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…

Women Should Make Up at Least 40% of UK Boards, Says Watchdogs

By Huw Jones

Investors are increasingly putting their money into companies that meet environmental, social and governance (ESG) objectives, including cutting carbon emissions or employing a more diverse workforce.

The proposals build on voluntary initiatives to increase diversity, but will push companies to do more. Britain’s top 350 listed companies have largely met a target of 33% women on their boards but fallen short of a target that each FTSE 100 board should have at least one director of colour by 2021.

The FCA, which polices the listing rules for all types of companies, also proposed that at least one senior position, such as company chair, chief executive or chief financial officer, be held by a woman, and that at least one board member should be from a non-white ethnic minority background.

The changes to the FCA’s listing rules are expected to take effect in late 2021 after a public consultation on the proposals that would affect 1,106 companies.

UK and overseas companies listed in London would have to comply with the targets or explain to shareholders in their annual reports why they have fallen short.

The FCA said that it may, at a later date, look to expand reporting and targets to other areas such as sexual orientation and disability and other aspects of diversity such as lower socio-economic background.

“We may also seek to widen the scope of the targets to levels below executive management,” the watchdog said.

It proposed that a wider range of listed companies publish an increased amount of diversity and inclusion data in a standardised format.

“This could include, for example, considerations of ethnicity, sexual orientation, disability, lower socio-economic background and other diversity characteristics,” the FCA said in a statement.

“This is a significant step towards transparency in the sector,” said Sarah Ozanne, an employment lawyer at CMS law firm.

The diversity targets would apply to UK and overseas companies with equity shares in either the premium or standard listing segments on the London Stock Exchange.

Last year U.S. stock exchange Nasdaq proposed a new rule requiring all companies on its market to comply or explain why they do not have at least two diverse directors. Hong Kong and Japan have also made similar proposals.

(Reporting by Huw JonesEditing by Gareth Jones, Barbara Lewis, Alexandra Hudson)

The Week Ahead – Corporate Earnings, Economic Data, the FED, and COVID-19 in Focus

On the Macro

It’s busier week ahead on the economic calendar, with 71 stats in focus in the week ending 30th July. In the week prior, just 33 stats had also been in focus.

For the Dollar:

Core durable goods and consumer confidence figures will be in focus on Tuesday. While both sets of numbers are key, consumer confidence should have the greater influence.

On Thursday, 2nd quarter GDP numbers are due out alongside weekly jobless claims data.

While 2nd quarter GDP numbers will be the key driver, another increase in claims would overshadow any positive GDP numbers.

At the end of the week, personal spending and consumer sentiment figures will also draw attention.

In the week ending 23rd July, the Dollar Spot Index rose by 0.24% to 92.912.

For the EUR:

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

Early in the week, the German economy will be back the spotlight.

German business and consumer sentiment and unemployment figures will be in focus in the 1st half of the week.

On Friday, the focus will then shift to 2nd quarter GDP numbers for France, Germany, and the Eurozone.

Throughout the week, member state and Eurozone prelim inflation figures for June will also draw attention.

For the week, the EUR fell by 0.30% to $1.1771.

For the Pound:

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

Economic data is limited to housing sector data that should have a limited impact on the Pound.

A lack of stats will leave the Pound in the hands of COVID-19 news updates in the week.

The Pound ended the week down by 0.14% to $1.3748.

For the Loonie:

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

Inflation figures are due out on Wednesday ahead of GDP numbers on Friday.

While both sets of numbers will influence, market risk sentiment and crude oil pries will remain the key driver. Rising COVID-19 cases continue to threaten to derail the global economic recovery and weigh on demand for crude oil.

The Loonie ended the week up 0.39% to C$1.2564 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Consumer and wholesale inflation figures are due out in the week.

While wholesale inflation will influence, expect consumer inflation figures to be key.

Away from the economic calendar, any new COVID-19 containment measures would further test Aussie Dollar support.

The Aussie Dollar ended the week down by 0.47% to $0.7366.

For the Kiwi Dollar:

It’s a quiet week ahead. Early in the week, stats are limited trade data. Late in the week, consumer confidence numbers will also be in focus.

While positive numbers will provide the Kiwi with support, market risk sentiment will influence.

Any further signs of a slowdown to the global economic recovery and expect the Kiwi Dollar to come under pressure.

The Kiwi Dollar ended the week down by 0.36% to $0.6974.

For the Japanese Yen:

Early in the week, private sector PMIs for July will be in focus.

Both sets of numbers will draw plenty of attention ahead of a busy 2nd half of the week.

At the end of the week, retail sales and prelim industrial production figures will have a greater impact on the markets.

The Japanese Yen fell by 0.44% to ¥110.550 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

At the end of the week, NBS private sector PMIs from China will come into view. The numbers are due out next weekend.

The Chinese Yuan ended the week down by 0.03% to CNY6.4813 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…

Corporate Earnings

Among the big names from the U.S include Apple Inc. (Tues), Microsoft Corp. (Tues), and Amazon.com Inc. (Thurs).

The Weekly Wrap – Another Win for the Greenback as COVID-19 Raises the Alarm

The Stats

It was a quieter week on the economic calendar, in the week ending 23rd July.

A total of 33 stats were monitored, which was down from 66 stats in the week prior.

Of the 33 stats, 15 came in ahead forecasts, with 18 economic indicators coming up short of forecasts. There were no stats that were in line with forecasts in the week.

Looking at the numbers, 14 of the stats reflected an upward trend from previous figures. Of the remaining 19 stats, all 19 reflected a deterioration from previous.

For the Greenback, market concerns over the resilience of the global economic recovery delivered Dollar support. Economic data from the U.S was mixed, however, limiting the upside. In the week ending 23rd July, the Dollar Spot Index rose by 0.24% to 92.912. In the previous week, the Dollar had risen by 0.60% to 92.687.

Out of the U.S

The markets had to wait until Thursday for the first set of key stats.

Jobless claim figures disappointed. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

At the end of the week, prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily on the composite.

In the equity markets, the NASDAQ rallied by 2.84%, with the Dow and the S&P500 ending the week up by 1.06% and by 1.96% respectively.

Out of the UK

It was quieter week. On Thursday, CBI industrial trend orders disappointed, falling from 19 to 17. Economists had forecast a more modest decline to 18.

At the end of the week, retail sales and private sector PMI numbers were the key stats of the week, however.

In June, retail sales rose by 0.5% in June, partially reversing a 1.30% fall from May. Year-on-year, sales was up 9.7%, falling short of a forecasted 10.1% increase. In May, sales had been up by 24.6%.

Private sector PMIs were also disappointing. In July, the services PMI fell from 62.4 to 57.8, with the manufacturing PMI falling from 63.9 to 60.4.

As a result, the composite PMI fell from 62.2 to 57.7.

In the week, the Pound fell by 0.14% to end the week at $1.3748. In the week prior, the Pound had fallen by 0.96% to $1.3767.

The FTSE100 ended the week up by 0.28%, following a 1.60% loss from the previous week.

Out of the Eurozone

It was a quieter week.

Eurozone consumer confidence and French, German, and Eurozone private sector PMIs were in focus.

