Morning Report

26 July 2021

“Market participants are braced ahead of ahead the Federal Open Market Committee (FOMC) meeting this week. The dollar has been strengthening on bets that the meeting will contain clues regarding the nearing of the imminent stimulus tapering. The rise in US infections, however, could delay such developments.”

Tim Hallinan, Trading Director

Main Headlines

US Senators pushed to finalise an infrastructure agreement on Sunday, but said they were still struggling to resolve a dispute over how much to increase public-transit funding by. GOP lawmakers had blocked efforts by Democrats to begin consideration of the roughly $1 trillion infrastructure bill on Wednesday, saying too much of the package remained unresolved. The bipartisan group crafting the legislation said late last week that they hoped to finish negotiations in time to reverse that outcome in a second vote in the next few days.

Britain’s biggest financial institutions are on track to meet the Bank of England’s deadline to be ready for negative interest rates, giving authorities another tool to aid the economy if the recovery fades. Banks including Natwest, HSBC, Barclays and Lloyds are close to completing the technical steps necessary to implement negative interest rates. The UK central bank in February asked for the work to be done by next month and is likely to deliver a progress report on 5 August. With growth recovering sharply, it is unlikely that this new functionality to be used anytime soon.


Sterling is lower against most major currencies this morning. A rethink of global recovery is bringing concerns about infections and the post-Brexit future back into the focus of pound investors. Sterling has been caught up in the selloff, hobbled by a surge in Britain’s infection rate just as Prime Minister Boris Johnson declared “Freedom Day” to mark the end of lockdowns. Meanwhile, the British government is exploring ways to remove China’s state-owned nuclear energy company from all future power projects in the UK, including the consortium planning to build the new £20bn Sizewell nuclear power station in Suffolk.


The euro is stronger versus most majors overnight. Despite growing protests, the French Senate approved the bill that would introduce obligatory coronavirus vaccinations for certain professions and condition access to cultural and leisure spaces, as well as travel, on a health pass showing proof of vaccination or a negative COVID-19 test. Elsewhere, EU executive vice-president in charge of trade policy Valdis Dombrovskis said a resolution to the EU’s Trump-era dispute with the US over steel and aluminium tariffs may fall short of removing all the barriers sheltering the industries.


The dollar is higher against the pound and lower against the euro in the early morning trade. Investors world-wide have funnelled more than $900 billion into U.S.-domiciled mutual and exchange-traded funds, on a net basis, during the first half of the year. That is a record in data going back to 1992 and is more than investors have put into funds elsewhere around the world combined during the first two quarters of 2021. The inflows underpin a rally that has carried U.S. stocks to records, ahead of major indexes in Europe or Asia.


A Hong Kong gauge of tech firms tumbled more than 6% and the city’s main market slid. Chinese equities are set for the worst retreat in a year. Beijing’s latest moves include reform of China’s $100 billion education tech industry and a vow to “improve order” in the property market, steps that roiled a slew of firms and stirred questions about what regulators may do next. Japanese shares bucked the sour mood, rising after a two-day holiday. US equity contracts slipped following a record Wall Street close Friday, with the S&P 500 almost doubling from the depths of the pandemic. About 87% of the S&P 500 firms reporting results so far this season have beaten estimates. Treasury market volatility has jumped on economic risks from the spread of the delta variant of Covid-19.

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

9:00 a.m.: Spain June PPI

10:00 a.m.: Germany July IFO Expectations

11:00 a.m.: Germany Auction of EUAs

11:30 a.m.: Germany to sell 4 billion euros of 357-day bills

12:00 p.m.: Belgium to Sell 1% 2031 Bonds

1:00 p.m.: BOE’s Gertjan Vlieghe speaks

2:50 p.m.: France sells bills

3:00 p.m.: Belgium July Business Confidence

Corporate Events

Earnings include Tesla, LVMH, Lockheed Martin, Michelin

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