‘Follow the Money’: Major Players Betting on Vaccinations to Keep Global Economy Afloat

The coronavirus is in the news again, not last year’s pandemic fueling COVID-19 version, but the fast-spreading Delta variant. While dominating the mainstream news in the United States (See CNN and FoxNews), and globally on business website such as CNBC, Reuters and Bloomberg, to name a few, we’re not really seeing a major impact on the financial markets.

This is interesting to note because the mainstream story is centered on rising infection numbers, the slow pace of vaccinations and what is likely to happen if countries don’t start clamping down on the spread of the virus. In other words, people’s health. Some experts are even calling it a “life or death” situation.

In the financial markets, obviously we’re not seeing the same reaction as we did in 2020 with stocks dropping 20% in a matter of weeks and crude oil testing prices below $20 a barrel. Instead we’re seeing a relative calm.

Is this telling us to “follow the money?” Is this telling us that since the situation is not as bad as last year, there is no need to panic? Are the financial markets indicating there is not enough information yet to understand the impact of this new outbreak? Do we wait for the bad economic numbers or do we anticipate them?

The answer is all of the above.

Of course, I don’t recommend putting your finances ahead of your health. I don’t think anyone is doing that. Traders are making their decisions on what they know at this time. Some are even basing their decisions on their belief in the vaccinations.

In this case, they feel that enough people are vaccinated so major economic shutdowns are warranted at this time. But we’ve seen different reactions all around the globe, which could be adding to the confusion over what to do. Lighten up on the long side? Buy more, start selling? Move to the sidelines?

I don’t think I am going to be able to answer any of these questions in this article, but if I had to center on one, I’d have to say “follow the money”. But I should add that I am vaccinated, so I may be biased.

Here’s What Others are Saying and Doing

Fed’s Powell Downplays Delta Variant’s Threat to the Economy

The spread of the COVID-19 delta variant is raising infections, leading some companies and governments to require vaccinations and raising concerns about the U.S. economic recovery, according to the AP.

But on Wednesday, Federal Reserve Chair Jerome Powell injected a note of reassurance, suggesting that the delta variant poses little threat to the economy, at least so far.

“What we’ve seen is with successive waves of COVID over the past year and some months now,” Powell said at a news conference, “there has tended to be less in the way of economic implications from each wave. We will see whether that is the case with the delta variety, but it’s certainly not an unreasonable expectation.”

“Dining out, traveling, some schools might not reopen,” he said. “We may see economic effects from some of that or it might weigh on the return to the labor market. We don’t have a strong sense of how that will work out, so we’ll be monitoring it carefully.”

More Corporations are Requiring Workers to Get Vaccinated ~ Axios

The federal government in May said that it is legal for companies to require employees to get vaccinated for coronavirus.

Google CEO Sundar Pichai sent an email to employees announcing that those going back to the office needed to be vaccinated. The company is also extending its work-from-home policy through October 18.

Facebook said that anyone going back to work in their U.S. campuses must be vaccinated.

Netflix is requiring that the casts for all of its U.S. productions be vaccinated, as well as everyone who comes in contact with them.

Drop in UK COVID-19 Cases Indicates Infections Surge May Be Past Peak ~ Reuters

Early last week, the UK added to the confusion when it reported its lowest daily total of new coronavirus cases since July 4, adding to signs that a recent surge in infections driven by the spread of the Delta variant may have passed its peak.

Sydney Readies for the Army as Lockdown Fails to Squash Australia Delta Outbreak ~ CNN

Sydney’s poorest neighborhoods on Friday braced for military enforcement of the city’s toughest and longest lockdown of the COVID-19 pandemic as the infection as the infection numbers held persistently high five weeks since restrictions began.

The situation appears to be so bleak in Australia that economists are already predicting a third quarter contraction.

Oil Climbs, Notches Fourth Monthly Gain on Growing Demand – Reuters

The crude oil market is interesting since it sold off sharply early in July when the Delta-variant story first broke. The biggest concern was demand destruction.

Since then, however, both WTI and Brent have recovered enough to post a fourth monthly gain, with demand growing faster than supply and vaccinations expected to alleviate the impact of a resurgence in COVID-19 infections across the world.

Conclusion

The best advice appears to be: bet on the vaccinations to work, keep monitoring the global economy especially output and labor and keep an eye on gasoline demand.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Economic Data, Monetary Policy, and COVID-19 in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 51 stats in focus in the week ending 6th August. In the week prior, 71 stats had also been in focus.

For the Dollar:

From the private sector, ISM Manufacturing and Non-Manufacturing PMIs for July will be in focus.

Expect the Non-Manufacturing PMI due out on Wednesday to have the greatest impact.

On the labor market front, ADP nonfarm employment change and weekly jobless claims figures on Wednesday and Thursday will also influence.

Nonfarm payrolls at the end of the week, however, will be the key stat of the week.

In the week ending 30th July, the Dollar Spot Index fell by 0.79% to 92.174.

For the EUR:

It’s a busy week on the economic data front.

Private sector PMIs for Italy and Spain together with finalized numbers for France, Germany, and the Eurozone will influence.

Expect Italy and the Eurozone’s PMIs to be key in the week.

German and Eurozone retail sales figures will also influence, with consumption key to a sustainable economic recovery.

For the week, the EUR rose by 0.84% to $1.1870.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs for July are due out on Monday and Wednesday.

Expect any revisions to the services PMI to have a greater impact in the week.

Construction PMIs also due out, should have a muted impact, however.

While the finalized numbers will influence, the Bank of England monetary policy decision on Thursday will be the main event.

Last week, the IMF talked up the outlook for the British economy. It now rests in the hands of the BoE.

The Pound ended the week up by 1.13% to $1.3904.

For the Loonie:

It’s a busier week ahead on the economic calendar.

Trade data on Thursday and employment change figures on Friday will be the key numbers.

While trade figures will influence, expect the employment change figures to have a greater impact.

The Loonie ended the week up 0.71% to C$1.2475 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Manufacturing sector data, building permits, retail sales, and trade data will be in focus.

Retail sales and trade data, due out on Wednesday and Thursday, will be the key stats of the week.

On the monetary policy front, however, the RBA monetary policy decision on Tuesday will be the main event.

The Aussie Dollar ended the week down by 0.30% to $0.7344.

For the Kiwi Dollar:

It’s a quiet week ahead. Mid-week, employment change figures will draw interest ahead of inflation expectation numbers on Friday.

With little else for the markets to consider in the week, expect both sets of numbers to provide direction. The markets are expecting a further pickup in inflationary pressures…

The Kiwi Dollar ended the week flat at $0.6974.

For the Japanese Yen:

Finalized private sector PMIs and Tokyo inflation figures will be in focus in the 1st half of the week.

Expect any revision to the PMIs to be of greater influence.