It was a mixed set of numbers, however.

Consumer confidence in the Eurozone waned in July, with the index falling from -3.3 to -4.4. Economists had forecast an increase to -2.6.

More significant, however, were the prelim PMI numbers for July.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

On the monetary policy front, the ECB left rates unchanged, which was in line with market expectations. ECB President Lagarde continued to deliver assurances to the markets, ultimately leading to a pullback in the EUR and supporting the European boerses on the day.

For the week, the EUR fell by 0.30% to $1.1771. In the week prior, the EUR had fallen by 0.59% to $1.1806.

The CAC40 rose by 1.68%, with the DAX30 and the EuroStoxx600 ending the week up by 0.83% and by 1.49% respectively.

For the Loonie

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

Retail sales figures were in focus on Friday.

In June, retail sales fell by 2.1%, following a 5.7% slide in May. Economists had forecast a 3.2% decline.

A sharp rebound in crude oil prices provided the Loonie with much-needed support, however.

Early in the week, the Loonie had visited $1.27 levels against the Greenback before finding support.

In the week ending 23rd July, the Loonie rose by 0.39% to C$1.2564. In the week prior, the Loonie had fallen by 1.33% to C$1.2613.

Elsewhere

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

In the week ending 23rd July, the Aussie Dollar fell by 0.47% to $0.7366, with the Kiwi Dollar down by 0.36% to $0.6974.

For the Aussie Dollar

It was a quieter week, with retail sales and RBA meeting minutes in focus.

Retail sales disappointed, falling by 1.8% in June. Economists had forecast a 0.6% decline following May’s 0.4% rise. The downside stemmed from a reintroduction of COVID-19 containment measures, as new cases spiked once more.

The RBA meeting minutes had a relatively muted impact on the Aussie Dollar early in the week.

COVID-19 and concerns over the sustainability of the economic recovery pegged the Aussie back.

For the Kiwi Dollar

It was a particularly quiet week, with no major stats to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was another relatively busy week.

Early in the week, inflation figures were in focus ahead of trade data on Wednesday.

Inflationary pressures returned in June, with Japan’s annual rate of inflation rising from -0.1% to 0.2%. The core annual rate of inflation ticked up from 0.1% to 0.2%.

In spite of the modest pickup, there was limited impact on the Yen. The numbers are unlikely to shift the BoJ’s stance on monetary policy.

On Wednesday, trade data was upbeat, with Japan’s trade balance rising from a ¥189.4bn deficit to a ¥383.2bn surplus. Year-on-year, exports were up 48.6% in June. In May, exports had been up by 49.6%.

The Japanese Yen fell by 0.44% to ¥110.55 against the U.S Dollar. In the week prior, the Yen had risen by 0.06% to ¥110.070.

Out of China

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

On the monetary policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 23rd July, the Chinese Yuan ended the week down by 0.03% to CNY6.4813. In the week prior, the Yuan had ended the week flat at CNY6.4792.

The CSI300 and the Hang Seng ended the week down by 0.11% and by 2.44% respectively.

Inflation Worries Overshadow Unilever’s Strong First Half, Hit Shares

Underlying sales for the maker of Dove soap rose 5% in the three months ended June 30, above 4.8% forecast by analysts.

It maintained its 3-5% sales growth forecast for the year, but rising prices of everything from crude to palm and soybean oil made the company cut its operating margin outlook to “about flat” from “slightly up” earlier and flag greater uncertainty surrounding that forecast.

The warning dragged shares of the FTSE 100-listed company down 6.2% by 13:45 GMT, wiping off nearly 7 billion pounds ($9.65 billion)of its market value, and making it the top loser on the index on Thursday.

Finance chief Graeme Pitkethly said he expected cost inflation to be in the high-teens in the second half, above the mid-teens rise anticipated earlier.

He said that since the company issued its guidance in the first quarter, crude oil prices had risen 12%, soy bean oil 21%; while freight and transportation costs had risen and 4% and 7%, respectively.

Unilever said that besides accelerating price hikes, it was introducing pack changes and narrowing promotions in the second half in response to rising costs.

The company raised prices by 1.6% in second quarter. In June those were up to 2.2%

“It is that eternal triangle of the competitiveness of our growth, …. landing the pricing and managing the cost inflation,” Pitkethly said.

Chief Executive Alan Jope said the lag between the impact of commodity costs and the benefits of increased product prices had created “a higher than normal range of likely year end margin outcomes.”

Investec analyst Alicia Forry called the message on costs slightly disappointing.

“They had been confident of passing through cost inflation at the first quarter stage…now they change their tune.”

INFERNO BOOST

Half-year sales rose 5.4%, a touch above the 5.3% forecast, propelled by 8.1% growth in its Foods and Refreshment division, as living restrictions began to ease in many markets.

In Europe, sales of ice cream eaten out of home grew at double-digits, boosted by markets like Italy where its new Magnum lines honoring Dante – Inferno, Purgatorio and Paradiso – sold well. Sales of teas also saw strong volume growth.

Jope also said the company was “fully committed to staying in Israel” after the company was embroiled in a controversy earlier this week over its U.S. subsidiary Ben & Jerry’s move to end ice cream sales in occupied Palestinian territories that has caused a backlash against the brand in Israel.

Unilever also said it had completed the review of its tea business, and anticipates either an initial public offering, sale or partnership as a final outcome of the separation.

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

($1 = 0.8476 euros)

($1 = 0.7276 pounds)

($1 = 0.7257 pounds)

(Reporting by Siddharth Cavale and Indranil Sarkar in Bengaluru; Editing by Tomasz Janowski and Keith Weir)

 

Virus, Inflation Woes Send FTSE 100 to Two-Month Low

The blue-chip FTSE 100 was down 1.4% by 0709 GMT, with BP and Royal Dutch Shell tracking a slide in oil prices.

Mining and financial stocks were also among the biggest decliners. No single FTSE 100 stock posted gains in early trading.

The mid-cap FTSE 250 tumbled 1.1% as Prime Minister Boris Johnson lifted most restrictions in England in what some have dubbed “Freedom Day” despite a new wave of COVID-19 cases.

Travel-related stocks sank for the fifth time in six days as the surge in infections raised the spectre of new travel curbs.

British Airways-owner IAG and InterContinental Hotels fell more than 2.5% to the bottom of the FTSE 100.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Arun Koyyur)

The Week Ahead – COVID-19 , Economic Data, and the ECB in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 32 stats in focus in the week ending 23rd July. In the week prior, 66 stats had also been in focus.

For the Dollar:

On Thursday, jobless claims will draw plenty of attention.

At the end of the week, prelim private sector PMIs for July will also be in focus.

Expect the services PMI and the initial jobless claim figure to be the key numbers of the week.

In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687.

For the EUR:

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

Late in the week, business and consumer confidence figures will be in focus. With the ECB looking for consumption to fuel the economic recovery, the numbers will influence.

On Friday, prelim private sector PMIs for France, Germany, and the Eurozone will also be in focus.

The markets will be looking for any economic speed bumps following disappointing stats from Germany recently.

