1. Jobless claims due as Daly warns some jobs may never come back
Initial jobless claims are expected to have fallen to 1.12 million last week, in what would be the lowest since the pandemic exploded in March. Continuing jobless claims, which are reported with a one-week lag to initial ones, are likewise expected to have dipped below 16 million for the first time since April.
San Francisco Federal Reserve President Mary Daly said late Wednesday that she feared many of the jobs lost since March would be lost forever, with the less-educated part of the workforce bearing the brunt.
Elsewhere, France reported a surprise drop in its second-quarter jobless numbers, but only because it only counts those who are actively looking for work, something that was practically impossible during lockdown. The employment rate for young French people fell to 26.6%, in a more accurate reflection of a dire situation.
2. Stimulus deadlock drags on
There’s still no sign of Congressional Republican and Democrats breaking the deadlock on talks over the next round of economic relief measures.
House Speaker Nancy Pelosi told reporters on Wednesday that lower chamber was prepared to meet the Senate and administration halfway, bridging the gap between the administration’s $1 trillion proposal and the House’s $3.5 trillion bill.
Treasury Secretary Steven Mnuchin described Pelosi’s characterization of talks on Wednesday as misleading, saying that the Democrats’ negotiators hadn’t been prepared to compromise at all.
3. Stocks set to open lower; jobless data eyed
U.S. stock markets are set to open modestly lower ahead of the jobless claims data, which are likely to set the tone for the day.
By 6:20 AM ET (1020 GMT), the Dow futures contract was down 16 points or less than 0.1%, while the US 500 Futures contract and the Nasdaq 100 futures contract were down in parallel.
Stocks in focus are likely to include ride-hailing company Lyft (NASDAQ:LYFT), which reported a sharp drop in rider numbers and revenue in the second quarter after the bell on Wednesday, as well as JC Penney (OTC:JCPNQ), amid reports that its landlords are close to a deal to buy out the bankrupt department store group.
After the close today, there will also be earnings updates from Chinese search giant Baidu (NASDAQ:BIDU) and Netflix-wannabe iQIYI (NASDAQ:IQ).
4. Trump pauses on EU tariffs
President Donald Trump decided not to raise the overall level of import tariffs on EU goods, in an apparent move to make sure that the squeeze on Americans’ spending power isn’t made any worse by tariffs ahead of the election.
However, the administration did introduce fresh tariffs on selected products, such as French jams and jellies and German knives. The tariffs are part of measures allowed under a WTO ruling that found the EU guilty of illegally subsidizing Airbus.
Airbus (PA:AIR) stock fell 1.6% in Paris.
5. Oil consolidates as IEA trims demand outlook
Crude oil prices softened slightly after the International Energy Agency followed the Organization of Petroleum Exporting Countries in trimming its forecast for average oil demand this year.
U.S. crude futures were down 0.1% at $42.64 a barrel, while the international benchmark Brent was down 0.3% at $45.31 a barrel
The IEA cut its estimates for the last two quarters of this year by 500,000 barrels a day, projecting that consumption will average 95.25 million barrels a day in the period.
The reduced forecasts this week have been largely due to slack demand for jet fuel, as air travel has failed to rebound with the same vigor as travel by car and truck. The extent of that was again shown on Thursday as German-based Tui (DE:TUIGn), the world’s largest travel group, said its revenue had fallen 98% from year-earlier levels in the three months through June.
1, Dollar, Treasury yields rise ahead of big 10-year note sale, CPI
The dollar hit its highest level in two weeks and U.S. 10-year Treasury yields hit their highest in over a month, while Gold Futures stabilized after their 5% drop on Tuesday.
The rise in 10-year yields came ahead of a big auction of notes due at 1 PM ET (1700 GMT) that will provide a stiff test of the market’s ability to satisfy the borrowing demands of a government whose deficit has more than doubled from a year earlier.
By 6:30 AM ET, the benchmark 10-year note yielded 0.66%, just off its intraday high and a full 16 basis points above its lows of last week.
The rise in bond yields had been triggered by signs of higher-than-expected factory gate inflation in Tuesday’s PPI release. That suggests the market could be vulnerable to any negative surprises from the consumer price index for July that will be release at 8:30 AM ET. Last month’s 0.6% increase was the biggest monthly rise in seven years. Analysts expect a rise of 0.3% this month.
2. Biden picks Kamala Harris
The Democratic Party’s presidential candidate Joe Biden picked California Senator Kamala Harris as his running mate, in a move that appeared to shore up support among women and ethnic minorities, and to reassure centrist voters that the party’s progressive wing won’t have undue influence on policy if Biden is elected in November.
The choice of Harris, a former state attorney general, also arguably limits the vulnerability of Biden’s campaign to claims that it can’t defend law and order, a key campaign issue given the backdrop of widespread violence in Portland and other cities this summer.
Reports noted that Harris has been a big recipient of donations from Silicon Valley in the past, which may feed speculation that a Democratic administration may avoid confrontation with giants such as Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) on antitrust issues.
3. Stocks set to rebound; Tesla's stock split, Tencent's earnings in focus
U.S. stock markets are set to open higher after Tuesday’s abrupt sell-off, when the rise in bond yields reintroduced the almost forgotten notion of discount rates back into stock valuations.
By 6:30 AM ET (1030 GMT), the Dow 30 futures contract was up 273 points, or 1.0%, while the S&P 500 futures contract was up 0.8% and the Nasdaq 100 contract was up 1.0%.
Stocks likely to be in focus in early trade include Tesla (NASDAQ:TSLA), which rose 6% in after-hours trading after the company announced a five-for-one stock split. Such a step makes no difference to the company’s market value by itself, but arguably supports it at the margins by broadening its appeal to smaller investors.
Also in focus will be Qualcomm (NASDAQ:QCOM), which won an important antitrust ruling on Tuesday, and Tencent Holdings (OTC:TCEHY), whose earnings easily outstripped expectations in the quarter, allaying fears of U.S. sanctions against its WeChat messaging system.
4. U.K. gets the biggest Covid-19 hit of all
The U.K. economy contracted by over 20% in the second quarter, the most of any major industrialized economy. The contraction was the result of a late and botched reaction to the first wave of the coronavirus, and also a reflection of the higher share of services in GDP relative to other economies.
Services have been particularly hard hit by lockdown measures and have also been slower to rebound.
Monthly data for June showed GDP, industrial production and construction output all recovering more quickly than expected, however. That limited losses in sterling against both the euro and dollar, while the two main U.K. stock indexes were mixed.
5. Oil bounces as inventory data support; OPEC report eyed
Crude oil prices rebounded from Tuesday’s lows, which were largely a function of developments in other assets.
By 6:30, U.S. crude futures were up 1.5% at $42.23 a barrel, while the international marker Brent was up 1.4% at $45.12 a barrel.
The market was underpinned by another reasonably strong set of numbers from the American Petroleum Institute on Tuesday, which indicated a 4.4 million-barrel draw in U.S. crude stocks last week, more than expected and enough to suggest the recovery in U.S. fuel demand is still intact.
The government’s data on weekly crude stockpiles is due at 10:30 AM ET, while the Organization of Petroleum Exporting Countries will publish its monthly report on the world market sometime earlier.
1. Virus recedes
The number of new infections of Covid-19 in the U.S. stayed under 50,000 for a second straight day, strengthening hopes that the virus is coming back under control.
The number of hospitalizations also fell in California, New York and Texas, although they continued at a high rate in Florida.
The curve of new infections has clearly flattened since states across the south and west started to tighten restrictions on indoor meetings and on the wearing of face masks. The question is now whether it can stay subdued as schools across the country prepare to reopen, potentially creating a powerful vector for community spread.