Late in the week, household spending figures will also draw interest.

The Japanese Yen rose by 0.75% to ¥109.720 against the U.S Dollar.

Out of China

It’s a busier day, with private sector PMIs to provide the markets with direction.

Following NBS numbers from the weekend, the market’s preferred Caixin manufacturing PMI will set the tone. Over the weekend, the NBS Manufacturing PMI fell from 50.9 to 50.4…

With service sector activity a greater component of the economy, Wednesday’s services PMI will also influence, however.

The Chinese Yuan ended the week up by 0.31% to CNY6.4614 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. News updates from the Middle East will also need continued monitoring…

U.S Mortgage Rates Rise but Remain Well Below the 3% Mark

Mortgage rates rose for the first time 5-weeks in the week ending 29th July.

Following a 10 basis points decline from the previous week, 30-year fixed rates increased by 2 basis points to 2.80%.

While on the rise, 30-year mortgage rates have risen just once beyond the 3% Since 21st April.

Compared to this time last year, 30-year fixed rates were down by 19 basis points.

30-year fixed rates were still down by 214 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

It was a quiet first half of the week on the U.S economic calendar.

Economic data included house price figures alongside durable goods and consumer confidence numbers.

A pickup in consumer confidence in July and a continued rise in durable goods orders were key in the week.

On the monetary policy front, the FED left policy unchanged mid-week, which was in line with market expectations. While delivering a positive economic outlook, FED Chair Powell continued to downplay any tapering plans.

After a risk-off start to the week, positive IMF economic growth forecasts for the U.S delivered further support to riskier assets in the week.

A continued rise in new COVID-19 cases globally remained a test market risk appetite, however.

Freddie Mac Rates

The weekly average rates for new mortgages as of 29th July were quoted by Freddie Mac to be:

  • 30-year fixed rates rose by 2 basis points to 2.80% in the week. This time last year, rates had stood at 2.99%. The average fee remained unchanged at 0.7 points.
  • 15-year fixed declined by 2 basis points to 2.10% in the week. Rates were down by 41 basis points from 2.51% a year ago. The average fee remained unchanged at 0.7 points.
  • 5-year fixed rates fell by 4 basis point to 2.45%. Rates were down by 49 points from 2.94% a year ago. The average fee fell from 0.4 points to 0.3 points.

According to Freddie Mac,

  • Home owners and buyers continue to benefit from some of the lowest mortgage rates of all-time.
  • Largely due to the current environment, the 30-year fixed-rate remains below 3% for the 4th consecutive week, while the 15-year fixed-rate hits another record low.

Mortgage Bankers’ Association Rates

For the week ending 23rd July, the rates were:

  • Average interest rates for 30-year fixed with conforming loan balances decreased from 3.11% to 3.01%. Points decreased from 0.43 to 0.34 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA decreased from 3.08% to 3.03%. Points rose from 0.31 to 0.35 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances decreased from 3.13% to 3.11%. Points decreased from 0.32 to 0.27 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, increased by 5.7% in the week ending 23rd July. In the week prior, the index had fallen by 4.0%.

The Refinance Index increased 9% and was 10% lower than the same week a year ago. The index had fallen by 3% in the previous week.

In the week ending 23rd July, the refinance share of mortgage activity increased from 64.9% to 67.2%. The share had risen from 64.1% to 64.9% in the week prior.

According to the MBA,

  • The 10-year Treasury yield declined last week as investors grew concerned about increasing COVID-19 case counts and the downside risks to the current economic recovery.
  • Refinance applications jumped in response to 30-year fixed rates falling to their lowest level since Feb-2021. The 15-year fell to another record low dating back to 1990.
  • The purchase index fell for the 2nd consecutive week to its lowest level since May-2020 and has now declined on an annual basis for the past 3-months.
  • Potential buyers continue to be put off by extremely high home prices and increased competition.
  • The FHFA reported that May home prices were 18% higher than a year ago, continuing a 7-month upward trend.

For the week ahead

It’s a busier first half of the week. Economic data includes private sector PMIs and ADP nonfarm employment change figures.

We can expect the ISM Non-Manufacturing PMI and ADP nonfarm employment change figures to be key.

From elsewhere, private sector PMI figures from China and the Eurozone will also influence market risk sentiment,

Away from the economic calendar, COVID-19 news updates will remain a key driver, however.

All Eyes on NFP as Fed Won’t Make a Move on Policy without Substantial Labor Market Growth

The Federal Reserve monetary policy statement and remarks from Fed Chair Jerome Powell set the tone in several financial markets last week with the biggest influence on the U.S. Dollar. Disappointing U.S. economic reports also weighed on the greenback.

Ahead of next week, however, investors are asking whether the sell-off represents a change in the longer-term trend or just a shift in momentum.

With the Fed not scheduled to meet until September 21-22, the move likely represents a shift in momentum since policymakers left in place their change in the timeline for the next interest rate hike that it announced in its June 16 monetary policy statement.

In last Wednesday’s announcement, all it did was push the possible start of tapering nearly seven weeks into the future. It didn’t remove the possibility of tapering and it didn’t move the timeline for the next rate hike so we really can’t call its policy statement “dovish”. It should probably be best described as “less-hawkish”.

Furthermore, the Federal Open Market Committee (FOMC) will have two Non-Farm Payrolls and Consumer Inflation reports under their belt before making its late September policy decision. With the labor market and inflation the biggest concerns for the Fed and likely to exert the most influence on policymakers, these are the two reports that traders should pay attention to during August.

The U.S. will release its Non-Farm Payrolls report on August 6 along with data on Average Hourly Earnings and the Unemployment rate. Non-Farm Payrolls are expected to show the economy added 895K new jobs in July. The unemployment rate is expected to dip from 5.9% to 5.7% and Average Hourly Earnings are expected to remain steady at 0.3%.

Labor Market Growth is Powell’s Major Concern

During July, Federal Reserve Chairman Jerome Powell mentioned his concerns about labor market growth twice in his public speeches. The first mention was mid-month in his testimony before Congress. The second was in his post-monetary policy statement press conference last Wednesday.

On July 14, Federal Reserve Chairman Jerome Powell told Congress that while the economy has come a long way back from its pandemic-induced depths, the labor market “still has a long way to go.”

“Labor demand appears to be very strong; job openings are at a record high, hiring is robust, and many workers are leaving their jobs,” Powell said. “Indeed, employers added 1.7 million workers from April through June. However, the unemployment rate remained elevated in June at 5.9 percent.”

Powell added that the official unemployment rate understates the real condition of the job market as many potential workers remain on the sidelines for reasons ranging from continued fear of COVID-19, enhanced unemployment benefits and difficultly finding child case.

At last Wednesday’s press conference, Powell fielded many questions about inflation, but he also said that hiring needed to progress further before the Fed would be ready to dial down its support for the economy.