On the monetary policy front, the ECB is also in action on Thursday. With the policy revamp and some uncertainty over the economic outlook, it should be an interesting press conference…

For the week, the EUR fell by 0.59% to $1.1806.

For the Pound:

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

CBI industrial trend orders will draw interest on Thursday.

At the end of the week, however, private sector PMI and retail sales figures will be the key stats of the week.

A pickup in spending and service sector activity would deliver the Pound with strong support.

The Pound ended the week down by 0.96% to $1.3767.

For the Loonie:

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

House price figures are due out along with retail sales data.

Expect the retail sales figures to be key on Friday. With economic data on the lighter side, crude oil prices and market risk sentiment will also influence in the week.

The Loonie ended the week down 1.33% to C$1.2613 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Retail sales figures are due out on Wednesday. With consumer spending key to a sustainable economic recovery, Wednesday’s stats will draw plenty of interest.

On the monetary policy front, the RBA monetary policy meeting minutes are due out on Tuesday.

Following the RBNZ’s surprise move last week, any talk of a tightening of monetary policy would give the Aussie Dollar a boost.

The Aussie Dollar ended the week down by 1.16% to $0.7401.

For the Kiwi Dollar:

It’s a particularly quiet week ahead, with no major stats to provide the Kiwi with direction.

A lack of stats will leave the Kiwi in the hands of market risk sentiment in the week.

The Kiwi Dollar ended the week up by 0.19% to $0.6999.

For the Japanese Yen:

Inflation and trade data on Tuesday will be the only stats of the week. Expect the trade data to garner the greatest interest.

On Wednesday, the BoJ’s monetary policy meeting minutes are due out for the June meeting. We don’t expect the dated minutes to have a material impact on the Yen, however.

The Japanese Yen rose by 0.06% to ¥110.070 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

In the week, the PBoC is in action, though the markets are expecting loan prime rates to be left unchanged.

The Chinese Yuan ended the week flat at CNY6.4792 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…

The Weekly Wrap – The Greenback Comes out on Top as U.S Inflation Spikes

The Stats

It was a busier week on the economic calendar, in the week ending 16th July.

A total of 66 stats were monitored, which was up from 42 stats in the week prior.

Of the 66 stats, 34 came in ahead forecasts, with 23 economic indicators coming up short of forecasts. There were 9 stats that were in line with forecasts in the week.

Looking at the numbers, 32 of the stats reflected an upward trend from previous figures. Of the remaining 34 stats, 32 reflected a deterioration from previous.

For the Greenback, economic data continued to deliver Dollar support. The upside came in spite of FED Chair Powell delivering dovish testimony in the week. In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687. In the previous week, the Dollar had fallen by 0.13% to 92.102.

Out of the U.S

Inflation figures drove support for the Greenback early in the week.

The annual rate of inflation accelerated from 5.0% to 5.4% in June, with the core annual rate of inflation picking up from 3.8% to 4.5%.

Wholesale inflationary pressures were also on the rise, with the producer price index increasing by 1.0% in June. In May, the index had risen by 0.7%.

In the 2nd half of the week, jobless claims, retail sales, and consumer sentiment were in focus.

It was a mixed set of numbers for the Dollar.

In the week ending 9th July, initial jobless claims fell from 386k to 360k.

Retail sales beat forecasts, with sales up 0.6% month-on-month. Economists had forecast a 0.5% decline following a 1.7% slide in May. Year-on-year, sales was up 18%, coming in ahead of a forecasted 14.0% increase. In May, retail sales had risen by 27.6% year-on-year.

While the jobless claims and retail sales figures were positive, consumer sentiment waned in July.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 85.5 to 80.8. Economists had forecast a rise to 86.0.

Manufacturing sector data from Philly and NY State, industrial production, and business inventories were also out but had a muted impact on the markets.

On the monetary policy front, FED Chair Powell delivered 2 days of testimony to lawmakers. Powell talked of the FED’s willingness to let inflation run hotter in order to avoid the mistake of tightening policy too soon. The FED Chair’s assurances had limited impact on the Greenback, however.

In the equity markets, the NASDAQ slid by 1.87%, with the Dow and the S&P500 ending the week down by 0.52% and by 0.97% respectively.

Out of the UK

It was busier week. Mid-week, inflation figures delivered Pound support, with the UK’s annual rate of inflation picking up from 2.1% to 2.5%.

On Thursday, employment figures were also positive for the Pound.

In June, claimant counts slid by 114.8k, following a 92.6k decline in May.

The unemployment rate saw an increase from 4.7% to 4.8% in May, though this is likely to fall back following the June claim figures.

While the stats were positive for the Pound, uncertainty over the impact of the Delta variant on the economy lingered.

In the week, the Pound fell by 0.96% to end the week at $1.3767. In the week prior, the Pound had risen by 0.56% to $1.3901.

The FTSE100 ended the week down by 1.60%, following a 0.02% loss from the previous week.

Out of the Eurozone

It was another busy week.

Industrial production and trade data for the Eurozone were in focus along with finalized inflation figures for June.

For the Eurozone, industrial production fell by 1.0%, reversing a 0.6% rise from April.

In June, the Eurozone’s trade surplus narrowed from €10.9bn to €7.5bn. Economists had forecast a widening to €16.4bn.

Following a shift in the ECB’s policy on price stability, however, the inflation figures had limited impact.

The Eurozone’s annual rate of inflation softened from 2.0% to 1.9%, falling below the ECB’s new 2% target rate.

The core annual rate of inflation softened from 1.0% to 0.9%.

For the week, the EUR fell by 0.59% to $1.1806. In the week prior, the EUR had risen by 0.09% to $1.1876.

The CAC40 fell by 1.06%, with the DAX30 and the EuroStoxx600 ending the week down by 0.94% and by 0.64% respectively.

For the Loonie

Monetary policy was the main area of focus in the week.

While holding monetary policy unchanged on Wednesday, the BoC revised down growth forecasts, weighing on the Loonie. The BoC revised its 2021 growth forecast down from 6.5% to 6.0%. While revised down for 2021, the BoC revised its growth forecast for 2022 up from 3.7% to 4.6%.

In spite of the downward revision to this year’s growth forecast, the BoC announced that it would reduce its weekly bond purchases from $3bn to $2bn, citing a strengthening in the economic recovery…

Stats in the week included manufacturing sales, ADP employment change, and wholesale sales figures.

While having limited impact on the Loonie, the stats were skewed to the negative.

Also weighing on the Loonie were falling crude oil prices in the week.

In the week ending 16th July, the Loonie slid by 1.33% to C$1.2613. In the week prior, the Loonie had fallen by 1.01% to C$1.2447.

Elsewhere

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

In the week ending 16th July, the Aussie Dollar slid by 1.16% to $0.0.7401, while the Kiwi Dollar rose by 0.19% to $0.6999.

For the Aussie Dollar

It was a busier week, with consumer confidence and employment figures in focus.

The stats were skewed to the positive, though had a limited impact on the Aussie Dollar.

In July, the Westpac Consumer Confidence Index rose by 1.5% to $108.8. The survey was carried out before the rollout measures announced on 9th July.

