Summary:
Global stock markets reached new record highs on Friday, driven by better-than-expected corporate earnings. However, the US dollar and Treasury yields fell after a survey showed a sharp decline in US consumer confidence. The University of Michigan’s survey indicated that consumer confidence in the US had dropped to its lowest level since 2011, suggesting that the Delta variant of COVID-19 could have a larger impact on the economy than previously anticipated. The weak reading could potentially delay the Federal Reserve’s decision to reduce the stimulus it implemented to support the US economy during the pandemic.
The decline in consumer confidence had an immediate impact on the US dollar and Treasury yields, and gold prices rose as concerns over tapering eased. The MSCI world equity index, which tracks shares in 50 countries, also reached a new record high. The S&P 500 and Dow Jones Industrial Average closed at record highs as well, with Walt Disney’s strong earnings contributing to the positive performance. European stocks also hit new highs, completing their fourth consecutive week of gains due to optimism surrounding the strong earnings season and a steady economic recovery.
Despite the record highs and positive earnings, some market observers remain cautious. Uncertainty regarding the COVID-19 situation, Chinese regulatory measures, and monetary policy create concerns about the sustainability of the current rally. In Asia, sapped confidence resulting from worries about regulatory crackdowns in China and the Delta variant led to declines in most markets. In the oil market, prices fell slightly on Friday but were on track to post a modest weekly gain despite concerns over slowing oil demand due to the spread of coronavirus variants.
Overall, the record highs in global stock markets were driven by strong corporate earnings, despite the decline in US consumer confidence. The weak consumer confidence reading may lead the Federal Reserve to reconsider reducing stimulus measures. Gold prices rose as tapering concerns eased, while the US dollar and Treasury yields fell. European stocks also reached new highs, while markets in Asia declined. Oil prices experienced some volatility but remained on track for a slight weekly gain.