“I’d say we have some ground to cover on the labor market side,” Powell said. “I think we’re some way away from having had substantial further progress toward the maximum employment goal.”

Conclusion

While the initial reaction to the Fed and Powell was to sell the U.S. Dollar because the notion of tapering was put on hold at its last meeting, the real move in the U.S. Dollar over the short-term is likely to follow the July Non-Farm Payrolls report, due on August 6.

A weaker-than-expected report for July will be bearish for the U.S. Dollar because traders will start reducing the chances of the Fed announcing the start of tapering at its September meeting. Furthermore, if July employment data is weak then the August report due in September is also likely to be weak if the COVID crisis gets out of control.

For a look at all of today’s economic events, check out our economic calendar.

China Manufacturing PMI Eases; Hong Kong, China Shares Tumble on Regulatory Restrictions, COVID Worries

China released economic data early Saturday that showed factor activity expanded in July as the slowest pace in 17 months as higher raw material costs, equipment maintenance and extreme weather weighed on business activity, adding to concerns about a slowdown in the world’s second-biggest economy, Reuters reported.

The report follows a week of volatile trading in Chinese markets that left Hong Kong Hang Seng Index 5% lower. Both Hong Kong and mainland-listed stocks fell on Friday, losing the partial recovery they made after diving earlier in the week.

China’s Factory Activity in July Grows at Slowest Pace Since February 2020

The official manufacturing Purchasing Manager’s Index (PMI) eased to 50.4 in July from 50.9 in June, data from the National Bureau of Statistics (NBS) showed on Saturday, but remained above the 50-point mark that separates growth from contraction.

Analysts had expected it to slip to 50.8. It was the lowest figure since the index slumped to 35.7 in February 2020, after China began lockdowns to control the coronavirus pandemic.

The official non-manufacturing Purchasing Managers’ Index (PMI) eased to 53.3 in July, from 53.5 in June, a separate survey from the NBS showed.

Hong Kong, China Stocks Resume Slump on Regulatory Concerns, COVID Jump

Shares in Hong Kong and China resumed their slump on Friday after rebounding in the previous session, with key indexes booking their worst monthly performance in years, as persistent concerns over regulatory crackdowns outweighed Beijing’s attempts to calm markets.

China’s blue-chip CSI300 Index closed down 0.8% and posted its biggest monthly loss since October 2018, while the Shanghai Composite Index lost 0.42%, capping its worst month since 2019.

Hong Kong tech shares slumped again, pulling the benchmark Hang Seng Index to its biggest monthly fall since October 2018.

The Hang Seng closed down 1.4%, following Thursday’s 3.3% rally. Tech giants such as Meituan and Alibaba led Friday’s decline. The Hang Seng Tech Index plunged 2.56%, extending its weekly fall to 6.7%.

Global investors have been dumping shares in Chinese companies after Beijing banned for-profit tutoring on core school subjects, following crackdowns earlier this year on the tech sector. The regulatory moves have revived worries about the risks of investing in China.

Finally, a resurgence in COVID-19 cases in mainland China and Hong Kong also dented investors’ risk appetite.

Chinese Companies Looking for US Listings Must File More Disclosures – SEC Chair

The chair of the US Securities and Exchange Commission said on Friday that he had asked staff to mandate certain disclosures from offshore issuers associated with China-based operating companies before registration statements can be declared effective.

Gary Gensler also said in a statement that the new disclosures will require Chinese companies tell the regulator and investors whether certain actions could affect the firm’s “financial performance and the enforceability of the contractual arrangements.”

For a look at all of today’s economic events, check out our economic calendar.

Japan, South Korean Shares Pressured by Chinese Technology Crackdown, Renewed COVID-19 Concerns

The major Asia-Pacific stock indexes finished lower across the board on Friday, ending a mostly bearish week on a down note. The markets were rattled all week as a Chinese crackdown on its technology sector and rising cases of the Delta coronavirus variant raged against still-dovish monetary policy and mixed earnings from a range of companies.

Friday’s Cash Market Performance

In Japan, the Nikkei 225 Index settled at 27283.59, down 498.83 or -1.80%. In Hong Kong, the Hang Seng Index finished at 25961.03, down 354.29 or -1.35% and South Korea’s KOSPI Index closed at 3202.32, down 40.33 or -1.24%.

China’s benchmark Shanghai Index settled at 3397.36, down 14.37 or -0.42% and in Australia, the S&P/ASX 200 Index finished at 7392.60, down 24.80 or -0.33%.

Nikkei Ends at Over 6-Month Low on Virus Worries, Earnings Lag

Japan’s Nikkei stock average closed at its lowest since the start of the year on Friday as spiking COVID-19 cases, some earnings disappoints and a decline in U.S. stock futures dented investor sentiment.

The Nikkei’s 1.8% decline on Friday was its biggest decline since June 21 and the lowest close since January 6.

For the month, the Nikkei slumped 5.24%, its worst performance since the coronavirus-induced market meltdown in March last year, after recording an 11th straight decline on the final trading day of the month.

In COVID-related news, Japan’s government on Friday proposed extending the state of emergency through August 31 for Tokyo and some other prefectures, as COVID-19 cases spike to record highs.

“The earnings weren’t that bad, but in terms of the outlook, there doesn’t seem to be a lot of confidence,” which is weighing on stocks, said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

“The market is wary that the Nikkei could break below 27,000.”

South Korea Stocks Post Worst Month Since March 2020 on Weak China Shares, Virus Woes

South Korean shares tumbled more than 1% on Friday, and posted its worst monthly decline in more than a year, weighed by continued worries about the Chinese government’s regulatory crackdown and the COVID-19 pandemic.

The KOSPI ended down 40.33 points, or 1.24%, at 3,302.32, its sharpest daily fall in more than two months. The index ended the month down 2.86%, its sharpest monthly decline since March last year, and snapped an eight month winning streak.

In economic news, Friday’s data showed South Korea’s factory output in June rebounded from May on a boost in semiconductor and car production.

In COVID-related news, South Korea reported 1,710 new cases for Thursday, still near the record infections marked this week, even after the country imposed the toughest distancing measures in the metropolitan Seoul area and some neighboring cities.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: A Month in Review – July 2021

The Majors

It was another bullish month for the European majors in July, logging a 6th consecutive monthly gain.

The CAC40 and the EuroStoxx600 rose by 1.61% and by 1.97% respectively, while the DAX30 struggled, rising by just 0.09%.

It was a choppier month for the European majors. Concerns over the resilience of the economic recovery tested support for the majors at the start of the 3rd quarter of the year.

A continued rise in new COVID-19 cases across the world added to the market angst in the month.

Economic data from Germany was also disappointing, pegging the DAX30 back.