Further afield, Russia – which has been accused of trying to steal intellectual property from U.S. and European pharma companies researching Covid-19 treatments – conditionally approved its first vaccine for the virus.
The worldwide number of confirmed cases topped 20 million, due not least to fast-rising case numbers in India.
2. Stimulus talks still deadlocked as Trump grandstands with CGT cut
The next round of economic relief measures for the U.S. economy remains deadlocked, although both the Trump Administration and House Democrats claimed they were ready to talk again.
Late on Monday, President Donald Trump said he’s “seriously considering” a cut in capital gains tax, a statement that has supported risk assets overnight despite the obvious difficulty in enacting it in the current circumstances.
Trump has benefited politically from his handling of the recent standoff and, it would seem, from the easing of the health crisis in the south and west, according to some political trackers. Spread betting firm Predictit now gives Trump a 45% chance of winning the election in November, the highest it’s been since early June.
3. S&P 500 nears all-time high
U.S. stock markets are set to open higher, supported by the improving news from the virus front and by Trump’s musing on tax cuts.
The S&P 500 is set to test an all-time high later, with the index’s futures contract trading up 0.7% at 3,376, less than 1% below February’s peak.
By 6:30 AM ET (1030 GMT), the Dow 30 Futures contract was up 272 points or 1.0%, while the Nasdaq 100 futures contract was up 0.5%
Stocks in focus are likely to include IAC/InterActiveCorp (NASDAQ:IAC), the owner of Tinder and other dating sites, which reported disappointing results after the bell on Monday, and Occidental Petroleum (NYSE:OXY), which reported an $8.4 billion loss with heavy writedowns and a big cut to its production forecast.
Also of interest will be Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT), which were ordered by a California court on Monday to treat their drivers as employees, a ruling that will sharply raise their operating costs if not overturned on appeal.
4. German sentiment improves
European stocks were also sharply higher overnight, despite a mixed bag of economic data that showed the extent of the troubles facing the economy.
The closely-watched German ZEW economic sentiment index rose to a 16-year high as expectations of a recovery became ever more firmly entrenched. However, the index of current conditions worsened, instead of improving as expected.
In the U.K., meanwhile, employment fell at the sharpest rate since 2009, with 220,000 jobs being lost in the three months through May. The more up-to-date figure of those claiming jobless benefits rose by 94,400 in July and is set to continue rising through year-end as the government winds back its wage subsidy scheme.
5 Oil drifts higher ahead of API, STEO
Crude oil prices pushed higher amid hopes that the U.S. economy has avoided another major hit from the Covid-19 pandemic.
By 6:25 AM ET (1025 GMT), U.S. crude futures were up 1.6% at $42.61 a barrel, while the international benchmark Brent was up 1.2% at $45.52 a barrel.
At 8 AM, the U.S. Energy Information Administration will release its latest Short-Term Energy Outlook, the first of three major updates on the state of the oil market this week.
At 4:30 PM, the American Petroleum Institute will release its estimate of U.S. crude stocks for last week.
1. China cracks down in Hong Kong, sanctions U.S. pols
China arrested Jimmy Lai, one of Hong Kong’s richest and best-known publishers, on suspicion of collusion with foreign agents, in a stark illustration of the new realities of power in the former U.K. colony since the introduction of a new security law earlier in the summer.
Shares in Lai’s company Next Digital Ltd (HK:0282), which had already collapsed in anticipation of government action against him, more than quadrupled on the news.
Beijing also said it will sanction 11 U.S. politicians, including Senators Ted Cruz and Marco Rubio, in response to U.S. sanctions announced on the same number of Chinese officials last week.
The U.S. sanctions are likely to be followed in the next month or two by a list from the Treasury identifying all the entities currently in breach of them, a list that Autonomous Research says may well include China’s state commercial banks and policy banks.
2. Trump tries to bridge the gap
President Donald Trump issued four executive orders to partially extend the payment of enhanced unemployment benefits, in order to bridge a gap left by the failure of Congressional Republicans and Democrats to agree on a new package of economic relief measures.
However, uncertainties over the legality of the orders mean that their impact both on the lives of ordinary Americans and on the psychology of the market may be limited, analysts warned.
Trump’s orders would extend the weekly checks sent to households under the CARES act, but cut the amount to $400 from $600. In addition, Trump wants states to foot one-quarter of that bill.
“We still expect a package worth at least $1.5 trillion to become law by the end of August, but the risk of no further legislative action has increased and could pose a threat to the budding recovery,” Goldman Sachs (NYSE:GS) analysts led by Jan Hatzius said at the weekend.
3. Stocks set to open mixed amid stimulus bill guesses
U.S. stock markets are set to open mixed as the market tries to guess where the stimulus package goes from here. The dollar, meanwhile, bounced after heavy losses.
By 6:30 AM ET (1030 GMT), the Dow futures contract was up 104 points or 0.2%, while the US 500 Futures contract was up 0.2% and the Nasdaq 100 futures contract was down less than 0.1%, retracing a little after another week of outperformance.
Earnings season continues with updates from Barrick Gold, Duke Energy, Tencent Music Entertainment, Marriott, WorldPay, Liberty Media Sirius and two canaries in the coronavirus coal mine, Occidental Petroleum and Royal Caribbean.
Another stock likely to be in focus is Warren Buffett's Berkshire Hathaway (NYSE:BRKa), which said at the weekend it bought back a record $5.1 billion in stock in the second quarter.
4. German companies see 9 more months of disruption
How long will it take life to return to normal after the coronavirus? Around 9 months, according to a survey of German firms by the Munich-based think-tank Ifo.
Ifo said the sports and leisure industry, along with the arts and other entertainment-related businesses, face the longest disruption, stretching all through next summer. Drinks and pharma companies see things back to normal within seven months, while the key automotive sector estimates eight months.
The survey reinforces perceptions that industry will lead the way out of recession, while the outlook for service sectors is much bleaker.
5. Upbeat Aramco puts a floor under crude
Crude oil prices stabilized after Saudi Aramco chief executive officer Amin Nasser gave an upbeat forecasts for demand, saying he expected it to continue rising through the end of the year.
Aramco also stuck to its promise to pay around $75 billion in dividends this year, despite a sharp drop in profits. That distinguishes it from the bulk of its rivals in the oil and gas major sector, who have had to reset their dividend payouts at lower levels in expectation of a lengthy period of low prices.
Aramco is the world’s most profitable company, thanks to its extraordinarily low marginal production costs.
U.S. crude futures were up 1.4% at $41.80 a barrel, while the international benchmark Brent was up 1.0% at $44.83 a barrel
1. Jobless claims due as lawmakers continue to haggle
As lawmakers haggle over the next package of measures to support the economy, the U.S. will release its latest weekly numbers for those claiming unemployment benefits.
Initial jobless claims are expected to have fallen back slightly last week after a two-week blip, although the number of continuing claims is set to remain at acutely high levels.
Economists expect 1.415 million in initial claims, down from 1.434 million last week, and 16.72 million continuing claims, down from 17.02 million.
White House Chief of Staff Mark Meadows said on Wednesday that the two parties remain far apart in their search for a compromise package, adding that “If we don’t have a deal by Friday, I’m not optimistic that more time will get us there.” The White House is reportedly threatening to break the deadlock with executive orders if the two chambers of Congress can’t craft a compromise.
2. Germany set for rebound, but European earnings slump
Germany’s recovery is on the way. Factory orders, a generally reliable advance indicator for Europe’s industrial heartland, rose by a record 27.9% in June, far above expectations for a 10.4% gain. There were strong rebounds for the auto industry, and for orders from outside the euro zone.
Orders were still more than 11% down from a year earlier, however.
