A look at the day ahead by Julien Ponthus.
In a parallel universe, England would celebrate the lifting of the European football crown with a public holiday and happily lift all COVID-19 restrictions for a much anticipated Great British Summer. In short, the day of freedom.
Instead, the Italians are the champions, Monday is an ordinary day in the City of London and Boris Johnson’s plan to reopen the economy is seen as a high risk bet at best. Scientists writing in the Lancet medical journal called it “dangerous and premature.”
With daily infections now north of 50,000, Britain’s mood could quickly switch from ‘Love Island’ to ‘I’m a celebrity… get me out of here’.
In fact, it’s just the kind of painful reality check that has been experienced by investors betting hard on reflation trade. As 10-year U.S. government bond yields below 1.30% show, the surge in the Delta variant of COVID-19 has eroded confidence in the global economic recovery.
Of course, the reasons for the recent bond rally aren’t fully explained, but a bewildering tale of “spike growth” and “spike stimulation” has found its way into market commentary and research.
So, European and US equity futures are trading deep in the red this morning, while Asian stocks have slipped to a one-week low. Assets seen as a safe haven, including the yen and gold, have risen slightly, while oil prices are falling.
Meanwhile, second quarter earnings were mostly strong, but they also seem to be screaming ‘this is a good result’. Few people think that the excellent results will make the world stock markets climb much higher than they are.
Key developments that should provide more direction to markets on Monday:
– UK house prices rise again amid record monthly sales read more
– BOE’s Jonathan Haskell speaks
– Italian luxury fashion group Ermenegildo Zegna goes public by partnering with a SPAC, giving the company an enterprise value of $ 3.2 billion Read more
– Auctions: US Treasury bills 6 months and 3 months,
– Telecom Italia updates its revenue and EBITDA forecasts after the DAZN agreement read more
– Tencent to buy British video game company Sumo for $ 1.3 billion read more
Report by Julien Ponthus; Editing by Sujata Rao
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