Central bank assurance of support, dip buying, corporate earnings, and economic data for France and the Eurozone delivered support, however.

The Stats

Key stats in the month included inflation, consumer spending, consumer sentiment, private sector PMIs, and 2nd quarter GDP numbers.

Once more, the stats were skewed to the positive, delivering support to the broader market.

The Private Sector

The Eurozone’s composite PMI rose from 59.5 to 60.6 in July, according to prelim numbers. Service sector activity picked up, delivering the upside at composite level.

Germany’s Manufacturing PMI increased from 65.1 to 65.6, which was key as private sector activity across France saw slower growth.

As a result of weak numbers from France, the Eurozone’s Manufacturing PMI fell from 63.4 to 62.6.

The German Economy

From Germany, while survey-based numbers were upbeat, non-survey-based data disappointed in the month.

Factory orders (-3.7%) and industrial production (-0.30%) were weak, with Germany’s trade surplus narrowing from 15.9bn to 12.6bn EUR.

German business and consumer confidence also failed to impress in spite of the reopening of the economy. Rising cases of the Delta variant across the world raised uncertainties over the economic outlook in the month.

Late in the month, 1st estimate GDP numbers for the 2nd quarter were also in focus.

The German economy expanded by 1.5%, quarter-on-quarter, partially reversing a 2.1% contraction from the previous quarter. Economists had forecast 1.9% growth.

A positive in the week, however, was a fall in the unemployment rate from 5.9% to 5.7%, which should support consumption.

The Eurozone

For the Eurozone, the economy expanded by 2.00% in the 2nd quarter, reversing a 0.3% contraction from the previous quarter.

The numbers were aligned with the ECB’s optimistic outlook on the economic recovery.

Inflation

In the month, the ECB also revised its price stability target, increasing the inflation target to 2.0%. The move was viewed as dovish, giving the ECB more legroom before having to make a move on the policy front.

In spite of this, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, according to prelim figures.

From the U.S

Economic data delivered mixed results for the markets.

Inflationary pressures continued to build, though following assurances from the FED, failed to spook the markets.

The market’s preferred ISM private sector PMIs for June were disappointing for June, which raised concerns over the economic recovery.

Weekly jobless claim figures also failed to impress, with claims falling to a month low 360k before climbing to a high 419k.

In the final week of the month, consumer confidence and 2nd quarter GDP numbers delivered mixed results.

Consumer confidence picked up in July, suggesting a further increase in consumption. In June, retail sales had risen by a modest 0.5%. On the economic growth front, however, the U.S economy grew by just 6.5% in the quarter, falling well short of a forecasted 8.5%.

Monetary Policy

In July, both the ECB and the FED left monetary policy unchanged. Both central banks delivered assurances of unwavering support, ultimately propping up the European majors in the month.

The Market Movers

For the DAX: It was a bearish month for the auto sector in June. Continental and BMW slid by 7.88% and by 6.09% respectively. Daimler and Volkswagen ended the month down by 0.44% and by 2.49% respectively.

It was also a bearish month for the banks. Deutsche Bank fell by 2.86%, with Commerzbank sliding by 9.03%.

From the CAC, it was a bearish month for the banking sector. BNP Paribas fell by 2.69%, with Credit Agricole and Soc Gen seeing losses of 0.42% and 0.52% respectively.

It was also a bearish month for the auto sector. Renault slid by 6.02%, with Stellantis NV ending the month down by 2.20%.

Air France-KLM fell by a further 3.71%, while Airbus SE rallied by 6.69%.

On the VIX Index

It was a first monthly gain in 6-months for the VIX in July.

Reversing a 5.55% loss from June, the VIX rose by 15.22% to end the month at 18.24.

In July, the S&P500 rallied by 2.27%, with the Dow and the NASDAQ ending the month up by 1.25% and by 1.16% respectively.

VIX 310721 Monthly Chart

The Month Ahead

Following some mixed numbers from Germany, we can expect increased sensitivity to the German numbers in the month ahead.

Private sector PMIs will also remain key, with any fall back in private sector PMIs likely to test support for the majors.

Following the latest spike in inflation, a further pickup in inflationary pressure will also raise questions over consumption. As a key component of the economic recovery, any concerns over consumption would also pressure the majors.

From the U.S, labor market numbers will now be the key area of focus as inflationary pressures continue to pick up.

Consumer confidence and consumption numbers will need to impress to support riskier assets.

From elsewhere, private sector PMIs and trade data from China will also need tracking.

Away from the economic calendar, COVID-19 news will also need monitoring. As new cases continued to rise in July, the threat of a vaccine resilient variant remains, which would materially impact the growth outlook.

European Equities: A Week in Review – 30/07/21

The Majors

It was another choppy week for the majors in the week ending 30th July, with the majors taking another slide to kickstart the week.

The DAX30 fell by 0.80%, while the CAC40 and the EuroStoxx600 ended the week with relatively modest gains of 0.67% and 0.05% respectively.

Concern over the continued rise in new Delta variant cases weighed on the markets and sentiment towards the economic outlook.

Mixed economic data from Germany, in particular, also pressured the markets in the week.

There were a number of support avenues for the majors, however.

Upward growth revisions from the IMF for advanced economies, a dovish FED, and corporate earnings provided support.

GDP numbers from France and the Eurozone were also ahead of forecasts at the end of the week. The data limited the damage in what was a bearish end to the week.

The Stats

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

From the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rose by 0.32% to buck the trend in the week. Continental slid by 2.49% to lead the way down, however. BMW and Volkswagen also struggled, ending the week down by 1.64% and by 1.34% respectively.

It was also a mixed week for the banking sector. Deutsche Bank rose by 1.18%, while Commerzbank fell by 0.18%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.74% and by 1.06% respectively, with Credit Agricole gaining 0.77%.

The French auto sector also found support with Stellantis NV and Renault seeing gains of 2.64% and 2.59% respectively.

Air France-KLM slipped by 0.05%, however, while Airbus rallied by 3.77%.

On the VIX Index

It was a back into the green for the VIX.

In the week ending 30th July, the VIX rose by 6.05%. Partially reversing a 6.78% fall from the previous week, the VIX ended the week at 18.24.

3-days in the green from 5 sessions, which included a 10.13% jump on Tuesday delivered the upside.

For the week, the NASDAQ fell by 1.11%, with the Dow and the S&P500 ending the week down by 0.36% and by 0.37% respectively.

VIX 310721 Daily Chart

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

Private sector PMIs for Italy and Spain will be in focus. Finalized numbers for France, Germany, and the Eurozone are also due out.

Any revisions to prelim numbers and Italy’s PMIs will likely draw the greatest interest.

Early in the week, Eurozone and German retail sales figures will also be key, however. The ECB is looking for a consumption driven economic recovery.

Later in the week, the ECB Economic Bulletin and member state trade data will also be in focus.