Elsewhere in Europe, industrial production in Italy also rebounded by 8.2% in June, stronger than the 5.1% expected.
The data cushioned the blow from a generally dismal round of earnings, in which Lufthansa reported its biggest ever quarterly operating loss, Adidas also went into the red, and insurer AXA and commodities trader Glencore (OTC:GLNCY) scrapped their dividends.
3. Stocks set to open mixed as death toll rises again
U.S. stock markets are set to open mixed, hesitant to extend recent gains against a backdrop of deadlock on Capitol Hill. Wednesday’s coronavirus data, which showed more U.S. deaths than on any other day bar one, are also keeping the pandemic uppermost in many minds.
By 6:30 AM ET (1030 GMT), the Dow futures contract was down 12 points or less than 0.1%, while the US 500 Futures contract was also flat and the Nasdaq 100 futures contract was down 0.1%
Today’s big results updates in the U.S. are mainly after the closing bell, coming from T-Mobile US (NASDAQ:TMUS), Booking (NASDAQ:BKNG), Illumina (NASDAQ:ILMN) and Uber (NYSE:UBER). There could also be interest in some Japanese ADRs, with Toyota Motor (NYSE:TM) forecasting a $7 billion profit for the current fiscal year, and Nintendo (OTC:NTDOY) reporting a six-fold increase in profit thanks to the pandemic.
4 Pound gains as Bank of England holds; EM CBs start to run out of road
The Bank of England said the U.K. economy will need at least until the end of 2021 to return to pre-pandemic levels of output.
However, it also said that it now expects the economic decline in the meantime to be a little smaller, in comments explaining a unanimous decision not to make any changes to its interest rates or bond-buying programs at its regular Monetary Policy Committee meeting.
The pound, which was also supported by a stronger-than-expected Construction PMI, strengthened against the dollar and euro,
Earlier, the Reserve Bank of India became the second central bank of a major emerging economy inside 24 hours to warn that it was running out of scope for further interest rate cuts. Unlike its Brazilian counterpart, the RBI held its key rate unchanged. It also indicated it would take a softer line as banking supervisor with regard to banks' non-performing loans.
Turkey, meanwhile, continues to lurch toward a financial crisis, with the dollar rising another 3% to a new record high against the lira.
5. Oil consolidates; precious metals march higher
Commodity markets went back into risk-off mode, with crude oil prices giving up some of the gains they made on strong U.S. inventory data on Wednesday.
U.S. crude futures were down 0.9% at $41.80 a barrel, while the international benchmark Brent was down 0.3% at $45.02 a barrel.
By contrast, haven assets gold and silver marched higher, Gold Futures breaking through $2,050 an ounce for the first time ever and silver futures hitting another seven-year high but failing just short of the $28/oz level.
Precious metals remain supported by signs of inflation bottoming out and expectations rising, even as nominal bond yields grind lower.
1. Rhetoric surrounding TikTok becomes toxic
The tone of the conversation surrounding the potential purchase of Tik Tok’s U.S. operations by Microsoft (NASDAQ:MSFT) is becoming more and more belligerent, with the move threatening to become the precursor to a larger tech war.
Microsoft said on Monday it was in talks -- reports Tuesday suggested there are other interested parties -- with ByteDance to buy parts of TikTok after U.S. President Donald Trump reversed course on a plan to ban the video-sharing app on national security grounds and gave the firms 45 days to strike a deal.
President Trump also noted Monday that the U.S. government should get a "substantial" cut of the sales price of the U.S. operations of the company, although it’s unclear how that would occur.
This prompted a scathing response in the state-backed China Daily newspaper, with its editorial saying that China will not accept the "theft" of a Chinese technology company.
It added that the United States' "bullying" of Chinese tech companies was a consequence of Washington's zero-sum vision of "American first" and left China no choice but "submission or mortal combat in the tech realm", and that China had "plenty of ways to respond if the administration carries out its planned smash and grab.”
It’s unclear what moves China has to respond, but watch this space.
2. Covid-19 “silver bullet” may never happen - WHO
The Covid-19 outbreak is showing signs of stalling in the U.S., with new cases falling below 50,000 for the second day in a row and the number of deaths dropping below one thousand a day.
That said, the U.S. government's top infectious disease expert, Dr. Anthony Fauci, on Monday said states with high coronavirus case counts should reconsider imposing lockdown restrictions, emphasizing the need to get cases to a low baseline before the fall flu season.
Additionally, senior figures at the World Health Organization warned on Monday that the road to normality would be long, and countries had to accept there might never be a "silver bullet" for Covid-19 in the form of a perfect vaccine.
"A number of vaccines are now in phase three clinical trials and we all hope to have a number of effective vaccines that can help prevent people from infection. However, there's no silver bullet at the moment - and there might never be," said WHO Director-General Tedros Adhanom Ghebreyesus Monday.
Elsewhere, U.N. Secretary-General Antonio Guterres warned earlier Tuesday that the world faces a "generational catastrophe" because of school closures amid the coronavirus pandemic and said that getting students safely back to the classroom must be "a top priority."
3. Apple helps tech sector soar
U.S. stock markets are seen opening a touch lower Tuesday, consolidating after more strong gains Monday, led by the tech-heavy Nasdaq index which posted another record close.
By 6:30 AM (1030 GMT), the Dow futures contract was down 44 points or 0.2%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 futures contract was 0.3% lower.
Apple set an all-time high Monday, and the iPhone maker is now a few share points away from registering a two trillion dollar market capitalization. The share price to look out for is $467.77, before the company undergoes a 4-for-1 share split, compared with Monday’s $435.75 closing level.
Helping the tone were reports the White House was considering acting on its own to boost unemployment benefits, with the stalemate in Washington meaning many citizens are currently missing out on $600 a week payments.
This indicates many investors are waiting on news from Washington, and House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin indicated that talks on Monday on a new virus relief package yielded “a little bit” of progress.
4. BP continues Big Oil’s tale of woe
BP cut its dividend for the first time in a decade Tuesday, to 5.25 cents per share, continuing the string of weak results from the oil sector as the coronavirus pandemic weighed heavily.
The British oil giant said it lost $16.8 billion in the second quarter after taking a charge of $10.9 billion, mostly for writing down the value of various projects after the steep fall in oil prices. Its underlying replacement cost loss was $6.7 billion, compared with a profit of $2.8 billion in the year-ago quarter.
The one saving grace for the company was its trading division, which delivered an “exceptionally strong result,” BP said.
European rivals Total, Shell (LON:RDSa) and Equinor have also all reported healthy trading gains, helping their bottom lines in these difficult times, while American counterparts Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), which are not as robust with their trading, posted their worst set of quarterly results of the modern era.
5. Electric vehicle sector also includes Nikola
The U.S. earnings season continues Tuesday, and one company that may be in the spotlight Tuesday is Nikola which releases its second quarter numbers.
While Tesla (NASDAQ:TSLA) has taken most of the limelight in the electric vehicle sector, Deutsche Bank (DE:DBKGn) said in a note on Monday that the electric truck maker could be worth a buy ahead of its latest update. Among the things investors are hoping to learn more about are the customer pipeline for Nikola's electric semi, its plans to build a hydrogen refueling network, and a manufacturing partner for its Badger pickup truck, according to Deutsche Bank analyst Emmanuel Rosner.
Nikola stock is up 11% this week, but down over 36% this month.
1. TikTok on the block
Chinese-owned video-sharing app TikTok has become the latest flashpoint in the deteriorating relationship between the globe’s two economic superpowers, the U.S. and China.
However, Microsoft could have the answer to this particular problem after the U.S. tech giant confirmed that it is holding talks with the app’s owner Bytedance over purchasing the app’s U.S. operations.