Employment figures also impressed, with a 51.6k jump in full employment following a 97.5k increase in May. As a result of the further increase in hiring, the unemployment rate fell from 5.1% to 4.9% in June.

While the stats were positive for the Aussie Dollar, new COVID-19 restrictions weighed on the Aussie in the week.

For the Kiwi Dollar

It was a busy week.

Early in the week, electronic card retail sales and business confidence figures delivered mixed results.

In June, card retail spending increased by a further 0.9%, following a 1.7% rise in May.

Business confidence waned, however, with the NAB Business Confidence Index falling from 20.0 to 11.0.

By contrast, economic data in the 2nd half of the week impressed.

In June, the Business PMI rose from 58.6 to 60.7, with inflation accelerating in the 2nd quarter.

The annual rate of inflation accelerated from 1.5% to 3.3%, with consume prices up 1.3% in the quarter.

While the stats influenced, the RBNZ monetary policy decision on Wednesday was key.

Catching the markets off-guard, the RBNZ agreed to end the additional asset purchases under the LSAP programme by 23rd July.

For the Japanese Yen

It was another relatively busy week.

Early in the week, machinery orders provided some comfort, with orders up 7.8% in May.

Industrial production figures disappointed, however, with production falling by 6.5% in May.

Tertiary industry figures were also week, with the index falling by 2.7% in May.

At the end of the week, the Bank of Japan was also in focus but failed to deliver any surprises.

The Japanese Yen rose by 0.06% to ¥110.07 against the U.S Dollar. In the week prior, the Yen had risen by 0.82% to ¥110.140.

Out of China

It was a big week on the economic data front.

Early in the week, trade data for June was in focus ahead of 2nd quarter GDP numbers on Thursday.

While trade data impressed, with exports up 32.2%, GDP numbers disappointed in the week.

Year-on-year, the Chinese economy expanded by 7.9%, which was down from 18.3% in the 1st quarter. Quarter-on-quarter, the economy expanded by 1.3%, which was up from 0.6% growth in the 1st quarter, however.

Other stats at the end of the week included fixed asset investment, industrial production, and retail sales data.

The full set of numbers were softer in June than back in May, adding further pressure on riskier assets.

In the week ending 16th July, the Chinese Yuan ended the week flat at CNY6.4792. In the week prior, the Yuan had fallen by 0.09% to CNY6.4790.

The CSI300 and the Hang Seng ended the week up by 0.50% and by 2.41% respectively.

Stocks Slide, Bond Yields Dip as Inflation Worries Linger

The Commerce Department said retail sales rose 0.6% in June, contrary to an expected decline, adding weight to those who say inflation will run faster than the Federal Reserve forecasts and force interest rates to rise sooner than it projects.

Yet bond yields pared most initial gains, with the benchmark 10-year U.S. Treasury note trading at 1.2987%, or a scant 0.2 basis points higher on the day. The Fed’s dovish outlook outweighed fears of a prolonged inflation spike.

Equity markets declined as investors turned risk-averse, with defensive stocks gaining both on Wall Street and in Europe.

MSCI’s all-country world index, a gauge of global shares, closed down 0.62% at 719.17. The index scaled a record peak earlier in the week, but lost 0.61% by week’s end.

In Europe, the FTSEurofirst 300 index fell 0.38% to 1,754.64. European defensive shares rose, with real estate, utilities and healthcare up between 0.5% and 1% as worries about the coronavirus mounted.

England’s coronavirus crisis could return again surprisingly quickly, the British government’s chief medical adviser said, before lifting all pandemic-led restrictions on Monday despite rising COVID-19 cases.

In California, Los Angeles county will reimpose a mask mandate this weekend, the latest sign of public health officials struggling with rising cases of the Delta variant.

The slide on Wall Street is surprising given earnings from the companies that have reported second-quarter results so far have surpassed estimates by 22.1%, Credit Suisse said in a note.

Removing year-ago comparisons show earnings are up decently from levels two years earlier and inflation is likely running about 2.6%, once last year’s low baseline is removed, said Jason Pride, chief investment office for private wealth at Glenmede in Philadelphia.

“That should ultimately be acceptable to the (equity) market and permit an ongoing upward grind,” Pride said. “My one hesitation is equity market valuations are high.”

Economically sensitive industrials, energy, financials, consumer discretionary and materials are projected to more than double earnings, while so-called big tech and non-cyclicals are expected to grow 36% and 10%, respectively, Credit Suisse said.

The Dow Jones Industrial Average closed down 0.86%, the S&P 500 slid 0.75%, and the Nasdaq Composite lost 0.80%.

For the week, the Dow lost 0.53%, the S&P 500 fell 0.97% and the Nasdaq shed 1.87%. The S&P 500 real estate index rose to a record high on Friday.

Gold prices dipped as a stronger dollar dulled bullion’s appeal, while bond yields were subdued after Fed Chair Jerome Powell this week pledged “powerful support” to ensure the U.S. economic recovery does not falter.

Mark Haefele, chief investment officer at UBS Global Wealth Management, adviser to many of the world’s super-rich, said he expected rates to move higher as the recovery fully takes hold.

“We believe the downward trend in yields will reverse as confidence in the economic recovery mounts. However, we see a rebound in 10-year yields to 2% by year-end as consistent with a continued rally in equities.”

In Europe, Germany’s 10-year yield fell to a new three-month low in cautious trade ahead of next week’s European Central Bank meeting.

Oil ended the week lower, sapped in volatile trade by expectations of growing supplies just when a rise in coronavirus cases could lead to lockdown restrictions and depress demand.

Brent crude settled down 12 cents at $73.59 a barrel. U.S. crude rose 16 cents to end at $71.81 a barrel.

U.S. gold futures settled 0.8% lower at $1,815 an ounce.

In foreign exchange, major currencies were little changed on the day but the dollar headed for its best weekly gain in about a month. The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.10% to 92.675.

The euro slid 0.02% at $1.1810, while the yen rose 0.17% at $110.0500.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4%, weighed down by a 1.1% drop in China’s blue-chip index and a 0.8% fall for Taiwanese shares.

The Asian weakness was in large part driven by lackluster earnings from TSMC, Asia’s biggest firm by market capitalization outside China, which saw its shares fall 4.1%.

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

(Reporting by Herbert Lash, additional reporting by Hideyuki Sano, Swati Pandey, Sujata Rao and Dhara Ranasinghe; Editing by Marguerita Choy, David Gregorio and Sonya Hepinstall)

 

The US Continues To Dominate The World Stock Exchanges – Can This Last Forever? Part I

Not only has the capitalization of global market exchanges changed, but the attitudes of traders/investors have changed as well.

As the reflation/recovery trade setup and as global central banks continued to make efforts to support the post-COVID-19 recovery efforts, it appears that the focus of capital was initially fairly evenly disbursed across multiple global exchanges.  Traders and investors seemed to believe opportunity existed in nearly all global market indexes and exchanges.  Yet, it appears something changed as the world neared the September/October 2020 time frame.  Suddenly, capital started shifting away from growth expectations and into hedging and Risk-Off assets.  Then, in November/December 2020, global traders and investors shifted focus again – targeting US equities, technology, healthcare, and other sectors. The new focus drove an incredible rally phase that has carried into 2021.