From the U.S, ISM Manufacturing and Non-Manufacturing PMIs will be key through the 1st half of the week.

On the labor market front, however, ADP nonfarm employment change, weekly jobless claims, and nonfarm payrolls will also influence.

Away from the economic calendar, corporate earnings and COVID-19 news updates need continued monitoring.

The Weekly Wrap – A Dovish FED and Weak Stats Left the Greenback in the Red

The Stats

It was a busy week on the economic calendar, in the week ending 30th July.

A total of 71 stats were monitored, which was up from 33 stats in the week prior.

Of the 71 stats, 37 came in ahead forecasts, with 30 economic indicators coming up short of forecasts. There were 4 stats that were in line with forecasts in the week.

Looking at the numbers, 42 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 27 reflected a deterioration from previous.

For the Greenback, disappointing economic data and a dovish FED left the Dollar in the red. The Dollar Spot Index fell by 0.79% to 92.174. In the previous week, the Dollar had risen by 0.24% to 92.906.

Out of the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

Out of the UK

It was a particularly quiet week. There were no major stats for the markets to consider in the week.

The lack of stats left the Pound in the hands of IMF economic growth forecasts, which delivered Pound support.

In the week, the Pound rose by 1.13% to end the week at $1.3904. In the week prior, the Pound had fallen by 0.14% to $1.3748.

The FTSE100 ended the week up by 0.07%, following a 0.28% gain from the previous week.

Out of the Eurozone

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

For the week, the EUR rose by 0.84% to $1.1870. In the week prior, the EUR had fallen by 0.30% to $1.1771.

The DAX30 fell by 0.67%, while the CAC40 and the EuroStoxx600 ended the week up by 0.67% and by 0.05% respectively.

For the Loonie

It was a relatively quiet week on the economic data front.

Inflation and GDP numbers were the key stats of the week.

In June, the annual rate of inflation softened from 2.8% to 2.7%, bucking the trend seen across key economies.

The Canadian economy also continued to struggle in May, with the economy contracting by 0.3%. The economy had contracted by 0.5% in April.

In the week ending 30th July, the Loonie rose by 0.71% to C$1.2475. In the week prior, the Loonie had risen by 0.39% to C$1.2564.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

While the Aussie Dollar fell by 0.30% to $0.7344, the Kiwi Dollar ended the week flat at $0.6974.

For the Aussie Dollar

Inflation was the main area of focus. The stats were mixed, however, pegging the Aussie Dollar back.

In the 2nd quarter, the annual rate of inflation surged from 1.1% to 3.8%. The trimmed mean rate of inflation picked up from 1.1% to 1.6%, however.

Wholesale inflation also saw a pickup but at a softer pace than anticipated.

Australia’s annual wholesale rate of inflation ticked up from 0.2% to 2.2%. Economists had forecast a rate of 3.5%.

For the Kiwi Dollar

It was a busier week, with trade and consumer and business confidence in focus.

Trade data disappointed, with the trade surplus narrowing from NZ$498m to NZ$261m in June. The narrowing stemmed from a more marked increase in imports, however, rather than a fall exports, which limited the damage.

Business and consumer confidence figures were also skewed to the negative. The ANZ Business Confidence Index fell from -0.60 to -3.80, with the ANZ Consumer Confidence Index falling from 114 to 113.1.

The week numbers were not enough to sink the Kiwi.

For the Japanese Yen

It was another relatively busy week.

Early in the week, private sector PMIs were in focus. Later in the week industrial production and retail sales also drew attention on Friday.

While prelim private sector PMIs softened slightly in July, industrial production and retail sales impressed.

Industrial production jumped by 6.2% in June, reversing a 6.5% slide from May. More significantly, retail sales increased by 3.1%, reversing a 0.4% decline from May.

The Japanese Yen rose by 0.75% to ¥109.72 against the U.S Dollar. In the week prior, the Yen had fallen by 0.44% to ¥110.550.

Out of China

It was a quiet week on the economic data front. There were no major stats from China for the markets to consider.

In the week ending 30th July, the Chinese Yuan rose by 0.31% to CNY6.4614. In the week prior, the Yuan had ended the week down by 0.03% to CNY6.4813.

The CSI300 and the Hang Seng ended the week down by 4.98% and by 5.46% respectively.

USD/CAD: Loonie Dips After Early Gains But Set to End Week Strong

The Canadian dollar pared early gains against its U.S. counterpart on Friday as crude oil prices marched higher and the greenback recovered after U.S. consumer spending outpaced expectations in June.

Today, the dollar to loonie conversion rose to 1.2472, up from Thursday’s close of 1.2444. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened about 0.5% so far this month. Although, the loonie is set to close this week with a gain

“The CAD has extended its rebound this week, even if gains came more as a reflection of a generally softer USD. Commodity prices strengthened broadly, driving the Bloomberg Commodity Index to a new cycle and six-year high Thursday while US-Canada 2Y spreads remain at a CAD-supportive –26bps. Our fair value models continue to reflect a significant USD overvaluation against the CAD (and a broadly overvalued USD against its major currency peers), although CAD-drivers have turned even more positive this week and our FV estimate has edged to a new cycle low below 1.17,” noted Shaun Osborne Chief FX Strategist at Scotiabank.

“It remains to be seen how far the USD will correct lower, however. We think the Fed has put the market on notice that taper timing is a live debate now among policymakers, which may provide the USD with general support in the coming weeks. Speculative FX traders have largely abandoned short USD positions in recent weeks and heightened equity market volatility—something of a “tradition” in August—will tend to work against the CAD and may lift USDCAD towards the upper reaches of our estimated range for next week (1.2508).”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.3% higher at 92.145 at the time of writing. Still, it hovers close to this month’s low of 91.782.

The dollar stalled its rally after the Fed in its Wednesday’s monetary policy decision highlighted that the interest rate hike is far away. The U.S. central bank also did not give any hint about reducing its purchases of government bonds.

“In the final week of the Olympics, we think the dollar will at least be able to stabilise after the recent correction. The prospect of the Fed’s tapering should be cemented by good payrolls, while global risk assets may still struggle to look past China’s regulatory clampdown. Elsewhere, the BoE and RBA should not deliver any new guidance,” noted analysts at ING.

However, the risk that the world’s dominant reserve currency, the USD, recovery over the coming year is high, largely driven by the Fed’s expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to CAD pair higher.

Canada is the world’s fourth-largest exporter of oil, which edged higher on tight supply and rising demand. High oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie. U.S. West Texas Intermediate (WTI) crude futures was trading around $73.51 a barrel.

Stocks Retreat As Amazon Drags Down Tech Shares

Stocks Are Under Pressure Ahead Of The Weekend

S&P 500 futures are moving lower in premarket trading as Amazon‘s disappointing quarterly results put pressure on tech stocks.

