Morning Report

July 22, 2021

“Strong earnings brushed away Delta concerns in the US. The consensus is that the strain does not pose an immediate risk to the recovery as it could delay reopening by three months at the most as countries are ramping up vaccination drives in response.”

Sam Cornford, Partner & Head of Trading


Main Headlines

President Biden expressed confidence that he could still secure passage of a $1tn bipartisan infrastructure package even after it was blocked by Republican lawmakers in its first congressional vote. Speaking to voters in Ohio during a televised town hall meeting on Wednesday night, Biden brushed off the setback in a procedural vote as “irrelevant” and said a compromise text could still be agreed by Monday. Although US growth and job creation has jumped since Biden took office in January, the economic outlook has been clouded by the resurgence of the Covid as well as an unnerving jump in inflation.

Business leaders have demanded solutions from the government to the problem of hundreds of thousands of workers having to self-isolate after being “pinged” by the NHS Covid-19 app. They hit out at ministers’ handling of the lifting of most coronavirus restrictions in England and pointed to issues developing such as keeping stores open and shelves stocked. In a call with business secretary Kwasi Kwarteng on Tuesday, more than a dozen trade associations were part of a group that raised concerns over the spiralling numbers affected by receiving an alert on the app after coming into contact with an infected person.


The pound is well bid against most majors this morning. NHS workers will be awarded a pay rise of 3%, triple the amount first proposed after the government faced a wave of criticism for undervaluing those who have struggled through the rigours of the pandemic. Health secretary Sajid Javid said the pay bump was offered to health service staff despite a wider public-sector pay freeze “in recognition of their extraordinary efforts” during the Covid pandemic, which has left nearly half a million Britons in need of hospital care. But unions have expressed dismay that the deal still fails to keep pace with the predicted level of inflation, representing a cut in real terms. The Royal College of Nursing made clear that industrial action remained on the table.


The euro is stronger than the dollar and weaker than the pound overnight. The US and Italy plan to increase their financial contributions to help developing countries fight climate change. Rome, which is hosting the G20, and Washington are seeking to heal a growing rift between rich and poor countries over climate finance, an issue that threatens to derail the UN COP26 summit in Glasgow in November. US climate envoy John Kerry and Italian energy transition minister Roberto Cingolani told the FT in separate interviews that they wanted to boost their climate donations ahead of the COP summit. The G20 environment ministers’ meeting on Thursday, usually a low-key affair, is this year seen as a key leading indicator for the potential outcomes and controversies ahead of climate change talks this autumn.


The dollar is weaker than most majors in the early morning trade. Todd David, the executive director of the Housing Action Coalition, a charity that works on housing policy in San Francisco, says all signs are pointing to a resurgence in rental costs in the Bay area after the pandemic-driven slump. “The trend is up,” he said. Housing expenses are the sleeping giant that could tip the scales of the increasingly heated debate on US inflation. They are quickly emerging as a pivotal indicator for officials at the Federal Reserve, within the Biden administration, and among private economists. So far this year, the shelter component of the consumer price index has shown smaller increases but housing costs have nonetheless been edging up, showing a year-on-year increase of 2.6 per cent in June compared to a 1.5 per cent annual rise in February.


Asian stocks climbed Thursday after solid company earnings boosted Wall Street, easing concerns about peak economic growth and coronavirus flareups. The dollar held a decline. An MSCI Inc. gauge of Asia-Pacific shares rose for a second day, led by cyclical sectors like materials and energy, though technology also pushed higher. Hong Kong and Australia outperformed, while Japan is shut for a holiday. European contracts advanced and U.S. futures edged up after the S&P 500’s biggest back-to-back increase in two months. Ten-year Treasury yields headed toward 1.3% as the recent bond rally fizzled. A 20-year debt auction fared poorly. Cash Treasuries won’t trade in Asia due to the Japan holiday. Gold was at $1,798.35 an ounce, down 0.3%.

Main Economic Data/Central Banks/Government (ALL TIMES CET)

8:45 a.m.: France July Manufacturing Confidence

10:30 p.m.: BOE’s Broadbent speaks

1:00 p.m.: Ukraine Rate Decision

1:45 p.m.: ECB Rate Decision

2:30 p.m.: ECB’s Lagarde speaks

2:30 p.m.: U.S. Initial Jobless Claims

4:00 p.m.: Euro-Area July Consumer Confidence

6:00 p.m.: Russia June Industrial Production

SARB Rate Decision

European Affairs ministers meet

Corporate Events

Earnings include Intel, Abbott, AT&T, Unilever, Blackstone, Snap, EQT


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