In this article, we’re going to explore this shift in how traders/investors perceive opportunities, and why the past 7+ months may have setup a global shift away from continued rally expectations as we move into the second half of 2021.

The US Continues To Dominate Global Investing Focus

First, let’s explore the current global (world) stock market capitalization levels and try to gain some insight into how the global markets have shifted over the past 12+ months.

This graphic shows how the US stock market continues to dominate the global market and how it relates as a driver of global wealth and economic stability.  Comparatively, the US stock market is nearly 10x to 12x larger than than the average of the next largest 5 or 6 global foreign stock market exchanges.

In comparison, there is no other single comparable growth of the global economy than the US – in terms of stock market capitalization, wealth creation, and/or single source/focus of global dynamics.  In short, the US stock market and economy continue to dominate the world in comparison to how money is deployed into investments and related to future expectations for opportunities.  Global traders are making a statement with their own money that they believe the US economy, stock market, and capabilities far exceed any other Nation’s ability to create wealth and opportunity.

(Source: https://www.statista.com/statistics/710680/global-stock-markets-by-country/)

Global Stock Market Capitalization Continues To Climb Higher

This next chart, even though the data ends in 2019, suggests the global stock markets continue to grow in total market capitalization at rates that far exceed the 2000 and 2008 market peaks.  As the US Fed and global central banks have poured more capital into the markets, traders and investors have continued to seek out the best environment for the best returns and safety.  I believe the US stock market and economy have clearly moved to the forefront of all other global markets and that global traders and investors continue to pour capital into the US Dollar-based US stock market exchanges.

This dynamic has really amplified over the past 4+ years as Emerging Markets, Foreign Markets, and global traders have continued to seek out the safest and most secure investments on the planet.  The end result is that no other global stock market exchange and/or investing environment beats the US stock market and economy.

Because this chart ends in 2019, I’ve drawn a MAGENTA line which my team and I believe represents the increase in the world stock market capitalization throughout 2020 and into 2021.  The current global stock market capitalization, which reflects a possibly 55% to 60% US stock market dominance, suggests global capitalization is possibly 85% to 110% higher than the peak in 2007-08 (the Housing Crisis peak).  This suggests that total global market leverage and risk exposure may be 200% to 300% higher than at any time in recent history.  In short, global market risks are likely 2x to 3x higher than at any time over the past 75+ years.

(Source: https://data.worldbank.org/indicator/CM.MKT.LCAP.CD)

US Dominates Top 10 World Stock Exchanges

This recent list of the Top 10 World Stock Exchanges, showing Market Cap, clearly shows the US continues to dominate.  This clearly shows the US economy, stock market, and consumer market is driving the global economic activity.  No matter how you try to slice up the data, the US economy and stock market continue to outpace the nearest global stock market exchanges by more than 3x to 5x total capitalization levels.

Combined, the New York Stock Exchange (NYSE) and the NASADAQ total more than 45 Trillion US Dollars.  Comparatively, a combination of the exchanges ranked 3~10 total $39.64 Trillion US Dollars.  That’s a pretty big comparison when you realize the total of the Shanghai Stock Exchange, Japan Exchange Group, Hong Kong Stock Exchange, Euronext, Shenzen Stock Exchange, London Stock Exchange, Toronto Stock Exchange, and India National Stock Exchange (representing more than ½ of the total world population), equates to only 87.6% of the US NYSE and NASDAQ stock exchange market capitalization.

The world has decided that the US stock market, economy, consumer engagement, and corporations are the driving force behind almost all of the global economic activity and wealth creation anywhere in the world right now.  Nothing is even close to equaling the total capitalization and potential for wealth creation and opportunity as the US.

(Source: https://www.advratings.com/companies/the-largest-stock-exchanges)

In Part II of this article, we’ll explore how the dynamics of the US vs global market indexes are showing how this divergence in market capitalization could be driving very big trends over the next 2+ years.  We’ll also show how vulnerable certain foreign market exchanges may be to broad market rotation events over the next 5+ years.

Simply put, the rotations over the past 20+ years in the US stock market, and the actions of the US Federal Reserve, have strengthened the position of the US consumer, economy, valuations, and future expectations.  If another broad market rotation/reversion event were to take place, we believe the disruption in capital flows and creation will continue to propel the shift towards the US stock market and economy even further.  Leaving many foreign market stock exchanges in very perilous market capitalization and liquidity positions.

Want to know how our BAN strategy is identifying and ranking various sectors and ETFs for the best possible opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

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Have a great day!

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

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

Marketmind: What If Transitory Is Not so Transitory After All?

On Thursday, Michael Saunders became the second Bank of England rate setter in two days to signal it may be time to consider reining in stimulus as inflation ramps up. Earlier this week central banks in Canada and New Zealand took steps towards unwinding post-crisis stimulus.

No surprise then that two-year gilt yields shot up 6 basis points after Thursday’s BoE comments in the biggest one-day jump since February. In contrast, U.S. bond yields continue to be pinned down by Fed chief Jerome Powell’s dovish rhetoric.

But another run of strong data could test the Fed’s resolve too; figures due later this session are expected to see U.S. June retail sales rose in June after declining in May.

In the meantime, equity markets are struggling to hold their nerve in the face of a continued surge in coronavirus infections globally.

Japan’s benchmark Nikkei share average fell below the psychologically key 28,000 mark and MSCI’s Asia stock index, excluding Japan, was last down 0.3%.

European and U.S. stock futures were mixed.

The dollar was headed for its best weekly gain in about a month, supported by investors’ drift toward safety.

Oil prices were a touch weaker, staying under pressure after a compromise deal between leading OPEC producers and a surprisingly poor weekly reading on U.S. fuel demand.

Key developments that should provide more direction to markets on Friday:

– BOJ cuts growth forecast, unveils climate scheme plan

– Ericsson Q2 earnings below market estimates; Burberry reports “excellent start” to its new year, with full-price sales accelerating; Puma raises 2021 outlook nASN001G8Y]

– German car registrations

– U.S. bond sales data

– Federal Reserve events:  New York Fed President John Williams speaks

– U.S. earnings: State Street, Honeywell, General Electric

– European earnings: Sandvik, Adtech, Husquarna, Handelsbanken, Swedbank, Richemont trading statement,

-Fitch to review Greek rating

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

(Reporting by Dhara Ranasinghe; Editing by Sujata Rao)

 

Stocks, Yields Slip as Investors Await Next Catalyst

The number of Americans filing new claims for unemployment benefits fell to a 16-month low last week as the U.S. labor market steadily gains traction while other data showed import prices rose solidly in June but have probably peaked.

Wall Street traded lower even as the four largest U.S. consumer banks posted blockbuster second-quarter results earlier this week that were above analysts’ estimates.

Investors are looking for visibility into future earnings as stocks have already surged in anticipation of stellar growth.

“We had the rally going into the earnings season. Now that we’re actually here, we’re seeing some softness. I wouldn’t be surprised if we don’t see a lot of strength during this reporting season,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Analysts expect strong earnings, with IBES data from Refinitiv showing consensus looking for a 65.8% gain from a year ago, making corporate guidance more important than results.