Amazon released its second-quarter report yesterday, after the market close. The company reported revenue of $113.1 billion and GAAP earnings of $15.12 per share, missing analyst estimates on revenue and beating them on earnings.

The market focused on the disappointing revenue performance and weak third-quarter guidance as Amazon forecasted revenue of $106 billion – $112 billion in Q3 2021.

Currently, the stock is down by about 7% in premarket trading, and Nasdaq futures are down by roughly 1%. It remains to be seen whether traders will rush to buy the dip in Amazon shares and other tech stocks ahead of the weekend or choose to take some profits off the table near record highs for S&P 500 and Nasdaq.

Personal Income Increased By 0.1% In June

U.S. has just released Personal Income and Personal Spending reports for June. The reports indicated that Personal Income increased by 0.1% month-over-month in June compared to analyst consensus whcih called for a decline of 0.3%. Personal Spending grew by 1% compared to analyst consensus of 0.7%.

Today, traders will also have a chance to take a look at the final reading of Consumer Confidence report for July. Analysts expected that Consumer Confidence declined from 85.5 in June to 80.8 in July.

WTI Oil Settles Above The $73 Level As Traders Shrug Off Virus Worries

WTI oil managed to get above the $73 level and continues to move higher as traders bet that demand for oil will continue to increase despite the recent surge in the number of new COVID-19 cases which was caused by the Delta variant of coronavirus.

Recent data indicates that crude inventories are moving lower, which is bullish for oil. Today, oil-related stocks will have a good chance to continue their rebound after strong results from Exxon Mobil and Chevron.

For a look at all of today’s economic events, check out our economic calendar.

Chevron Stock Price Rally As Company Posts Second Straight Quarters Of Profits

The shares of Chevron are up by more than 1% during Friday’s pre-market trading session after the company reported profits for the second consecutive quarter.

Chevron Posts Profit Again

Oil giant Chevron reported its second quarter of the year earnings earlier today, beating analysts’ estimations and recording profits yet again. The rising demand for petroleum products and an increase in oil prices in recent months contributed massively to Chevron’s success in the last quarter.

Chevron reported earnings of $1.71 per share during the second quarter of 2021 on an adjusted basis. Meanwhile, the revenue generated during that period stands at $37.6 billion. The figures were better than expected, with analysts estimating earnings per share of $1.59 and revenue of $35.94.

The performance in this quarter far outweighs the company’s output in the same period last year. Due to the Coronavirus pandemic, Chevron lost 1.59 per share on an adjusted basis and revenue of $13.49 billion.

The results of the second quarter are also better than the first, with demand for products increasing as more countries reopen their economies. In Q1 2021, Chevron earned 90 cents per share on an adjusted basis and reported a revenue of $32.03 billion.

Chevron To Resume Share Repurchases

After recording profits for the second consecutive quarter, Chevron said it would resume repurchasing shares again in the third quarter. Mike Wirth, Chevron’s chairman and CEO, said, “Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending. We will resume share repurchases in the third quarter at an expected rate of $2-3 billion per year.”

The oil giant said it would continue to exercise discipline regarding its capital spending. The company cut down capital spending by 32% over the past year. The shares of Chevron rose by over 1.3% at Friday’s pre-market trading session, thanks to the news of the company’s positive quarter.

CVX stock chart. Source: FXEMPIRE

Year-to-date, CVX is up by over 20%, with investors appreciating the company’s performance in the first two quarters of 2020.

An Economic Data Deluge Delivers EUR Support as the Eurozone Economy Bounces Back

Following interest in the German economy through much of the week, it was the Eurozone and member state economies in focus this morning.

The numbers were skewed to the positive, supporting market optimism.

Member States

In the 2nd quarter, the French economy expanded by 0.9%, quarter-on-quarter, reversing a 0.1% contraction in the previous quarter.

The German economy expanded by 1.5%, partially reversing a 2.1% contraction from the 1st quarter.

Italy and Spain also saw growth in the quarter.

In the 2nd quarter, the Spanish economy grew by 2.8%, reversing a 0.4% contraction from the 1st quarter. Stats from Italy were also positive, with the economy growing by 2.7%. In the 1st quarter, the economy had grown by just 0.2%, quarter-on-quarter.

The Eurozone

In the 2nd quarter, the Eurozone economy grew by 2.0%, quarter-on-quarter, reversing a 0.3% contraction from the previous quarter.

Year-on-year, the economy grew by 13.7% after having contracted by 1.3% in the previous quarter. Economists had forecast a 12.6% increase.

Inflation figures were also in focus, with the annual rate of inflation ticking up from 1.9% to 2.2%. Economists had forecast an annual rate of inflation of 2.0%.

The pickup in inflationary pressures muted unemployment figures for the Eurozone, however. In June, the Eurozone’s unemployment rate slipped from 8.0% to 7.7%. Economists had forecast a fall to 7.8%.

While the economy was in recovery, the need for a consumer driven recovery remains in question as inflationary pressures build.

Market Impact

In response to today’s stats, the EUR fell to a low $1.18751 before climbing to a post-stat and current day high $1.19087.

At the time of writing, the EUR was up by 0.09% to $1.18974.

EURUSD 300721 Hourly Chart

Next Up

Personal spending, inflation, and consumer sentiment figures from the U.S.

Ferrari’s Revenue to More Than Double in Q2; Target Price $238

The luxury sports car maker Ferrari is expected to report earnings of $1.26 per share for the second quarter, representing a 3,050% increase over $0.04 per share a year earlier.

The company, known for its prancing horse logo, would post revenue growth of over 107% to around $1.3 billion. According to ZACKS Research, the company has beaten earnings per share (EPS) estimates in three of the last four quarters.

The U.S. listed Ferrari shares have slumped about 6% so far this year. The stock closed 1.88% higher at $216.21 on Thursday.

Analyst Comments

“Growth potential and strong execution. Global shipments of >11k units in 2021, growing at a 9.1% CAGR to 2030 ending at ~22k shipments. Adj. EBITDA margins rise to 35% in 2021 on improved mix and pricing after launching 5 new models in 2020 and 2 in 2021,” noted Adam Jonas, equity analyst at Morgan Stanley.

Ferrari trades at a justified premium to luxury brands, in line with luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China & Asia-Pac, as well as exhibiting a unique moat with a world-renowned brand and a 12+ month customer order book.”

Ferrari Stock Price Forecast

Nine analysts who offered stock ratings for Ferrari in the last three months forecast the average price in 12 months of $238.63 with a high forecast of $281.00 and a low forecast of $202.00.

The average price target represents a 10.35% change from the last price of $216.24. From those nine analysts, four rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $265 with a high of $350 under a bull scenario and $160 under the worst-case scenario. The firm gave an “Overweight” rating on the luxury automaker’s stock.

