Morning Report

August 11, 2021

“The trillion-dollar injection into infrastructure will doubtlessly fuel inflation, but for now, markets are subdued as participants look ahead to the latest US inflation data, which could determine the Fed’s decision to hike interest rates. Lifted by last week’s jobs data and Fed’s tapering hints, the dollar is just below this year’s high.”

Tim Hallinan, Trading Director

Main Headlines

The US Senate has passed a sweeping $1tn infrastructure bill that will provide hundreds of billions of dollars to upgrade America’s crumbling transport systems in a big victory for the Democratic party. Nineteen Republicans, including Senate minority leader Mitch McConnell, joined all of the Democrats in Congress’s upper chamber to back the bill in a rare display of bipartisanship in a fiercely divided Washington. The Senate voted 69-30 in favour of the bill, in a breakthrough that has eluded Congress and presidents for years, despite both parties calling infrastructure a priority.

The Office for National Statistics said Covid-19 accounted for 4% of all deaths in the last week of July in the UK, the highest weekly share of all deaths in three months. 11,573 deaths were recorded in the week through July 30, 468 of which included the coronavirus as a cause. That’s 1,262 above the five-year average. Infections have been rising steadily since most restrictions were scrapped on July 19, but serious sickness and hospitalisations remain below peak levels last year.


Sterling is weaker versus most major currencies this morning. Demand for expensive homes in the UK is shifting away from London, with the bulk of £1m-plus sales coming outside of the capital in the first five months of this year. Stamp duty investigations fell dramatically last year, despite property transactions having soared since the housing market reopened last summer. The global chip shortage has constricted the supply of new cars but boosted purchases of used vehicles in the UK, which doubled to about 2.17m units in the three months to June compared with the same period a year ago.


The euro is lower against the dollar and higher against the dollar overnight. Germany’s finance minister, Olaf Scholz, appears to be a favourite in the race to succeed Angela Merkel as chancellor, with a recent poll showing support of 35 per cent behind him, compared with 20 per cent who would back Armin Laschet of CDU/CSU, and 16 per cent behind Annalena Baerbock of the Greens. The drammatic price of shipping goods from Asia to Europe has further soared over the recent months, with about $6,000 rise in shipping costs per container since the end of April.


The dollar is higher against most majors in the early morning trade. Within minutes of passing a sweeping $1tn infrastructure package on Tuesday, the US Senate moved on to the next order of business: an even bigger budget bill with an estimated price tag of $3.5tn. While members of Biden’s economic team generally support nominating Federal Reserve Chairman Jerome Powell to a second term, a resistance is growing from prominent Democrats including Sen. Elizabeth Warren, which could lead to his replacement. New York Governor Andrew Cuomo resigned on Tuesday over sexual harassment allegations.


The Stoxx Europe 600 Index opened modestly higher, as strong earnings from the likes of ABN Amro Bank NV and Stop & Shop owner Royal Ahold Delhaize NV boosted the gauge. Shares rose in Japan and Chinese stocks were little changed, while those in South Korea retreated after the country posted a record number of coronavirus cases. US equity futures fluctuated, and Treasuries slipped ahead of data out today showing US consumer prices probably jumped again in July. Crude oil was steady after bouncing from a three-week low as a report showed shrinking inventories.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany July CPI
9:15 a.m.: Sweden NIER forecast update
10:00 a.m.: Italy July CPI
11:00 a.m.: Italy to sell bills
11:00 a.m.: U.K. to sell linkers
11:30 a.m.: Germany to sell bonds
2:00 p.m.: Hungary central bank minutes
3:00 p.m.: Russia June trade balance
4:30 p.m.: EIA U.S. crude oil inventories

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