‘NAME OF THE GAME’

Energy and technology stocks led the decline on Wall Street, with defensive consumer staples and utilities the only two of 11 S&P 500 sectors to gain. Staples have pricing power that could help Procter & Gamble Co, Coca-Cola Co and others rise, once it is clear their margins remain intact, said Tom Hayes, founder and managing member of Great Hill Capital LLC.

“Guidance is the name of the game. A lot of good news is already baked into the market and even with strong guidance, you may get a breather here,” Hayes said.

The MSCI world equity index, which tracks shares in 50 countries, closed down 0.33% to 723.66 after touching a record high on Wednesday. Europe’s broad FTSEurofirst 300 index closed down 0.92% at 1,761.30, less than 20 points from an all-time peak set Monday.

Losses in Europe were broad-based, with economically sensitive stocks such as banks, automakers and travel down between 0.3% and 1.6% as investors grew wary of rising COVID-19 cases and their potential economic impact.

Official data showed that the United Kingdom reported the highest daily increase in COVID-19 cases since Jan. 15.

On Wall Street, the Dow Jones Industrial Average eked out a 0.15% gain but the S&P 500 fell 0.33% and the Nasdaq Composite slid 0.70%.

Shares in emerging markets rose, bucking the global trend, with MSCI’s index gaining 0.77%.

The 10-year Treasury note fell 5.9 basis points to yield 1.2972%, while the dollar index, which tracks a basket of six currencies, rose 0.19% to 92.586.

The rally in U.S. and European bond prices, which show the inverse of yields, suggested growing investor caution.

The dollar has climbed in recent weeks as investors take stock of the Fed’s increasingly upbeat assessment of the U.S. economy, which for some investors has brought forward the timeframe for its next rate rise. Rates have fallen on Japanese buying and investors selling long-dated maturities for shorter-duration government debt, which has pushed prices up.

The euro fell 0.21% at $1.1810, while the yen traded slid 0.18% at $109.7900.

Oil prices fell as investors braced for increased supplies after a compromise agreement between leading OPEC producers and after a surprisingly low weekly reading on U.S. fuel demand.

Brent crude fell $1.29 to settle at $73.47 a barrel, while U.S. crude slid $1.48 to $71.65 a barrel.

Gold hit a one-month peak, spurred by Federal Reserve Chair Jerome Powell’s dovish comments that squashed market interest rates.

U.S. gold futures gained 0.3% to $1,830.00 an ounce.

COVID-19 VARIANT FEARS

China’s economic data showed average growth surpassed the first quarter, while June retail sales and industrial output beat expectations. But it also showed authorities, which only last week injected 1 trillion yuan into the financial system, will ensure that conditions stay loose.

The World Health Organization (WHO) COVID-19 dashboard reported the first weekly rise in global deaths from the virus in 10 weeks and a 5.6% jump in daily case numbers on Wednesday.

“The market is fearing the Delta variant could take a hold of different economies so you are almost seeing that we are back to the ‘bond yields lower, tech doing well’ scenario,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

The likes of Amazon and Google are up 6-8% this month, while China’s biggest tech firms Alibaba and Tencent have surged more than 12% since China’s central bank made a supportive policy tweak for the first time in nearly a year on Friday.

The Chinese yuan dipped to 6.4628 per dollar in Asia after hitting a three-week high of 6.4508 overnight.

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

(Additional reporting by Sujata Rao; Editing by Will Dunham, Alex Richardson, Barbara Lewis and Gareth Jones)

Inflation Woes, Travel Stocks Drag Europe Shares Lower

The pan-European STOXX 600 index fell 0.3% after hitting a record high in the previous session.

Travel & leisure slid 0.8%, with TUI shedding 2.9% on reports that the world’s largest holiday company had cancelled more holidays until August.

UK’s FTSE 100 dropped 0.4% on a stronger pound after data showed British inflation jumped to 2.5% in June, further above the Bank of England’s target and hitting its highest since August 2018.

“The creeping UK headline inflation rate is likely to add to the sense of unease pervading the financial markets about the impact higher prices will have on economies around the world,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.

“Although much of the increases are related to the unusually low level of prices last year due to the pandemic effect, it appears genuine price inflation is also occurring.”

Investors were already nervous after data on Tuesday showed U.S. inflation ran hotter than expected in June, leading many traders to price in faster interest rate hikes.

All eyes now will be on Federal Reserve Chairman Jerome Powell’s congressional testimony starting later in the day.

European Central Bank policymakers have stressed in recent weeks that they will not remove support measures prematurely as the economic recovery is still underway.

Along with euro zone bond yields, the bloc’s banks rallied after sharp falls in the previous session.

Swedish telecoms operator Tele2 gained 4% after it reported an 8% rise in quarterly core earnings, helped by cost savings and lesser pandemic-related headwinds.

German fashion house Hugo Boss jumped 5.1% after it forecast its revenue to grow by 30% to 35% this year.

Italian luxury group Brunello Cucinelli underperformed despite raising its 2021 sales guidance for the second time this year.

German airline Lufthansa slipped 0.6% after it said passenger numbers were currently around 40% of pre-pandemic levels and it was aiming to reach 60%-70% by the end of the year.

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

(Reporting by Sruthi Shankar in Bengaluru; editing by Uttaresh.V and Subhranshu Sahu)

 

Stronger Pound Weighs on FTSE 100 as June Inflation Jumps

The blue-chip FTSE 100 index slid 0.3%, with travel stocks down nearly 0.7%. Retailers Unilever, GlaxoSmithKline, and Diageo were among the top drags as the pound rose after inflation jumped to its highest in almost three years.

The domestically focussed mid-cap index fell 0.4%, with Cineworld being the top loser.

British inflation rose further above the Bank of England’s target in June at 2.5%, up from 2.1% in May, led by higher prices for food, fuel, second-hand cars, clothing, and footwear, official data showed on Wednesday.

That pushed UK’s benchmark 10-year bond yields up by five basis points, but the central bank’s comments that said the spike is likely to be transitory helped curb further losses.

“We’re still stuck in an inflationary limbo, where we can’t tell if rising prices are a statistical blip, or a more concerning and permanent feature of the global economic recovery,” said Laith Khalaf, a financial analyst at AJ Bell.

The blue-chip FTSE 100 has gained nearly 10% so far this year, supported by cheap interest rates, but its pace of growth has slowed since June to trade range-bound near the 7,100 level as higher COVID-19 cases and inflation weighed on investor mood.

Among stocks, AstraZeneca lost 0.7% and was the top drag on the FTSE 100. UK’s competition regulator cleared its $39 billion buyout of U.S.-based Alexion.

Barratt Developments gained 1.3% after it forecast 2021 profit to be marginally above the top end of market expectations.

Snack food firm SSP Group tumbled 2.7% on its chief executive officer’s plans to step down from his role at the end of 2021 to join a private equity-backed business.

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

(Reporting by Shashank Nayar in Bengaluru; Editing by Subhranshu Sahu and Uttaresh.V)

 

Stocks Hit Record; U.S. Treasury Yields Hover Above 5-Month Lows

Last week, a bond market rally pushed the yield of the benchmark 10-year U.S. Treasury note to a five-month low of 1.25% as investors worried that climbing cases of the variant could slow the economic recovery. The yield had risen to as high as 1.78% in March as rising vaccination rates fed expectations for growth.