Microsoft boss Satya Nadella had a conversation with President Donald Trump about the acquisition on Sunday, the tech firm said, and Reuters reported Monday the president has now allowed Microsoft 45 days to negotiate a deal.
A successful bid by Microsoft for the popular app would immediately make it a major competitor to social media giants like Facebook (NASDAQ:FB) and Snapchat.
Trump had previously vowed to ban the app, with the U.S. administration stating that it poses a national security risk because of the personal data it handles. This follows the hard-line stance the U.S. has taken over Chinese companies that it feels contain critical technology.
Short-form video app TikTok is thought to have about half a billion active users worldwide - and about 80 million in the U.S. - with a huge proportion of these in their teens or early 20s.
Banning the app could alienate many of these young TikTok users ahead of the U.S. presidential election in November, an election which is likely to be tightly fought.
2. Coronavirus “extraordinarily widespread” in U.S. - Birx
Coronavirus cases continued to surge in parts of the U.S., with July being the worst month for new cases since the pandemic began. Additionally, White House coronavirus experts warned Sunday that the country is in a new phase of the outbreak.
"We are in a new phase," said Dr. Deborah Birx. "What we are seeing today is different from March and April. It is extraordinarily widespread" in rural as well as urban areas.
"To everybody who lives in a rural area: You are not immune or protected from this virus," Birx said.
The virus has already claimed over 150,000 lives in the U.S., by far the highest death toll in the world, plus more than a half-million others around the globe.
With this in mind, investors will be keeping their eyes on Washington where Congress is still deadlocked over the next round of economic relief from the pandemic.
White House Chief of Staff Mark Meadows said on Sunday he was not optimistic on reaching agreement soon on a deal for the next round of legislation.
On Friday tens of millions of Americans lost a $600 per week federal unemployment supplement.
3. Positive corporate earnings helping U.S. stock markets
U.S. stock markets are seen largely unchanged Monday, with the Nasdaq index set to outperform on the back of strong earnings from the tech giants last week. News out of Washington (see above) and the ongoing earnings season will be key factors this week, ahead of Friday’s official employment report.
By 6:30 AM (1030 GMT), the Dow futures contract was up 20 points or 0.1%, while the S&P 500 futures contract was up 0.3% and the Nasdaq 100 futures contract was 0.7% higher.
These cash indexes had a strong July. The Dow Jones Industrial Average gained 2.4%, the S&P 500 5.5%, its best July in 10 years, and the Nasdaq Composite rose 6.8%.
The week ahead brings another packed slate of earnings, with 130 members of the S&P 500 set to report. Monday sees Tyson Foods (NYSE:TSN) and Clorox (NYSE:CLX) report before the opening bell, and Virgin Galactic (NYSE:SPCE) after the close.
“To date, 63% of the companies in the S&P 500 have reported actual results for Q2 2020,” said John Butters at Factset, in a note to clients. “In terms of earnings, the percentage of companies reporting actual EPS above estimates (84%) is above the five-year average. If 84% is the final percentage for the quarter, it will mark the highest percentage of S&P 500 companies reporting a positive EPS surprise since FactSet began tracking this metric in 2008.”
4. ISM manufacturing index set to show growth
The jobs report on Friday will be the key economic release this week, but ahead of that comes the Institute for Supply Management’s manufacturing index, due at 10 AM ET (14:00 GMT).
This is expected to show a small rebound to 53.6 in July, from 52.6 the previous month, suggesting this part of the economy remains in expansion territory, although the containment measures which were reintroduced in some states in the second half of the month could create a negative surprise.
Earlier Monday, manufacturing activity across the euro zone expanded for the first time since early 2019, with IHS Markit's final Manufacturing Purchasing Managers' Index bouncing to 51.8 in July from June's 47.4.
The news was also positive in Asia, as China’s private Caixin manufacturing PMI increased to 52.8 from 51.2 the prior month, its highest level since January 2011.
On Friday, China’s official manufacturing purchasing managers’ index rose in July to 51.1 from 50.9 a month earlier, according to the National Bureau of Statistics.
5. Weak dollar helps gold, Treasurys higher
The U.S.dollar had a bad July, suffering its largest monthly fall in three years.
Traders have been fretting about the explosion of coronavirus cases across America, amid fears an ineffectual response could result in lasting damage to the U.S. economy that could keep interest rates and growth low for years.
“This is not the benign dollar decline we had envisaged, but instead, one seemingly being driven on a new risk premium being inserted into U.S. asset markets on the back of a resurgence in US Covid-19 cases,” said analysts at ING, in a research note.
This has resulted in a soaring price for gold, which moved up more than 9% in the month of July to all-time highs. The yellow metal is denominated in dollars and thus cheaper for investors outside of the U.S., as well as being seen as a store of value during geopolitical uncertainty.
U.S. Treasurys have also been in demand, with five-year Treasury yields falling to a record after the Federal Reserve last week delivered a dovish message of support for the coronavirus-stricken U.S. economy.
1. Powell to strike cautious note after Fed meeting
The Federal Reserve will conclude a two-day meeting of its policy-making Federal Open Markets Committee. The committee’s decisions are due at 2 PM ET (1400 GMT), and Chairman Jerome Powell’s press conference will follow half an hour later.
No immediate changes to monetary policy are expected, although the Fed did announce on Tuesday that it will extend seven of its nine emergency lending facilities for another three months, creating a safety net that may be needed if the global wave of Covid-19 infections continues to rise.
Given the generally downbeat tone of comments from Fed officials before the blackout, there is a chance that the central bank’s guidance will take on a more ‘dovish’ note, with increasingly heavy hints of future easing if necessary. Expectations of as much have been a large factor behind the recent surge in gold and Treasury bond prices.
The dollar index hit a new 22-month low.
2. Monopolists? Us?
Representatives of four of the U.S.’s biggest tech companies will appear before the House of Representatives’ Antitrust Sub-Committee on Capitol Hill, in an effort to persuade lawmakers that they aren’t concentrating excessive wealth and power in the U.S.
The committee will hear evidence from Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Apple (NASDAQ:AAPL) CEO Tim Cook and Alphabet (NASDAQ:GOOGL) CEO Sundar Pichai.
In prepared remarks released ahead of the hearing, the four all stressed their ability to meet demands for new goods and services and strenuously downplayed suggestions that their success was due to monopoly power.
The four companies combined, along with Microsoft (NASDAQ:MSFT), now represent 22% of the S&P 500 market capitalization, a higher degree of concentration than anything seen in the last 20 years.
3. Stocks set to open higher; AMD's strong quarter supports; Industrial heavyweights to report
U.S. stock markets are set to open mostly higher ahead of what could be a bumpy session for megacap stocks, depending on how the Congressional hearing goes.
By 6:30 AM ET (1030 GMT), the Dow futures contract was up 25 points or 0.1%, while the S&P 500 futures contract was up 0.2% and the Nasdaq 100 futures contract was up 0.5%
There’ll be earnings updates before the bell from Boeing, Shopify and automotive mid-cap General Motors, among others. Top billing after the close goes to PayPal and Qualcomm. The latter will have to live up a better-than-expected performance from Advanced Micro Devices (NASDAQ:AMD), which is indicated to open 11% higher after a strong quarterly report late on Tuesday.
4. Euro banks ravaged by Covid-19 provisions
Europe's banks followed the pattern of U.S. ones in the second quarter. Those with relatively big investment banking arms, such as Deutsche Bank (DE:DBKGn) and Barclays (LON:BARC), were able to offset heavy provisions for credit losses with windfall gains in the stock and, especially, the bond and currency markets.
