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Daily Market Commentary 3rd May 2021

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US Equity markets turned negative, to close out the week, despite blowout corporate earnings. US Personal Income exploded by an increase of 21%, while spending only increased 4.2%. The massive fiscal and monetary stimulus is having the desired impact, putting money in peoples pockets, but still perhaps the consumer is cautious? There are massive threats on the horizon, in the form of inflationary pressures and deficit and debt.

The EU dropped into a ‘Double Dip’ recession, with news confirming Q1 GDP contracted 0.6%, hardly surprising considering the rolling lock-downs imposed through many of the participating countries. The total lock-downs have been devastating to the economies and societies and the consequences will be felt for a very long time. The EUR fell back to 1.2020, while the GBP dropped to 1.3810, exaggerated by a resurgent US Dollar.

Commodity prices continue to trade at near record levels, as a direct result of monetary policy, rather than the more desired demand driven price rises. Asset bubbles across many asset classes, are a direct result of ‘modern monetary policy’ (MMP), which holds the massive expansion of money supply will have little consequence. Bond Yields, PPI and Inflation may explode this theory? The rising reserve impacted the resurgent commodity currencies, with the AUD falling back to 0.7700, while the NZD fell to 0.7150.

The coming week will witness an avalanche of data releases, headlined by Central bank rate decisions and culminating in the all-important Non Farm Payroll. The RBA and Bank of England are in lock-step with the Fed and will more than likely follow their lead. No changes to interest rates or QE infinity should be anticipated. Look for the Bankers narrative to give insights into their thinking and the state of their economies.

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