The World Health Organization warned the Delta variant was becoming dominant and many countries had yet to receive enough doses of vaccine to secure their health workers.

Analysts also cited a lack of supply for the drop in yields. Yields were little changed after Treasury sold $58 billion in three-year notes and $38 billion in 10-year notes, with a sale of $24 billion in 30-year bonds set for Tuesday.

Earnings season begins this week, and the market will take in U.S. inflation data on consumer and producer prices as well as comments from Federal Reserve Chair Jerome Powell.

“Earnings season is going to be warmly greeted as an opportunity for existing biases to be confirmed,” said Mike Zigmont, head of trading and research at Harvest Volatility Management in New York.

“Even if forecasts are not as rosy as what the most bullish had hoped, it’s all going to get rationalized away.”

Benchmark 10-year notes last yielded 1.3712%, from 1.356% late on Friday.

Equity gains on Wall Street were modest, with financials the best-performing S&P sector of the session ahead of results from JPMorgan Chase, Goldman Sachs and Bank of America on Tuesday, but the gains were enough to push each of the three major averages to record closing levels.

The Dow Jones Industrial Average rose 126.02 points, or 0.36%, to 34,996.18, the S&P 500 gained 15.08 points, or 0.35%, to 4,384.63 and the Nasdaq Composite added 31.32 points, or 0.21%, to 14,733.24.

European equities also advanced to close at a record level of 460.83. The pan-European STOXX 600 index rose 0.69% and MSCI’s gauge of stocks across the globe gained 0.50%, closing at a record 727.24.

Investors will watch Powell’s testimony this week after the People’s Bank of China late on Friday moved to free up $154 billion for banks to buttress the economic recovery while the European Central Bank said it will discuss a change to its forward guidance on policy direction at next week’s meeting.

Crude prices fell on concerns about dampening economic growth.

U.S. crude settled down 0.62% at $74.10 per barrel and Brent was settled at $75.16, down 0.52% on the day.

The safe-haven dollar moved slightly higher on the concerns about the pandemic and its potential to thwart growth.

The dollar index rose 0.092%, with the euro down 0.1% to $1.1861.

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

(Additional reporting by Noel Randewich; Editing by Dan Grebler, Sonya Hepinstall and David Gregorio)

 

 

Marketmind: Real World Data Bites

While U.S. 10-year Treasury yields have bounced back 10 basis points from the 1.25% floor hit last week, there’s still a lot of uncertainty on the direction of travel.

The pandemic is obviously the biggest unknown moving forward with the Delta variant causing a surge in cases around the world.

From Sydney, which reported another record daily rise in COVID-19 cases, to London where the British government’s plans to lift restrictions comes just as a new wave of infections hits, it’s clearly not what markets had in minds.

In that light, China cutting the amount of cash that banks must hold as reserves to boost liquidity and back its economic recovery is a sign that the global economy is not out of the wood yet.

The move has at least temporarily lifted spirits in Asia with MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.7% after shedding 2.3% last week.

Shanghai copper prices also rose, while a steady dollar ahead of U.S. inflation data on Tuesday kept London prices under pressure.

Crude futures are also under pressure despite talks among key producers to raise output in coming months stalling.

In Europe and on Wall Street, stocks futures are mixed ahead of an earnings season that is about to kick off with record expectations.

While profits for Europe Inc are expected to have soared over 100% in the second quarter, any setback could bite hard with markets already pricing stellar earnings.

Key developments that should provide more direction to markets on Monday:

– ECB to change policy guidance at next meeting, Lagarde says

– Credit Suisse’s Swiss compliance officer Scarlato leaving

– Euro zone ministers meet

— Auctions of U.S. 6-mth, US 10 year, 3 year notes

– ECB Vice-president Luis de Guindos speaks

– New York Fed President John Williams speaks on inflation

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

(Reporting by Julien Ponthus; editing by Dhara Ranasinghe)

The Week Ahead – Economic Data, Monetary Policy, and the Delta Variant in Focus

On the Macro

It’s busier week ahead on the economic calendar, with 64 stats in focus in the week ending 16th July. In the week prior, 42 stats had also been in focus.

For the Dollar:

Inflation figures will be in focus early in the week. With market concerns over FED monetary policy lingering, expect the numbers to influence.

On Thursday, jobless claims and Philly FED manufacturing numbers will draw attention.

Wrapping things up will be retail sales and consumer sentiment figures on Friday. Expect the retail sales figures to be key.

In the week ending 9th July, the Dollar Spot Index fell by 0.10% to 92.130.

For the EUR:

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

Eurozone industrial production figures on Wednesday and trade data on Friday will be in focus.

Following some disappointing numbers last week, we can expect increased sensitivity to the Eurozone figures.

Through the week, finalized inflation figures for member states and the Eurozone will also draw interest.

The Eurozone’s inflation figures on Friday will be key on the inflation front. Following the ECB’s revision to its inflation target, however, sensitivity should be limited to the upside.

For the week, the EUR rose by 0.09% to $1.1876.

For the Pound:

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

Inflation figures will draw attention on Wednesday ahead of employment figures on Thursday.

While inflation figures will influence, expect Thursday’s stats to be key.

Away from the economic calendar, COVID-19 news will need monitoring.

The Pound ended the week up by 0.56% to $1.3901.

For the Loonie:

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

Manufacturing sales figures will be in focus on Wednesday ahead of ADP employment change figure on Thursday.

At the end of the week, housing starts and wholesale sales figures are also due out. We don’t expect too much influence from these numbers.

The main event of the week will be the Bank of Canada monetary policy decision on Wednesday. Expect plenty of Loonie sensitivity to the BoC’s outlook on the economy and monetary policy.

The Loonie ended the week down 1.01% to C$1.2447 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s also a relatively quiet week ahead.

Housing sector data in the early part of the week will likely have a muted impact on the Aussie Dollar.

On Wednesday, consumer confidence figures for July and June employment figures on Thursday will be key, however.

Expect the employment numbers to have a greater influence in the week.

The Aussie Dollar ended the week down by 0.50% to $0.7488.

For the Kiwi Dollar:

It’s a busier week ahead.

Early in the week, retail card spending and business confidence figures will be in focus.

Both sets of numbers will provide the Kiwi Dollar with direction.

At the end of the week, business PMI and inflation figures will also influence.

The main event of the week, however, is the RBNZ monetary policy decision on Wednesday. Economic data has continued to deliver Kiwi Dollar support. Whether the RBNZ will deliver a hawkish statement remains to be seen, however.

The Kiwi Dollar ended the week down by 0.57% to $0.6986.

For the Japanese Yen:

Machinery orders on Monday and industrial production figures on Wednesday will be the key stats of the week.

At the end of the week, the BoJ will also deliver its July monetary policy decision and quarterly outlook report.

There’s unlikely to be any surprises from the BoJ, however.

The Japanese Yen rose by 0.82% to ¥110.140 against the U.S Dollar.