Main street lenders fared worse. Spanish-based Santander (MC:SAN) took a $14 billion charge against the value of its assets, mostly against its struggling U.K. subsidiary. As with Dutch bank ING on Tuesday, it took the hit as a non-cash charge against goodwill, thus sparing its sensitive capital ratio. The European Central Bank had said on Tuesday it would give banks until at least the end of 2022 to get over the worst ravages of Covid-19 on their balance sheet but "recommended" that they pay no dividends this year.
Unicredit (MI:CRDI), which had big dividend plans at the start of the year, indicated on Wednesday it will comply with the recommendation.
5. Oil stabilizes after API data
Oil prices have stabilized after the American Petroleum Institute’s weekly estimate of U.S. crude inventories showed a much bigger draw than expected. The API estimated a draw of 6.83 million barrels, much bigger than the 1.2 million draw forecast.
However, stocks of both gasoline and distillates both posted unexpected increases. The official government data are due as usual at 10:30 AM ET (1430 GMT).
U.S. crude futures were up 1.0% at $41.45 a barrel, while the international benchmark Brent was up 1.2% at $44.11 a barrel.
Jitters about the strength of both U.S. and global demand are being made worse by the awareness that OPEC and its allies are about to release 2 million barrels a day more crude into the world market from Aug. 1. Analysts at Rystad Energy say that may be enough to tip the market back into surplus.
1. Republicans present stimulus plans
Senate Republicans unveiled a package of economic support bills worth an estimated $1 trillion that would cut the federal subsidy for unemployment benefits by two-thirds from the end of September. Thereafter, the payments would be combined with state benefits to replace 70% of lost wages.
The package reflects Republican concerns that the current weekly checks of $600 per week disincentivize Americans returning to work (and costs a lot of money too – an estimated $15 billion a week).
Democratic Party politicians, who control the House of Representatives, criticised the move as removing a vital support for over 16 million people currently claiming unemployment benefits.
The two parties have until the end of the week to thrash out a compromise. A bill passed in the House approved a much larger $3.5 trillion package of measures, including $900 billion of support for state and municipal governments that is lacking from the Republican package.
2. Fed meeting starts; consumer sentiment data due
The Federal Reserve’s two-day Federal Open Markets Committee meeting starts, but the results will not be known until Wednesday. Rhetoric ahead of the meeting has raised expectations that the Fed could offer clearer guidance of an intention to ease monetary policy further in the future, although no fresh actions are expected at this week’s meeting.
In the meantime, there are house price data from S&P/Case Shiller at 7 AM ET, the Conference Board’s consumer sentiment index at 8 AM and the Richmond Fed’s regional business survey also at 8 AM.
Data out of Europe earlier were marginally better than expected, with Spain’s jobless numbers rising less than feared and a sharper-than-expected rebound in the U.K.’s distributive trades survey.
The euro held on to most of its recent gains to trade at $1.1729.
3. Stocks set to open lower as earnings rain in
Don’t blink or you’ll miss them. It’s raining earnings Tuesday, with updates from (deep breath) Visa (NYSE:V), McDonald’s, Pfizer (NYSE:PFE), Amgen, Raytheon, Starbucks, Mondelez, Altria, (NYSE:MO), eBay (NASDAQ:EBAY) and Advanced Micro Devices - to name but a few.
Most of those are due after the closing bell but McDonald’s, 3M and Pfizer will be out early.
The updates will be hitting a stock market struggling for direction, with many CEOs having cast doubt on the sustainability of the recovery in their conference calls.
By 6:30 AM ET (1030 GMT), the Dow futures contract was down 87 points or 0.3%, while the S&P 500 futures contract and the Nasdaq 100 futures contract were both down in parallel.
4. Moderna 's and Pfizer's stage 3 drug trials start
Moderna Inc (NASDAQ:MRNA) announced the start of the third and final stage of trials for its experimental drug for treating the Covid-19 virus.
Pfizer and its German partner, Nasdaq-listed Biontech Se (NASDAQ:BNTX), also said they would start a hybrid stage 2/stage 3 trial for their candidate vaccine.
The rapid progress in vaccine development - albeit progress that has no guarantee of ultimate success – comes at a time when the number of new infections globally is running at a record high. The rate of new infections in the U.S. appears to have slowed somewhat in response to a tightening of regulations across the south and west of the country, the number of new cases dropping to 56,336 on Monday, after running well over 60,000 last week.
Germany’s top public health official also sounded the alarm over a rise in cases in Europe’s largest economy, which he linked to a loss of discipline in observing social distancing rules.
5. ECB warns banks against dividends
The European Central Bank told eurozone banks not to pay dividends for the rest of the year, but rather to hoard their cash to strengthen defenses against an expected wave of bankruptcies.
At the same time, the ECB cut the banks further slack on recognizing loan losses, saying it wouldn’t tighten supervisory standards on liquidity and capital until the end of 2022 at the earliest. The ECB is determined not to turn an expected economic crisis into a financial one so soon after the last wave of eurozone banking.problems
Eurozone bank stocks rose an average of 0.6%, with the biggest rises seen in Spain, whose banks may need capital relief more than most given the risk to its large tourist sector from the recent rise in Covid-19 cases.
1 Gold hits record high; silver surges
The price of gold hit a new all-time high, as concern over the health of the U.S. recovery and increasing signs of second waves of coronavirus around the world strengthened demand for the asset that is no-one’s liability.
Gold futures rose as high as $1,939.35 a troy ounce before retracing to trade at $1.938.35 an ounce by 6:30 AM ET (1030 GMT).
Silver futures also surged again in sympathy, rising 6.1% to $24.24 an ounce, the highest since 2013. The Dollar Index, meanwhile, hit its lowest since September 2018.
The prospect of negative real interest rates for the foreseeable future has bolstered the case for non-interest-bearing haven assets, with both gold and silver ETFs registering heavy inflows in recent weeks.
2. U.K. quarantines visitors from Spain
One of the factors underpinning demand for havens is the increasing suspicion that the world isn’t bringing the coronavirus pandemic under control.
China has registered its highest number of new infections since March owing to outbreaks from Xinjian in its far west to Liaoning in the north-east. It’s also tightened lockdowns in Hong Kong, restricting public gatherings to no more than two people (an action that will raise eyebrows in Washington, given the political backdrop).
Of most concern to developed markets, however, is arguably the U.K. decision to impose a two-week quarantine on travelers returning from Spain, a focal point for European summer vacations. Spanish regions including Catalonia have been forced to tighten restrictions on the hospitality sector against a backdrop of evidence showing the impossibility of enforcing social distancing rules.
3. Stocks set to open higher; NXP (NASDAQ:NXPI)'s earnings eyed
However, the idea that ‘bad news is good news’ is again in the ascendant as risk assets get support from speculation that the Federal Reserve will resort to more stimulus at its policy meeting this week.
By 6:30 AM ET (1030 GMT), the Dow futures contract was up 125 points, or 0.5%, while the S&P 500 futures contract was up 0.6% and the Nasdaq 100 futures contract was up 1.2%.
Earnings season is taking a bit of a breather, with the only updates of note coming from NXP, Oaktree Capital, Albertsons and Hasbro (NASDAQ:HAS). In Europe. Software giant SAP beat expectations and Ryanair warned of a tough nine months ahead. Luxury giant LVMH reports after the close.
4. Mnuchin promises stimulus proposals
White House Chief of Staff Mark Meadows said he expects the Republican Party to present its new stimulus proposals in the Senate later today, according to various reports, after losing last week to internal arguments. The Wall Street Journal reported that the GOP-led Senate is likely to propose a bill that extends the $600 weekly unemployment benefit checks to households, but which contains no funds expressly for city and state administrations.
There’s a big gap between that position and the much more expensive proposals drafted by the Democrat majority in the House of Representatives.
