Capital.com: With all the excitement centred in stocks and oil this week, other markets look a little pedestrian by comparison

Comment from David Jones, Chief Market Strategist at European investment trading platform, Capital com

Stock markets got off to a shaky start this week, to say the least.  In the US on Monday, the benchmark Dow Jones Index suffered its largest one-day sell-off for the year so far, finishing more than 700 points lower.  This was put down to worries about the delta variant of the coronavirus – with its high transmissibility spooking investors that there could be further lockdowns ahead, and the corresponding knock-on there might be for the economic recovery. But by Wednesday all of these losses had been recovered, proof again of the ongoing optimism that we have continued to see since the March 2020 lows. It seems like nothing at the moment will deter investors from just buying the dips. But there are still storm clouds out there of course – the spectre of inflation still has the potential to deliver shocks in the second half of the year.  It does feel like central banks have a “nothing to see here” attitude when it comes to rising prices, and they are providing a united front of assuring the world that the relatively higher inflation we are seeing is just temporary and it will all blow over. Don’t be so sure – with basic materials and commodities having enjoyed a strong run this year, that cost is probably going to continue being passed onto consumers for some time to come.

It wasn’t just stocks experiencing volatility – the oil price also traded in a near 10% range for the week. Oil has been well supported since the April 2020 lows by a series of coordinated production cuts by the OPEC+ countries. This capping of supply, whilst demand has expanded as economies recover quicker than expected, has meant that just this month oil touched its best levels since October 2018.  However, this week OPEC+ announced that the taps would now start to gradually open once more and production of oil would increase starting in August. The market response to this was predictable enough, with oil dropping by $6 a barrel on Monday.  What was not quite as predictable was the $6 bounce back over the next few days.  Like their cousins in the stock market, oil traders also currently like to buy the dip and still seem to be predicting that the pace of economic recovery is going to more than make up for the extra barrels hitting the market from next month.

With all this excitement in stocks and oil, other markets looked a little pedestrian by comparison. Cryptocurrencies had a brief surge of excitement as Elon Musk suggested that it was likely Tesla would start taking Bitcoin again as payment in the future. This helped lift Bitcoin back above $30k, but nothing has really changed the sideways range that many major cryptos have been in for the past couple of months. One market not on many people’s radar, but worthy of note this week, is coffee.  The price briefly touched its best levels in almost seven years, as temperatures plunged in Brazil’s coffee-growing region, potentially damaging the harvest.  This combined with drought in previous months leaves some speculating that next year’s crop could potentially be the worst in decades, with prices for consumers expected to rise.