Morning Report – Wednesday 16th July

Main Headlines

ECB policy makers will probably sound somewhat optimistic when they meet today. Analysts do not expect any expansion of asset purchases or rate changes, but Christine Lagarde may face questions over whether current support measures will be enough to restore growth. Most expect the bank to do more by December, with total bond buying under all programs seen exceeding 2 trillion euros this year and next.

Investors fled from risk assets as U.S. and European stock futures dropped along with Asian equities. Chinese shares led declines with the index 4.7% lower this morning as a tumble by big names such as Moutai overshadowed better than expected GDP data. The yuan also slid with the Aussie. Treasuries edged up. Oil dropped with industrial metals. Gold was steady.

The virus hot spots in the U.S. are getting worse. Texas and California both recorded record tallies in new infections, and fatalities in California soared 69% over the two week average. Disease expert Anthony Fauci said there will be an effective vaccine by year end, Reuters reported. Also, Oxford University’s vaccine trial will report “positive news,” a U.K. journalist said, boosting AstraZeneca ADRs in late trading.

Twitter is investigating after con artists hacked into the accounts of tech moguls, politicians and some companies in an apparent bid to acquire Bitcoin. Joe Biden, Jeff Bezos, Elon Musk, Bill Gates and Mike Bloomberg were among those whose accounts spit out nearly identical tweets offering to pay $2,000 for every $1,000 sent to a Bitcoin address. The perpetrators have already racked up over $100,000. Twitter fell 3.2% in extended trading.

GBP

Interest rates in the U.K. are likely to stay low for a long time, BOE Governor Andrew Bailey told Conservative Party lawmakers, people familiar said. He also said the central bank “will do everything we can to support the economy.” His remarks may bolster the government’s confidence it can manage the high debt burden for longer than normal as borrowing costs will stay low.

EUR

Focus is shifting to Europe, and the region’s recovery plans, as well as rising global tensions. The ECB is all but certain to keep policy on hold on today, which would keep pressure on political leaders to agree on a recovery plan this weekend at a conference in Brussels. Any deal requires bridging a gap between wealthy, thrifty northern countries and the high-debt south that has taken the brunt of the COVID crisis.

USD

The dollar found support on overnight as simmering Sino-U.S. tensions and weak Chinese consumption data knocked investors’ faith in a fairly swift global economic recovery from the coronavirus crisis. Surging U.S. virus cases also dampened sentiment and weighed on equity markets. Focus shifts to Europe, and the region’s recovery plans, as well as rising global tensions.

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

7:00 a.m.: U.K. June labor market figures
7:00 a.m: EU June new car registrations
10:00 a.m.: Euro-area May trade balance
12:15 p.m.: BOE Governor Bailey speaks on financial education
12:45 p.m.: ECB policy decision
1:30 p.m.: U.S. initial jobless claims
5:30 p.m.: German and Hungarian Defense Ministers’ briefing
Swedish Prime Minister Lofven meets French President Macron

Corporate Events

Earnings include Adevinta, Atlas Copco, Barco, BasWare, Esker, F-Secure, Hansa Biopharma, Husqvarna, Sandvik, Telenor, Morgan Stanley, Bank of America