Morning Report – Monday 13th July

Main Headlines

Boris Johnson is set to make it compulsory for Britons to wear face coverings in shops, local media reported. This after earlier saying it was optional. Donald Trump wore a mask in public for the first time after previously defying calls to set an example by doing so. The Fed has said mandatory masks would spur growth and protect jobs.

The U.S. announced 25% tariffs on about $1.3 billion worth of French goods including makeup and handbags but not wine and cheese, as had been proposed. France held firm on its plans to resume collection of a tax that hits tech giants including Amazon, Google and Facebook. Implementation of the new tariffs will be delayed by 180 days as France has not started collecting the levies.

OPEC+ is leaning toward gradually easing oil output controls in August, delegates said. The cartel’s monitoring committee meets midweek to mull whether to keep curbs of 9.6 million barrels a day or taper to 7.7 million as planned.

Oil dropped on the news, but global stocks continued to advance. U.S. and European futures rallied along with Asian markets. Chinese and Japanese equities led the way. The offshore yuan and Korean won outperformed as Credit Suisse recommended the currencies because the nations stabilised their virus outbreaks. Treasuries and gold rose. Copper jumped on prospects of a strike at an Antofagasta mine in Chile.

GBP

Sterling was the second best performing major currency last week and was resilient against the backdrop of Brexit trade talks. “Serious divergences” still remain between the two sides but the pound still closed higher against all major rivals other than Sweden’s Krona.

EUR

Croatia and Bulgaria became the latest countries to inch closer to joining the EU when they got the green light last week to enter the so called waiting room to join the single currency. They would be the 20th and 21st members; Romania, another former communist state, hopes to be the 22nd. Croatia and Bulgaria will now spend at least two years with their currencies pegged to the euro before they can become full members.

USD

The dollar edged lower in Asian trade on Monday as investors looked to looming economic data from around the world and U.S. corporate earnings to gauge whether the markets’ guarded optimism on the economic outlook is justified. The greenback recorded its third week of losses as investors bought into risk sensitive currencies on bets that the worst of the pandemic’s sweeping impact was over. U.S. consumer inflation figures for June are due on Tuesday while retail sales, a key gauge of consumption, are released on Thursday. The U.S. corporate earnings season will start this week, providing another window to assess the scale of the damage as well as the recovery, from the pandemic.

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

7:00 a.m.: German June wholesale price index
10:30 a.m.: ECB’s Panetta joins virtual conference
4:30 p.m.: BOE Governor Bailey speaks about Libor
EU foreign ministers meet