Alongside doubts over the stimulus package, sentiment in the U.S. is also at risk from the spread of violent unrest in major cities as the wave of protests sparked by the killing of George Floyd by police morphs into a broader expression of the cultural divide across the country.
5. Durable Goods numbers due; German business confidence rises
Did Americans carry on spending their ‘enforced savings’ in June as they emerged from lockdown? Durable goods data, due at 8:30 AM ET, will give at least a partial answer. Consensus forecasts are for a 7.2% increase, following on from May’s 15.7% rise.
Data from elsewhere in the world continued to point to a moderate recovery. The German Ifo business confidence index increased by slightly more than expected, buttressing the impression made by IHSMarkit’s European PMIs on Friday.
Chinese industrial profits also rose 11.5% on the year in June, although they were still down by more than 12% over the first half as a whole.
1. Europe's historic deal
The European Union’s member states finally agreed on a landmark deal that will create a 750 billion euro ($860 billion) recovery fund for the bloc.
The fund will be financed by borrowing by the EU itself, and over half of it – 390 billion euros in all – will be disbursed in the form of grants rather than loans. As such it puts the firepower of German, Dutch and French taxpayers more solidly behind the credit of Italy, Greece, Spain and Portugal.
Sovereign bonds and bank stocks across the southern European periphery all outperformed on the news, but the euro itself, was unchanged against the dollar, having hit a four-month high in anticipation of the news last week.
2. Republicans, Democrats set to thrash out stimulus package
U.S. policy-makers will meet again to thrash out details of what will be the fifth U.S. stimulus package since the coronavirus struck.
Various reports suggest the Republican and Democratic parties remain far away from each other’s position, but the fact that each controls one chamber of Congress means that compromise will have to be found.
President Donald Trump said at the weekend he still wants a payroll tax cut to form part of the package, while Treasury Secretary Steven Mnuchin said on Monday the measures would be worth around $1 trillion and would focus on “kids and jobs and vaccines.”
He also said the administration wants to provide tax incentives for businesses to rehire people and money for states that reopen schools. House Democrats are lobbying for more explicit support for states and cities, by contrast.
3. Stocks set to open higher after tech melt-up
U.S. stock markets are set to open higher again, extending gains made on Monday on the back of increased hope that one or more vaccine cures for the Covid-19 virus will be readily available by the end of the year.
By 6:30 AM ET (1030 GMT), the Dow Futures contract was up 177 points or 0.7%, while the S&P 500 Futures contract was up 0.7% and the Nasdaq 100 Futures contract was up 0.8%
Stocks likely to be in focus will include Texas Instruments, Coca-Cola, Philip Morris and Lockheed Martin, all of which report before the open, as well as Snap, which reports after the close.
4. Bezos gains another $13 billion
Amazon (NASDAQ:AMZN) founder and CEO Jeff Bezos’ net worth rose by $13 billion on Monday, in the latest sign of tech stock valuations de-anchoring from the reality of an economy in the middle its biggest contraction since World War 2.
Amazon stock rose 7.9% on Monday, helped by big upgrades from Wall Street analysts including Goldman Sachs (NYSE:GS) and Jefferies (NYSE:JEF). However, the company said in an e-mail to suppliers it’s delaying its annual Prime Day, ostensibly due to the pandemic.
After the closing bell on Monday, IBM (NYSE:IBM) had joined the apparently unstoppable tech party, its shares rising over 5% in after-hours trading after it reported a 5.4% drop in revenue and a fall of nearly 50% in earnings per share for the second quarter. Those figures were marginally better than analysts’ expectations. Cloud-computing revenue rose 30% on the year, IBM noted.
5. Crude hits four-month high; API eyed
Crude oil prices hit their highest since early March as part of a generalized rally in risk assets after the EU deal.
By 6:30 AM U.S. crude futures were up 2.5% $41.95 a barrel, having earlier hit an intraday high of $42.02, while the international benchmark Brent was up 2.6% at $44.41 a barrel.
At 4:30 PM, the American Petroleum Institute will publish its latest weekly estimate of U.S. oil stocks. Analysts expect official government data, due on Wednesday, to show a fresh draw of 1.95 million barrels from crude inventories, after last week’s mammoth 7.5 million barrel draw.
1. Fights over the next round of stimulus
The week starts with two economic stimulus packages in focus. Congressional Republicans are due to meet with President Donald Trump to discuss the terms of what would be the fifth U.S. stimulus package, 11 days before a raft of earlier measures are due to expire.
“The economy is probably not ready for the abrupt withdrawal of money that that implies,” Paul Donovan, chief economist with UBS Global Wealth Management, said in a morning briefing.
Meanwhile in Europe, an EU summit that aimed to approve the 750 billion euro ($860 billion) recovery fund has dragged on to a fourth day, amid resistance from five northern European states to the idea of 500 billion euros in grants to poorer countries. Reports suggest the proportion of grants could be whittled down to as little as 390 billion euros, leaving a greater part to be made up by conditional loans that would take longer to approve and disburse. Talks are set to resume at 10 AM ET (1400 GMT)
The euro still rose 0.3% to $1.1454 by 6:30 AM ET (1030 GMT), close to a four-month high.
2. AstraZeneca/Oxford University to update on drug progress
AstraZeneca (NYSE:AZN) is due to release the results of clinical trials for its experimental Covid-19 drug, being developed in partnership with Oxford University in England.
AZ’s drug was touted by Business Week last week as being the front-runner of all the various candidate vaccines being developed by the world’s pharma industry. Early-stage test results had suggested that the drug killed not only the virus, but also the cells infected by it, strengthening the body’s immune response.
Elsewhere, Dutch medical technology company Philips stock rose 4.8% to its highest since January after posting a surge in sales of and orders for its ventilators, while a U.K. small-cap Synairgen more than tripled after reporting positive early-stage results for a protein-based Covid treatment.
3. Stocks set to open lower; IBM 's, Halliburton's earnings eyed
U.S. stock markets are poised to open mostly lower against the backdrop of more negative headlines over the weekend about the spread of the coronavirus. Florida posted its fifth straight day of over 10,000 new cases on Sunday, while the mayor of Los Angeles said that the city was "on the brink" of imposing fresh restrictions to try to slow down the virus' spread.
President Trump, meanwhile, told Fox News that the country is dealing with the 'dying embers' of the epidemic, although he acknowledged that Florida was still 'a flame'.
By 6:30 AM ET (1030 GMT), the Dow futures contract was down 55 points or 0.2%, while the S&P 500 futures contract was down 0.3% and the Nasdaq 100 futures contract was essentially unchanged.
Earnings season continues with updates from oil and gas services company Halliburton (NYSE:HAL) before the opening, and with International Business Machines (NYSE:IBM) after the closing bell.
4. Disney joins Facebook boycott (sort of)
Walt Disney (NYSE:DIS) has – sort of – joined the advertising boycott of Facebook (NASDAQ:FB) over its perceived failure to tackle hate speech on its social media platforms, according to The Wall Street Journal.
Disney, which was Facebook’s biggest advertiser in the first half of the year with a total ad spend of some $210 million, hasn’t made any public decision about its advertising policy, but the number of ads for its new streaming service Disney+ on Facebook’s main platform has nearly dried up, the WSJ said.
In addition, the company has also paused advertising for its Hulu service on Facebook’s Instagram platform.
5. Oil weakens on Chinese news; Chevron goes bargain-hunting
Crude oil prices started the week on a weak note on reports that Chinese refiners will reduce throughput in response to a drop in local demand due to heavy flooding.
U.S. crude futures fell 0.9% to $40.41 a barrel, while the international benchmark Brent was down 0.8% at $42.78 a barrel.