Several other analysts have also updated their stock outlook. BofA slashed the price objective to $281 from $287. UBS Group cut their price objective to $238 from $247 and set a buy rating.

NASDAQ Bearish Divergence, Amazon’s After-Hour Losses Weighing on US Futures Overnight

U.S. stock index futures are down sharply in Friday’s pre-market session as a disappointing earnings report from Amazon.com threatened to dampen an otherwise strong month ahead of July’s final day of trading. The early price action has put the major futures indexes in a position to post a potentially bearish closing price reversal top. If confirmed, this could mean a weak start to August.

Early Trading Results

At 04:41 GMT, September E-mini S&P 500 Index futures are trading 4378.25, down 33.50 or -0.76%. September E-mini Dow Jones Industrial Average futures are at 34863, down 111 or -0.32% and September E-mini NASDAQ-100 Index is trading 34861, down 113 or -0.32%.

Possible Bearish Divergence

On Thursday, the S&P 500 Index and the Dow Jones Industrial touched record highs but the NASDAQ Composite underperformed. This created a divergence in the major indexes, suggesting weakness in the technology sector.

Weighing on the tech-heavy NASDAQ Composite during the regular session were shares of Facebook, which tumbled 4% after the social media company’s earnings report.

A disappointing IPO from online brokerage firm Robinhood helped cap NASDAQ’s gains throughout the regular session. The stock opened at $38 per share on Thursday, but eventually closed its debut session more than 8% lower at $34.82 per share.

The weakness carried over into the after-hours and pre-market sessions after e-commerce giant Amazon and social media platform Pinterest released their earnings reports to investors.

Amazon equity sank 7.4% in extended trading after it reported its first quarterly revenue miss in three years and gave weaker guidance. The move in Amazon’s stock helped weigh on NASDAQ-100 futures. Pinterest fell even further, down 19%, after saying it lost monthly users during the three months ended June 30.

Thursday Recap

Thursday’s positive session came despite a government report that showed U.S. second-quarter gross domestic product accelerated 6.5% on an annualized basis, considerably less than the 8.4% Dow Jones estimate. Meanwhile, weekly initial claims surprisingly came in higher-than-expected.

Helping to underpin the markets was the Fed news from late Wednesday. Many investors were relieved that the Federal Reserve signaled no imminent plans for dialing back asset purchases.

Fed Chairman Jerome Powell also noted that while the economy has come a long way since the COVID-19 recession, it still has a ways to go before the central bank considers adjusting its easy-money policies.

Near-Term Outlook

The bearish divergence between the NASDAQ and the other major indexes could be an early sign that a major top is forming. If the tech-heavy NASDAQ trades sharply lower, it will drag the technology sector of the S&P 500 with it. The Dow is not likely to feel as much pain since it is tech unweighted.

The U.S. stock markets could be facing several near-term headwinds including summer vacation until after the U.S. Labor Day holiday. This would lead to low volume trading sessions. Overvaluation is another concern as well as the coronavirus outbreak.

One major concern is that investors won’t have a clue as to what the Fed is planning to do about tapering until it meets on September 21-22.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: 2nd Quarter GDP and July Inflation in Focus

Economic Calendar

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was another bullish day for the European majors on Thursday.

The CAC40 rose by 0.37%, with the DAX30 and the EuroStoxx600 ending the day up by 0.45% and by 0.46% respectively.

Market reaction to Wednesday’s dovish FED and economic data from the Eurozone and the U.S provided the majors with support.

From the Eurozone, German unemployment figures impressed, while stats from the U.S looked to have put a near-term lid on any need for the FED to make a move. U.S GDP and jobless claims figures were good enough, however, to support riskier assets and not spook the markets.

Support also came from corporate earnings releases on the day.

The Stats

The German economy was in focus once more on Thursday, with unemployment and inflation the key stats of the day.

In July, unemployment slid by 91k, following a 39k decline in June. As a result of the decline, the unemployment rate fell from 5.9% to 5.7%. Economists had forecast a 22k decline and for the unemployment rate to fall to 5.8%.

On the inflation front, Germany’s annual rate of inflation accelerated from 2.3% to 3.8% in July, according to prelim figures. Economists had forecast a pickup to 3.2%.

Month-on-month, consumer prices rose by 0.9%, following a 0.4% increase in June. Economists had forecast a 0.4% rise.

From the U.S

1st estimate GDP numbers for the 2nd quarter were out along with the weekly jobless claim figures.

In the 2nd quarter, the U.S economy grew by 6.5% in the 2nd quarter, ticking up from a 1st quarter 6.4%. Economists had forecast 8.5% growth in the quarter, however.

On the employment front, U.S jobless claims fell from 424k to 400k in the week ending 23rd July. Economists had forecast a decline to 370k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Daimler rallied by 2.80%, with BMW and Volkswagen ending the day up by 1.40% and by 1.28% respectively. Continental saw a more modest 0.80% gain on the day.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 3.23% and by 1.74% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas gained 1.78%, with Soc Gen and Credit Agricole rising by 1.55% and by 1.38% respectively.

It was also a bullish day for the French auto sector. Stellantis NV rallied by 3.36%, with Renault ending the day up by 0.62%.

Air France-KLM and Airbus SE also found further support, rising by 1.06% and by 0.61% respectively.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday, marking the 2nd decline of the week.

Following a 5.42% fall on Wednesday, the VIX declined by 3.33% to end the day at 17.70.

The NASDAQ rose by 0.11%, with the Dow and the S&P500 ending the day up by 0.44% and by 0.42% respectively.

VIX 300721 Daily Chart

The Day Ahead

It’s a particularly busy day ahead on the economic calendar. Eurozone and member state 1st estimate GDP numbers for the 2nd quarter are due out later today.

Expect plenty of interest in the numbers. We have seen concerns over the resilience of the economic recovery test support for the majors of late. Weaker than expected numbers would weigh.

Prelim inflation and consumer spending figures are also due out but will likely play 2nd fiddle to the GDP numbers.

From the U.S, inflation and personal spending figures will also influence late in the session.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 21 points.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD: U.S. Dollar Weakness Pushes Loonie to Two-Week High; Volatility To Last

The Canadian dollar rose against its U.S. counterpart on Thursday as the U.S. dollar tumbled to a month low after the Federal Reserve reiterated that the interest rate will remain zero for a long time.

Today, the dollar to loonie conversion fell to 1.2447, from 1.2527 on Wednesday. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened about 0.6% so far this month.

“Canada’s headline inflation faced a slowdown (from 3.6% to 3.1% YoY) in June. That is probably a welcome development by the Bank of Canada as it supports the central bank’s view that inflation spikes will have a transitory nature. That said, it will hardly impact the BoC’s tapering plans, in our view. After all, the jobs market has proven to be very strong in the recovery and core inflation was broadly unchanged (and above target) from May to June,” noted Petr Krpata, Chief EMEA FX and IR Strategist at ING.

