We start this week in a risk off mood with Asian shares dropping to one-week lows amid fears of rising Covid-19 cases and inflation concerns. Safe haven assets, including the yen and gold are trading higher. Oil prices stumbled more than 1% after OPEC plus group has reached an agreement to boost the output. This week’s data calendar is quite light until Friday, when global PMI are going to be published. In US we have US housing starts on Tuesday and Existing Home Sales on Thursday. ECB makes its first policy announcement since concluding a strategy of greater tolerance to inflation on Thursday.
US stocks fell on the week last week for the first time in a month, as the growing inflation is bringing concerns to the sustainability of economic expansion. University of Michigan’s preliminary sentiment index released on Friday at 80.8 for July lower than 85.5 the prior month contributed to the losses. S&P 500 fell 0.8%, Dow Jones fell 0.9% and Nasdaq 100 fell 0.8%. US Dollar has kept new highest levels in months this Monday with DXY trading at around 92.74, as the spread of Delta variant made investors move funds into safety. Treasury yields fell for a third consecutive week with a 10-year yields are currently around 1.28%. US Federal Reserve Chair Jerome Powell has repeatedly said any inflation uprise is expected to be transitory, indicating monetary policy will remain supportive for some time yet. US Housing starts are expected to rise in June, which will be published on Tuesday.
European stocks have followed Asia and have opened lower this Monday with DAX trading 0.4% lower, CAC 40 dropping 0.8% and FTSE 100 falling 0.8%. A rising number of Covid-19 cases globally weighing on sentiment. A few European Countries, including France, the Neverlands, Greece and Spain announced new restriction last week, although England is set to lift all restrictions from this Monday. In Europe the destruction caused by massive floods in Germany and Belgium also weighs on sentiment. There is almost no economic data from Europe this Monday. The focus this week will the on ECB’s meeting on Thursday, where Governing Council is expected to announce an updated guidance on its future policy. The stimulus measures are expected to be left unchanged, as new Covid-19 infections rise across the Eurozone. EURUS is trading marginally lower today at 1.1803.
Asian shares slipped to a one-week low on Monday with MSCI broadest index of Asia-Pacific shares outside of Japan falling 1.1%, Japan’s Nikkei and Australia’s benchmark both dropping 1.3% and Chinese stocks also loosing 0.6%. Global economic growth is beginning to stall, particularly in Asia, where many countries are struggling to curb highly contagious Delta variant with some lockdowns coming back. The risk-sensitive Australian Dollar slipped to $0.7372, the lowest since last December, during early Asian trading, while save haven yen has risen up to 109.90 against the dollar.
Oil is trading lower this Monday with prices falling more than 1 %, as OPEC and allies achieved an agreement to boost output over the weekend. Brent Oil fell 1.16% to $72.74 after falling 3% last week. WTI dropped 1.17% to $70.72. Under OPEC’s agreement reached on Sunday, the cartel will add 400k barrel a day every month from August 2021 onwards, until all the output that was halted due to pandemic has been revived. This agreement should give market participants a relief that there is not going to be a messy breakup or price wars.