People arrive for the “00:01” event organised by Egyptian Elbows at Oval Space nightclub, as England lifted most coronavirus disease (COVID-19) restrictions at midnight, in London, Britain, early July 19, 2021. REUTERS/Natalie Thomas
July 19, 2021
A look at the day ahead from Julien Ponthus.
In a parallel universe, England would be celebrating lifting the European football crown with a public holiday and joyfully lifting all COVID-19 restrictions for a much-anticipated Great British Summer. In short, Freedom Day.
Instead, it’s the Italians who are champions, Monday is a regular day in the City of London and Boris Johnson’s plan to reopen the economy is seen at best as a high-risk gamble. Scientists writing in the Lancet medical journal called it “dangerous and premature”.
With daily infections now north of 50,000, Britain’s mood could switch swiftly from ‘Love Island’ to ‘I’m a Celebrity…Get Me Out of Here’.
In fact it’s just the kind of painful reality check that’s been experienced by investors gambling hard on the reflation trade. As U.S. 10-year government bonds yields below 1.30% show, the surge of the Delta variant of COVID-19 has eroded faith in global economic recovery.
Sure, the reasons behind the recent bond rally are not fully explained but an unnerving ‘peak growth’ and ‘peak stimulus’ narrative has found its way into market commentary and research.
So European and U.S. stock futures are trading deep in the red this morning while Asian shares slipped to a one-week low. Perceived safe-haven assets, including the yen and gold, edged higher, while oil prices are down.
Second-quarter earnings meanwhile have been buoyant for the most part but they also seem to be shouting ‘this is a good as it get’. Few believe the stellar results will lift global stock markets much higher than they are.
Key developments that should provide more direction to markets on Monday:
– UK house prices rise again amid record monthly sales
– BOE’s Jonathan Haskell speaks
– Italian luxury fashion group Ermenegildo Zegna to go public by combining with a SPAC, giving the business an enterprise value of $3.2 billion
– Auctions: U.S. 6-month and 3-month T-bills,
– Telecom Italia updates forecasts on revenues, Ebitda after DAZN deal
– Tencent to buy British video game company Sumo in $1.3 billion deal
Graphic: REFLATION – https://fingfx.thomsonreuters.com/gfx/mkt/azgpoqgxqpd/Pasted%20image%201626340348083.png
(Reporting by Julien Ponthus ; Editing by Sujata Rao)