Out of China

It’s a relatively busy week ahead, with trade data for June due out on Monday.

On Thursday, GDP numbers for the 2nd quarter will be key, however.

Fixed asset investment, industrial production, and retail sales figures are also due out on Thursday. Much will depend on the GDP figures on the day.

Following last Thursday’s risk aversion over concerns over the resilience of the global economic recovery, China’s GDP numbers will lay the foundations of what to expect from elsewhere…

The Chinese Yuan ended the week down by 0.09% to CNY6.4790 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need monitoring…

Banks, Miners Pull Down FTSE 100; Entain Top Gainer

The owner of Ladbrokes and Coral brands climbed 2.2% after it reported an 11% rise in first-half net gaming revenue and said it was doubling investment in its game development studios.

The FTSE 100 dropped 1.1%, dragged down by a 1.9% fall in big banks as they tracked weaker bond yields. Precious metal miners and homebuilders fell 1.7% and 1.5%, respectively.

“Miners and banks are the principal sectors weighing on the index, suggesting that investors have started to worry again about the strength of the economic recovery,” said Russ Mould, investment director at AJ Bell.

“If the economic outlook is not as strong, then investors start to go off banks for fear that it will be harder for them to push up earnings.”

Homebuilder Persimmon Plc slipped 2.2% even after it reported higher half-year revenue and said it expected housing demand to remain robust.

Meanwhile, an industry survey showed fewer homes were put up for sale last month and buyer demand grew less fast ahead of the end of a tax break on property purchases.

The FTSE 100 has risen 9.3% so far this year, primarily led by gains in banks, materials and energy stocks. However, it has largely underperformed its developed market peers over risks arising from a rise in local coronavirus infections.

The domestically focussed mid-cap index was down 0.7%.

Among stocks, Deliveroo surged 4.6% after it said orders jumped 88% during the June quarter, although the food delivery firm tempered its outlook for annual profit margins.

Discount retailer B&M fell 2.8% after it reported a drop in underlying sales in its latest quarter, reflecting a very tough comparison with the same period last year when shoppers stocked up for the first COVID-19 lockdown.

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

(Reporting by Shashank Nayar in Bengaluru; Editing by Subhranshu Sahu)

Marketmind: “Ok, Who Leaked the Fed Minutes?”

The Day Ahead

While one would typically expect investors to trade cautiously a day before getting a better sense of what caused the hawkish shift at the U.S. Federal Reserve’s June meeting, the market price action was surprisingly decisive.

Government bond yields dropped, the dollar rose, the reflation trade and cyclical stocks got hammered and traders were suddenly ready to pay an extra premium for growth stocks, particularly tech, which sent the Nasdaq to new record highs.

Market participants were hard pressed to find a single catalyst for the mood swing but offered plenty of explanations.

COVID-19 fears (Delta variant surging), peak-growth fears (ISM showing a cooling in U.S. services), the Chinese crackdown on tech companies, falling oil prices (OPEC+ meeting): there was no shortage of possible triggers.

Another view is that the U.S. yield curve flattening, with U.S. 10-year notes dropping to their lowest since February at 1.34%, meant some investors were betting the Fed would tighten its policy pre-emptively to head off inflation.

There’s not much left to wait before the Fed minutes are published later on Wednesday. In the meantime, bond markets are calmer. Stock futures in Europe are slightly positive with no palpable sign of yesterday’s stress.

That’s good news for London’s stock market, which faces a test of its capacity to be a hub for fintech post Brexit with the listing of cross-border payments firm Wise.

Key developments that should provide more direction to markets on Wednesday:

– Samsung Electronics flags 53% jump in Q2 profit, tops estimates

– German May industrial output -0.3% m/m in May

– Germany to sell 5 bln euros of 5-year bonds

– UK Halifax fall for first time since January

– Japan coincident index first fall in 3 months

– France May current account

– U.S. May JOLTs job openings

– Thai central bank monetary policy report

– Riksbank deputy governor Henry Ohlsson talk on e-krona

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

(Reporting by Julien Ponthus; Editing by Dhara Ranasinghe)

 

Stocks Stumble, Dollar Stands Tall as U.s. Payrolls Loom

By Tom Westbrook

Equity futures pointed to a small bounce in Europe, after a month-end selloff, with Euro Stoxx 50 futures up 0.4%, while FTSE futures rose 0.1% and S&P 500 futures trod water at record high levels and were last up about 0.15%.

In an Asia session thinned by a holiday in Hong Kong, Japan’s Nikkei fell 0.3% and MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4%.

The U.S. dollar edged up to a four-month high of $1.1839 per euro and a 15-month high of 111.18 yen.

“The virus is still playing a role … although it’s difficult to see much direction in anything at the moment,” ING economist Rob Carnell said on the phone from Singapore.

“There’s a broad sense that the dollar isn’t such a bad unit to be holding,” he said, as traders turned to U.S. jobs data due Friday for the next clue on the Federal Reserve’s rates outlook.

“Everyone is a little bit jittery.”

In China, equities cheered the centenary of the Communist Party with a small rise, but a nationalist address from President Xi Jinping in Tiananmen Square did little to soothe geopolitical nerves and the yuan weakened very slightly.

Data in Asia also painted a mixed picture, with Japanese manufacturers’ mood at a two-and-a-half year high, but factory activity slowing down through the region – particularly in Vietnam and Malaysia – on a resurgent pandemic.

German retail sales missed expectations.

Slower vaccination rates in Asia and the extension of restrictions to curb the spread of the virus – as well as a regulatory crackdown on Chinese tech giants – have had regional markets lagging this year.

The MSCI ex-Japan index closed out the first half with a gain of 5.8% compared with world stocks’ rise of 11.4% and a gain of 14.4% for the S&P 500, which logged its fifth consecutive record closing high to end last month.

EYES ON PAYROLLS

Market participants will be eyeing euro zone unemployment, a meeting of Sweden’s central bank and appearances from Bank of England Governor Andrew Bailey and from European Central Bank President Christine Lagarde later in the day for trading cues.

However, it is U.S. payrolls on Friday that traders think could jolt markets from a slumber that has locked currencies in some of their tightest trading ranges for decades.

Overnight dollar/yen implied volatility stands at its highest in more than three months.

U.S. private payrolls beat expectations overnight, although they are an unreliable guide to Friday’s broader indicators.

Economists polled by Reuters expect a gain of 700,000 jobs for June, up from 559,000 in May. But variation among the 63 estimates is big, ranging from 376,000 to more than a million.

“Unless the monthly jobs report disappoints, the level to beat for the dollar index is the year’s high at 93.4,” analysts at DBS Bank in Singapore said in a note.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit 92.483 in the Asia session, its highest since April. The yield on benchmark ten-year U.S. Treasuries was steady in Asia at 1.4696%.

In commodity markets, prices for metals seem to be stabilising below May peaks and oil was edging up toward the multi-year highs touched earlier in the week.

Brent crude futures were last up 0.1% at $74.69 a barrel. Corn futures extended a sharp overnight bounce as lower-than-expected U.S. planting supported prices.

(Reporting by Tom Westbrook; Editing by Himani Sarkar)