“We remain of the view that the BoC will end asset purchases by the end of 2021 and that the case for the first hike in 2022 is getting stronger. From an FX perspective, we think that the central bank’s hawkishness can help CAD outperform once market sentiment improves and investors find fresh interest in entering reflationary/carry trades.”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, hit this month’s low of 91.910 and was trading 0.42% lower at 91.934 at the time of writing.

Following the Fed’s monetary policy announcement on Wednesday, the dollar lost momentum after it noted that a rate hike in the near future is unlikely. No hints were given by the U.S. central bank about reducing its purchases of government bonds.

“In terms of the dollar, the currency was slightly softer following the meeting. This suggests currency watchers may have been expecting somewhat stronger guidance from the Fed on the ‘tapering’ issue,” noted analysts at AIB.

“As the European session gets underway this morning, the modestly softer dollar tone is reflected in EUR/USD trading up at the midpoint of $1.18-1.19, while GBP/USD has regained some ground in $1.39 territory. Elsewhere, EUR/GBP remains pinned down near to the 85p mark.”

Nevertheless, the USD is at high risk of recovering over the next year. This is partially due to expectations of two rate hikes in 2023 by the Fed. A stronger dollar and growing odds of the Fed tightening monetary policy sooner than expected would push the USD/CAD pair higher.

Oil prices in Canada have edged higher amid hopes of an inventory report that is expected to be bullish. Higher oil prices result in increased U.S. dollar earnings for Canadian exporters, which translate to a stronger loonie. U.S. West Texas Intermediate (WTI) crude futures traded higher by 0.67 cents, or 0.94%, to $73.06 a barrel.

German Inflation Hits 13-Yr High, Union Demands “Strong Wage Increases”

By Rene Wagner and Paul Carrel

Consumer prices, harmonised to make them comparable with inflation data from other European Union countries, rose by 3.1% in July compared with 2.1% in June, the Federal Statistics Office said. A Reuters poll had pointed to a reading of 2.9%.

July’s reading was the highest since August 2008, when the harmonised inflation rate hit 3.3%, an official at the Statistics Office said.

The rise pushed the inflation rate further above the European Central Bank’s 2% target, and fuelled a debate about whether the increase in the cost of living will persist.

“From today’s perspective, a sustained increase in inflation is not to be expected,” an Economy Ministry spokesperson said, citing base effects from a temporary reduction in VAT rates in the second half of 2020 that affected comparisons.

However, German central bank chief Jens Weidmann has said he is worried about the prospect of the ECB’s low-interest-rate environment being extended for too long. Weidmann said his advisers anticipated inflation nearing 5% in Germany later this year.

Weidmann made his comments after the ECB pledged to keep interest rates at record lows for even longer to boost sluggish inflation and warned that the fast-spreading Delta variant of the coronavirus poses a risk to recovery.

ING economist Carsten Brzeski said supply chain disruptions and higher commodity costs could put more pressure on prices, adding: “Don’t rule out that headline inflation north of 4% at the end of the year will affect wage negotiations in 2022.”

Services sector trade union Verdi jumped on the acceleration in inflation to call for robust wage rises.

“We need strong wage increases for employees precisely because of rising prices,” Verdi deputy chair Andrea Kocsis told Reuters.

Holger Schmieding, economist at Berenberg Bank, said some service sector businesses had taken advantage of the reopening of the economy after COVID-19 lockdowns to raise their prices.

“In the coming months, the inflation rate will remain high and even tend to increase somewhat,” he added.

Euro zone inflation figures for July are due on Friday. In June, the rate ran at 1.9%.

The ECB said last week it would not hike borrowing costs until it sees inflation reach its 2% target “well ahead of the end of its projection horizon and durably”.

(Writing by Paul Carrel; Editing by Douglas Busvine and Carmel Crimmins)

Comcast’s Shares Up By 2% After Beating Earnings Expectations

The shares of Comcast are up by over 2% today after the company reported its second-quarter earnings, surpassing analysts’ expectations.

Comcast’s Revenue Surpasses Expectation

Telecommunication conglomerate Comcast reported its second-quarter earnings earlier today, with the company outperforming analyst’s expectations. According to its report, the adjusted earnings per share was 84 cents, higher than the 67 cents expected in a Refinitiv survey of analysts.

Furthermore, Comcast’s revenue in the second quarter of the year was $28.55 billion vs. $27.18 billion in the Refinitiv survey. The biggest win for the company was the huge number of high-speed internet customers it added during that period. According to Comcast, it added 345,000 new high-internet speed customers, surpassing the expected value of 270,000.

The company stated that the net addition for high-speed internet customers in Q2 was its best second-quarter performance on record. Comcast’s cable business remains its biggest revenue generator, raking in $16 billion, up 10.9% from a year ago. Furthermore, NBCUniversal also saw a surge in revenue, booking $8 billion for the second quarter of 2021, up 39.2% from a year ago.

The entertainment segments of NBCUniversal had been affected by the pandemic, making it almost impossible for theaters and theme parks to operate. However, Comcast has recorded positive news in this regard, as the Coronavirus vaccine allows partial resumption of operations.

Meanwhile, studios revenue is also slowly recovering, raking in $2.2 billion during the quarter. This is up from 8.4% that was recorded last year. The partial reopening of theme parks saw this aspect of Comcast’s business generate $1.1 billion.

Although the revenue generated from Sky surged by 14.9%, the company lost 248,000 subscribers after the completion of the soccer season.

Comcast’s Shares Rally After

The shares of Comcast began to rally as soon as the market opened today. At the time of this writing, Comcast’s shares are up by over 2%, and it continues to increase as traders adjust to the news of the earnings.

CMCSA stock chart. Source: FXEMPIRE

Year-to-date, CMCSA is up by over 10%, rising from $51 per share to currently trade at $59 per share.

U.S. Pending Home Sales Decline in June

By Evan Sully

The National Association of Realtors (NAR) said on Thursday its Pending Home Sales Index, based on contracts signed last month, fell 1.9% to 112.8. Economists polled by Reuters had forecast pending home sales would increase 0.3%.

Pending home sales for May were revised to show an increase of 8.3% instead of the 8.0% gain previously reported.

Pending home contracts are seen as a forward-looking indicator of the health of the housing market because they become sales one to two months later.

“Pending sales have seesawed since January, indicating a turning point for the market,” Lawrence Yun, NAR’s chief economist, said in a statement. “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”

Compared with one year ago, pending home sales were down 1.9%.

Sharp drops in pending home sales in the South and West in June outweighed modest increases in the Northeast and Midwest.

(Reporting by Evan Sully; Editing by Paul Simao)