The pressure of low prices was also evident as Noble Energy (NASDAQ:NBL), whose shares have more than halved this year, agreed to be bought by Chevron (NYSE:CVX) for just under $5 billion in an all-stock deal. Chevron stock was down 1.3% in premarket trade, while Noble (NYSE:NE)'s was up 9.9%.
Elsewhere, reports said that Saudi Arabia’s King Salman and the Emir of Kuwait were both hospitalized.
1. China's economy returns to growth; its stock market reverts to type
China became the first major global economy to return to growth in the wake of the Covid-19 pandemic, with gross domestic product rising 3.2% on the year in the second quarter, and 11.5% from the first three months of the year. Both numbers were above analysts’ expectations.
However, the Chinese stock market tanked and the yuan weakened after the People’s Daily newspaper attacked drinks company Kweichow Moutai for its overpriced liquor and flagged alleged links to corruption. The stock is a popular one with the retail investors who have piled into the market in recent weeks, and making it a target has the effect of cooling off the whole market.
Another factor that weighed on sentiment was the fact that some monthly data disappointed, with retail sales still running 1.8% below last year’s levels in June.
2. Retail sales, jobless claims due
Retail sales for June will also be the focus of Thursday’s data dump in the U.S., with the range of potential outcomes seemingly broader there than in the labor market, where the pattern of a grindingly slow decline in jobless claims is now firmly established.
Both sets of data are due for release at 8:30 AM ET (1230 GMT), along with the Philadelphia Fed’s monthly business survey. The NAHB housing market index is due at 10 AM, while New York Fed President John Williams’ speech at 9:10 AM may also draw attention.
Retail sales had rocketed by a record 17.7% in May, as the U.S. started to lift its lockdowns. Another 5.0% increase is expected for June. Initial jobless claims are expected to fall to 1.25 million from 1.315 last week, while continuing claims are expected to drop below 18 million.
3. Stocks set to open lower; banks, health and Netflix earnings eyed
U.S. stocks are set to open lower, retracing after a buoyant reaction on Tuesday to a better-than-expected rebound in industrial production and Goldman Sachs’s blowout second quarter. Rivals Morgan Stanley (NYSE:MS) and Bank of America will have their work cut out to match it when they report before the opening.
By 6:30 AM ET (1030 GMT), the Dow futures contract was down 190 points or 0.7%, while the S&P 500 Futures contract was down 0.8% and the Nasdaq 100 futures contract was down 1.5%
In addition to Morgan Stanley and Bank of America (NYSE:BAC), there are also updates due from Johnson & Johnson (NYSE:JNJ) and Abbott Laboratories (NYSE:ABT). Streaming giant Netflix reports after the close.
Other stocks likely to be in the spotlight include American Airlines (NASDAQ:AAL), which outlined plans late on Wednesday to furlough up to 25,000 workers when the company’s federal aid expires on Oct. 1, and Virgin Galactic (NYSE:SPCE), which named Disney’s parks head Michael Colglazier as its new CEO. It’s the second divisional boss Disney (NYSE:DIS) has lost in as many months.
4. ECB meets; EU slams data transfer practises
The European Central Bank’s governing council is meeting, but is not expected to announce any changes to monetary policy at 7:45 AM ET (1145 GMT) after June’s package of easing measures.
Of more interest will be President Christine Lagarde’s press conference starting at 8:30 AM, where the attention will be on any hints of limits to the central bank’s activism in supporting markets.
Europe’s top court meanwhile ruled earlier that the current framework for data transfers from the EU to the U.S. isn’t up to scratch (effectively dissing the effectiveness of U.S. data privacy rules). The ruling has potentially far-reaching effects for many U.S. and European companies, not least the social media giants.
5. Twitter hacked
One particular social media giant has some soul-searching to do. Twitter’s platform was hacked in a high-profile attack that compromised the accounts of, among many others, Elon Musk, Bill Gates and Joe Biden. The attack comes only a few months after CEO Jack Dorsey’s account was hacked.
The hack was ostensibly driven by scammers, who posted messages encouraging Bitcoin donations. Around $100,000 in Bitcoin was stolen, according to various reports (the price of Bitcoin fell over 2% in response to yet another illustration of its links to illicit activity).
However, it can’t be ruled out that the Bitcoin aspect of the hack was intended to divert attention from something else. After all, if you had access to Elon Musk’s account and you had any inkling of how far it could move Tesla (NASDAQ:TSLA) shares in the current environment, why would you satisfy yourself with $100,000 worth of cryptocurrency?
Twitter (NYSE:TWTR) stock was down 6.6% in premarket trade.
1. Reopening rollback
California Governor Gavin Newsom ordered the closure of all indoor businesses. The state’s two largest school districts, in Los Angeles and San Diego, will also conduct classes remotely after the summer break, defying pressure from the federal government to reopen.
The measures, which apply to bars, indoor restaurants, movie theaters and nail salons among other things, are the most dramatic reversal yet of the economic reopening across the U.S. They come after a 20% increase in cases and a 10% rise in deaths across the state over the last week.
The national seven-day rolling average for new cases, which evens out some short-term volatility in the reporting, has risen from less than 20,000 in mid-June to a new record of over 59,000 as of Monday.
Reopening has brought similar concerns across the world, with both Japan and Germany warning on Monday that nightclubbing in particular could prompt renewed surges in infections.
2. Bank reports to set the tone for Q2 earnings season
Earnings season kicks into gear, with JPMorgan (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) all due to report on what is set to be a dismal quarter.
Of most interest will be the rate at which banks are building provisions against corporate and personal loans turning bad as they are struck by a wave of bankruptcies and job losses. The provisions number will, indirectly, be a comment on the effectiveness of government policy in preserving jobs.
FactSet estimates that S&P 500 companies overall will post a 10% decline in revenue and a 45% drop in earnings in the quarter. The banks look likely to fare even worse: JPMorgan’s earnings per share expected to have fallen by more than half to $1.19, while Citigroup’s are expected to fall 84% to 36c.
3. U.S. Stocks set to bounce a little; Delta, Softbank in spotlight
U.S. stocks are set for a modest bounce at opening after sharp losses on Monday in response to the Californian news, although the quarterly reports from the banks may change all that.
By 5:55 AM ET (9:55 GMT), the Dow futures contract was up 96 points or 0.4%, while the S&P 500 Futures contract and the Nasdaq 100 futures contract were both up 0.3%. Overnight, UBS struck a note of caution regarding tech stock valuations, cutting its recommendation on both Netflix (NASDAQ:NFLX) and Spotify (NYSE:SPOT).
In addition to the three big banks, there’ll also be earnings from Delta Air Lines (NYSE:DAL). Also in the spotlight may be SoftBank ADRs (OTC:SFTBY), which hit a one-year high on Monday on reports that it is lining up a possible sale of a stake in chipmaker ARM.
4 Chinese exports, imports return to growth; German, U.K. data underwhelm
China’s external trade data showed positive numbers in year-on-year terms for the first time since the pandemic erupted at the start of the year. Chinese exports rose 0.5% on the year in June, while imports rose 2.7%, due largely to the country’s taking advantage of low prices to restock their crude oil reserves.
China has emerged furthest from the pandemic-induced collapse partly because it was the first country to be hit by it. In Europe, which only started to suffer two months after China, the recovery is still looking fragile: U.K. May GDP data rebounded by only 1.8% rather than the 5.5% expected, although industrial output and manufacturing were down by slightly less than feared.
In Germany, meanwhile, the ZEW index of economic sentiment fell from June due to a much sharper-than-expected worsening in the assessment of current conditions.
5. Oil steadies on evidence of Chinese buying; OPEC report due
The Organization of Petroleum Exporting Countries will release its monthly assessment of the global oil market, on the same day that a two-day technical meeting to assess compliance with the so-called OPEC+ deal on output restraint starts.
