the canal. Many are forced to divert their routes or wait it out, exacerbating the shortages and shipping delays that have already compounded since the pandemic began last year. Companies since then have struggled to keep up with consumers’ demands as Americans locked down at home order goods from Asia.

Major brands such as Nike, Honda, and Samsung at the height of the pandemic have already warned their customers of dwindling supplies, with some halting production of certain products altogether.

In February, oil and natural gas prices have also climbed as the arctic blast that unexpectedly swept through Texas, leaving thousands without power, threw the energy markets in deep turmoil.

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