The first big data point for markets this week has helped the dollar recover with the US ISM beating expectations yesterday, increasing to 61.2 in May from 60.7. New orders also jumped and supplier deliveries are at the highest level since 1974. It seems the overheating economy is not easing up just yet, though many economists expect that may happen during the second half of this year.

Equity markets were generally higher but the US closed mixed with value stocks such as financials and industrials back as the leaders while tech and healthcare fell. Asian stocks, aside from Japan touched a three-month peak before profit-taking in recently strong Chinese markets pulled it lower. Momentum has clearly ebbed from stock markets as investors worry that a stronger-than-expected rebound means sooner-than-expected monetary policy tightening.

The spotlight has been shining once again on gains in retail-investor driven “meme stocks”. AMC Entertainment rose more than 20% and is up more than 1,400% for the year while the infamous Gamestop surged over 12%. Short sellers are suffering as the Reddit crowd redirect their focus on these heavily shorted companies and move away from cryptocurrencies.

Booming commodities help European markets

Base metals are on the march again as copper closes above $10,000 for a third straight day and iron ore futures rebound. The OPEC+ meeting also passed with a supply increase in July, as agreed at a meeting in early April and the market has less concern over future Iranian supply as demand gathers pace through the summer months. Oil has pushed to recent highs with commodities in general seen as a good hedge against inflation.

Big commodity companies are enjoying this resurgence in commodity prices, with European stock market posting new record highs. The eurozone’s factory activity also helped yeseterday, rising to 63.1 in May, the highest since the survey began in June 1997.

Virus and reopening key for GBP

GBP/USD climbed to its highest level since April 2018 yesterday morning following a broadly weaker dollar tone and comments from the Bank of England’s deputy Governor acknowledging the potential for more sustained inflation and increasing optimism about the economic recovery. But dollar buying and increasing concern that the grand reopening in the UK slated for June 21 could be delayed due to the Indian Covid variant saw GBP sink back below 1.4150.

PM Johnson is due to give a press briefing later today so the threatened sterling breakout is on ice. Support rests at the bottom of the recent range around 1.41 while the bulls await a sustained push above 1.42 to continue the 15-month bullish trend.

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