Oil prices steadied overnight having weakened on Monday in response to the Californian news, which casts fresh doubt over the trajectory for fuel demand.
Signs of record buying by Chinese importers in June then acted as a counter-weight. Crude imports to China soared to a record 12.99 million barrels a day in June, up over 3.3 million b/d from May.
U.S. crude futures were down 0.8% at $39.77 a barrel, while the international benchmark Brent was down 0.6% at $42.47 a barrel
1. Virus spreads faster; Trump dons a mask
The World Health Organization registered a new daily record high for the number of new cases of Covid-19 at the weekend at over 230,000. The U.S. registered a new daily record of over 70,000 infections on Friday, while Florida alone registered over 15,000 new cases – more than New York at the height of the virus’ first wave in April.
The White House sought to distance itself from Anthony Fauci, the head of the National Institute for Allergies and Infectious Diseases, after the latter repeatedly warned about the inadequacy of the U.S.’s response to the virus in recent weeks.
At the same time, President Donald Trump wore a face mask in public for the first time after weeks of refusing to do so and mocking his opponents for doing so.
2. Chipmakers Analog and Maxim to merge
Analog Devices (NASDAQ:ADI) is to merge with Maxim Integrated (NASDAQ:MXIM) in an all-stock deal that will be the biggest in the U.S. so far this year.
The merger will create a company with a market value of some $70 billion and annual revenue of around $8 billion. It is the latest combination in a sector that has seen rapid consolidation in its top tier in the last five years.
Under the terms of the deal, Maxim shareholders will own around one-third of the company.
The two companies are both major players in analog semiconductors, whose applications include power management for automotive batteries. Their biggest rival, according to The Wall Street Journal, will be Texas Instruments (NASDAQ:TXN).
3. Stocks set to open higher as Goldman ups forecast; Pepsi silent on outlook
U.S. stock markets are poised to open higher, shrugging off reports of the further spread of the coronavirus amid confidence that the upcoming earnings season won’t force investors to take a bleaker view of the outlook for major companies.
Goldman Sachs strategists have revised their baseline forecast for 2020 earnings per share at S&P 500 companies up to $115 from $110 previously, according to a note released at the weekend. David Kostin’s team stressed that outlooks, rather than historical figures, will be particularly important during the coming earnings season.
Pepsico, which reported earlier, ducked the challenge, failing to provide a financial outlook for the year beyond reiterating its previous assurances on shareholder payouts.
By 6:30 AM ET (1030 GMT), the Dow Futures contract was up 139 points, or 0.5%, while the S&P 500 Futures contract was up 0.4% and the Nasdaq 100 futures contract was up 0.6%.
4. Zloty weakens slightly on Duda's re-election
The Polish zloty weakened slightly after incumbent President Andrzej Duda, standing for the conservative Law and Justice party, was re-elected by a narrow margin, in what was seen as a popular vindication of the party’s economic record.
Duda’s victory over his more economically and socially liberal opponent suggests that the strength of conservative opinion in central and eastern Europe, which has led to increasing tension between the EU and its newer members, is set to continue.
By 6:30 AM ET (1030 GMT), the euro was at 4.4764 zloty, just off what would be a seven-week high.
5 Oil slides as OPEC+ prepares to open the taps
Crude oil prices slid on the prospect of OPEC and its allies partially turning the taps back on at the end of the month.
Under the emergency deal on output restraint agreed during the pandemic by the so-called “OPEC+” bloc, the amount of oil being withheld from world markets is set to drop from 9.7 million barrels a day to 7.7 million b/d at the end of July.
Officials from Russia have indicated that they see no need to diverge from that timetable, which is likely to be re-endorsed at a technical monitoring meeting later this week.
U.S. crude futures were down 1.7% at $39.85 a barrel, while the international benchmark Brent was down 1.4% at $42.62 a barrel.
1. Hong Kong reports hit HSBC but not the $HKD
The U.S. is looking at further ways to punish China for its perceived violation of Hong Kong’s autonomy with a new national security law that greatly expands the powers of mainland security organs in the former British colony.
Bloomberg reported that aides to Secretary of State Mike Pompeo are looking at ways to undermine the Hong Kong dollar’s peg to its U.S. counterpart, but the agency reported that concerns about the potential market instability it would trigger are a powerful disincentive.
HSBC Holdings (LON:HSBA) shares fell by the most in more than two months amid concerns that the U.S. could limit the access of Hong Kong banks to dollars. HSBC gets more than two-thirds of its profits from Hong Kong and the adjoining Pearl River Delta. The Hong Kong dollar was stable, however, and the Hang Seng stock index rose another 0.6%.
2. U.S. virus cases hit new record high
The U.S. posted over 60,000 new cases of Covid-19 for the first time, with the state of Texas accounting for over 10,000 of them.
The World Health Organization’s executive director Mike Ryan said that it wouldn’t be surprising if the global death count starts to rise again, given the virus’ spread not just in the U.S., but also in countries such as Latin America and India.
San Francisco delayed the restart of indoor dining on Tuesday, while Ohio introduced a mask requirement in the counties covering Cleveland and Cincinnati.
President Donald Trump said on Tuesday that he would pressure primary and secondary schools in the fall, which would have the consequence of allowing more parents to return to work. The federal government hasn’t issued any guidance on how to ensure schools can be reopened safely yet.
3. Stocks set to open mixed; Allstate to buy National General
U.S. stocks are set to open flat to lower after breaking a five-day winning streak on Tuesday over concerns that the spread of the coronavirus will crimp the economic rebound.
By 6:30 AM ET (1030 GMT), the Dow Futures contract was down 33 points or 0.1%, while S&P 500 Futures were down less than 0.1% and Nasdaq 100 futures were up 0.2%.
European stocks were also mostly lower but Chinese indices continued to rise.
Bed Bath & Beyond (NASDAQ:BBBY) will report fiscal first-quarter results after the closing bell. Also in the spotlight will be insurance giant Allstate (NYSE:ALL), which has agreed to buy rival National General (NASDAQ:NGHC) for $4 billion in cash.
4. Gold hits nine-year high
The spot price for gold bullion rose above $1,800 for the first time in nearly nine years as fears of a second wave of the pandemic and expectations of easy central bank policy continued to drive flows into perceived safe haven assets.
According to the World Gold Council, gold-backed ETFs had record net inflow of $40 billion in the firs half of 2020. In June alone, they added 104 tons of gold, taking global holdings to all-time highs of 3,621 tons.
Federal Reserve Richard Clarida and San Francisco Fed President Mary Daly stressed that the Fed still has options to increase monetary stimulus in appearances on Tuesday, lending credibility to expectations of what Citigroup (NYSE:C) analysts called “incessant” Fed support.
Elsewhere, European Central Bank President Christine Lagarde indicated in an interview that the ECB could be on hold for some time after nearly doubling the size of its pandemic-focused bond-buying program.
5. U.K. to announce more stimulus
The U.K. government is expected to announce further fiscal stimulus measures in a ‘mini-budget’ from Chancellor of the Exchequer Rishi Sunak.
The measures expected to be announce include 3 billion pounds for improving the energy efficiency of homes and commercial property, 1.5 billion for supporting the arts and entertainment industry, and 2 billion pounds in wage subsidies for the young. There have also been reports that transaction taxes levied on home purchases will be partially suspended in an effort to revive the U.K.’s housing market.
The announcement comes a day after Prime Minister Boris Johnson told German Chancellor Angela Merkel that the U.K. was prepared to accept a ‘no deal’ scenario on trade with the EU at the end of the current post-Brexit transition period at the end of the year. The pound was down 0.1% at $1.2525 and 1.1113 euros.