Advanced Share Registry : Market News 14 June 2021

A one-sentence market wrap. Buoyant growth and inflation support risk assets.

Let's dig deeper. Used cars inspired confidence to ignore last weeks hot inflation data as a serious threat to this immortal Bull market. A switch away from virus friendly public transport by commuters and a global deficit of semiconductors for new cars drove prices for used vehicles. But other sectors reveal minor sensitivity to changes in demand.

Like airfares and accommodation, hard-hit service sector products have seen only a partial recovery of prices, which are still below pre-pandemic levels. A more enduring inflation threat would rise from what economists call a "demand-pull inflation", which arises when aggregate demand in an economy outpaces aggregate supply. That's simply not here yet.

The prices of used cars have been flat for 20 years, so the theory is markets don't believe they'll rise by 7% every month from now. Thats the theory anyway.

Likewise, computer prices have plunged 90% for thirty years, so while chip shortages are lifting, they'll soon bump into the cold hard fact that people won't make the purchase if it's likely to be cheaper later, and current supply-chain issues will be resolved in months, not years. Once again, these are the logical conclusions of equities that are swallowing the Feds assurance that price rises are temporary.

The bond market figured this out first (as they always do), sending 10-year Treasury notes to1.45%, where they've barely budged since. Prominent Short positions over Bonds closed out (making them buyers), explaining record demand in last weeks auctions that matched yield lows from March. This action also implies the Fed is going to remain lower for longer and hold rates steady.

The Consumer Price Index isn't without controversy, though. Fast-rising housing costs came in at an unlikely 2.2% for the year. Not included in the CPI market basket are housing units as they view housing units as capital/ investment goods, not consumption items. The Case-Shiller Home Price Index for March has no problem including units and reveal prices were up over 13%, the most significant growth rate since 2005. But U.S. lumber futures slipped 40% from last month's record as buyers baulk, so natural market forces are coming to the rescue - when supply isn't an issue.

Equity moves weren't significant, but the S&P500s 0.2% lift delivered a close at a new high of 4,247.44 points while the Nasdaq exceeded 14,000 for the first time since May. The Dow shrank 0.8% this week, ending a 2-week green streak.

A little infrastructure spending optimism helped markets as ten Democratic and Republican senators reached an agreement for spending on infrastructure programs. The $1.2 trillion package over the next eight years won't be financed with tax hikes, so corporate earnings won't take a hit. The compromise also has no hope of ever becoming law, but markets ran with it anyway.

In the U.K., the highly infectious Covid Delta variant is doubling every nine days, forcing Boris Johnson to contemplate delaying the easing restrictions on June 21. The math threatens 100,000 Covid cases in the U.K. every day by July if the spread isn't contained soon and sharp. Hospitals are already becoming overrun due to a backlog of patients that didn't come in during the previous waves, with emergency departments the busiest they've been for years last month. Such are the mechanics of this pandemic that a comparatively small increase in hospital admissions from COVID will have a significant impact now on non-COVID patients.

US Dow Jones	34464.64	+141.59	+0.4%
US S&P500	4200.88	+4.89	+0.1%
US Nasdaq	13736.28	-1.72	+0%
UK FTSE	7019.67	-7.26	-0.1%
German Dax	15406.73	-43.99	-0.3%
Gold futures ($US/oz)	1898.5	-5.3	-0.3%
Spot Iron Ore ($US/t)	-	-	-

Europes Stoxx 600 gauge posted a fourth weekly increase, up 0.7%, as investors rode on the back of the comfortable beast called easy policy support. Even emerging markets underscored the return of risk appetite. Stronger resource stocks led the way, with Rio Tinto leading the way on upgrades and imminent disaster.

The Regional Labor Department for the southeastern Brazilian state of Minas Gerais warned that the decommissioned Xingu dam is at risk of collapse again after a previous one in 2015 that killed 15 people. The Brumadinho dam disaster in early 2019 killed 270 people and cost the Australian iron ore competitor Vale US$7 billion. Our futures are strong, up 34 thirty minutes to open after Fridays 0.1% gain and a new record close of 7312.3.

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