“ECB to Chart New Policy Path Next Week…”

The European Central Bank is charting their new policy path at its next meeting to reflect its change of strategy and show it is serious about reviving inflation.

Announced last week, the ECB’s new strategy allows it to tolerate inflation higher than its 2% goal when rates are near rock bottom, such as now. This is meant to reassure investors that policy will not be tightened prematurely and cement their expectations about price growth, which has lagged below the ECB’s target for most of the past decade. It was said the new strategy will be incorporated into the central bank’s policy guidance at the July 22 meeting. “Given the persistence that we need to demonstrate to deliver on our commitment, forward guidance will certainly be revisited,” Lagarde told Bloomberg TV. The ECB’s current guidance says it will buy debt for as long as necessary and keep interest rates at their current, record-low levels until it has seen the inflation outlook “robustly converge” to its goal. It also commits the bank to reinvesting proceeds from maturing bonds for a long time after that. Lagarde did not elaborate on how that message might change, simply saying the aim will be to maintain “favourable financing conditions”. De Guindos also said that the ECB should continue to underpin the economy in light of a new bout of infections with the delta variant of the coronavirus. “The spreading of virus mutations in some EU countries shows we should not be complacent about the observed rise in confidence but continue the path of policy support,” de Guindos commented.

Inflation

European shares slipped from record highs on Wednesday as global investor mood soured on signs of increasing inflationary pressure, while travel stocks dropped on worries over the Delta variant’s spread in the continent. The pan-European STOXX 600 index fell 0.3% after hitting a record high in the previous session. Travel & leisure slid 0.8%, with TUI shedding 2.9% on reports that the world’s largest holiday company had cancelled more holidays until August. UK’s FTSE 100 dropped 0.4% on a stronger pound after data showed British inflation jumped to 2.5% in June, further above the Bank of England’s target and hitting its highest since August 2018. “The creeping UK headline inflation rate is likely to add to the sense of unease pervading the financial markets about the impact higher prices will have on economies around the world,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown. “Although much of the increases are related to the unusually low level of prices last year due to the pandemic effect, it appears genuine price inflation is also occurring.” Investors were already nervous after data on Tuesday showed U.S. inflation ran hotter than expected in June, leading many traders to price in faster interest rate hikes. All eyes now will be on Federal Reserve Chairman Jerome Powell’s congressional testimony starting later in the day. European Central Bank policymakers have stressed in recent weeks that they will not remove support measures prematurely as the economic recovery is still underway.

Inflationary pressure remains high in Russia

In June, annual inflation accelerated to 6.5%, its fastest rate since August 2016, providing Russia with a strong argument to raise rates at its next rate-setting meeting on July 23 and adding to concerns that tighter monetary policy might hamper economic growth. The central bank on Monday said inflation would return to the 4% target in the second half of 2022 and remain near that level in the future.

Hong Kong Arrests Four Men in Alleged $155M Crypto Money Laundering Scheme

Hong Kong authorities arrested four men suspected of involvement in a money laundering syndicate that involved HK$1.2 billion (US$155 million), the South China Morning Post reported on Thursday. The men, aged 24-36, were arrested last week during operation “Coin Breaker,” SCMP cited a Hong Kong Customs official as saying. It is alleged the syndicate operated from February 2020 to May this year, with shell companies using e-wallet accounts and a local platform to trade in “privacy coins” issued by Tether Ltd. Stuart Hoegner, General Counsel for Tether told CoinDesk via Telegram on Thursday his company did not issue so-called “privacy coins.” It is the first money laundering case involving cryptocurrency detected by the city’s Customs authorities, according to the report. Money laundering in Hong Kong carries a maximum penalty of 14 years in prison and a fine of up to HK$5 million (US$643,000).

Earnings to Watch This Week (AA, JPM, PEP, WFC)

With the second quarter earnings season kicking off this coming week, the question that keeps coming up surrounds whether growth expectations and optimism surrounding the economic recovery are well placed. Stocks aren’t cheap when compared to the S&P 500’s historical metrics such as price-to-sales and price-to-earnings. As such, it will take impressive revenue and earnings beats and confidence guidance to keep the momentum going. On Friday, the Dow Jones Industrial Average rose 448.23 points, or 1.30%, to close at 34,870.16. Strong performances this week in Apple (AAPL), Salesforce (CRM), Microsoft (MSFT) and Intel (INTC) helped power the Dow to record highs. The S&P 500 index SPX rose 48.73 points, or 1.1%, to end the session at 4,369.55, while the Nasdaq Composite gained 0.51%, adding 142.13 points to finish at 14,701.92. The tech-heavy index has accelerated over the past two weeks, thanks the FAANGs, namely Facebook (FB), Apple and Amazon (AMZN), which notched new all-time highs this week. For the week, both the Dow and S&P 500 logged respective gains of 0.2% and 0.4%. The Nasdaq also gained 0.4% for the week, reversing what started off Friday morning as a loss of 0.3%. Friday’s strong rebound in all three benchmarks was a reversal from Thursday’s declines on fears of a slowing global recovery due to the rise of the Delta variant of the coronavirus pandemic and the impact it will have on some countries.

On Friday, however, it appears that the focus turned to the second quarter earnings season. The market is now seemingly in a see-saw battle between corporate earnings and the guidance that will be provided versus the potential impact of an increase spread and possible delay in a global re-opening. But there’s also good news. Aside from widespread vaccinations across the U.S., which some analysts forecast will lead to a surge in economic growth, there’s also the infrastructure spending plan proposed by the Biden administration. These catalysts are factored into the the growth expectations not only for the second quarter, but also for the third and fourth quarters as well. As such, when evaluating stocks and valuations, the question is whether all of this potential good news are already priced in to stocks. From my perspective, the risk-versus-reward potential in relation to the pace of re-opening continues to look favorable. The market will get some confirmation once CEOs start issuing guidance, presumably that are far more optimistic than they were a year ago. That said, conservative guidance won’t work given where stocks are. Here are this week’s names that will set the tone for what’s to come in the weeks ahead.

Currency Roundup

EUR/USD seen testing 2021 lows in the current quarter. Analysts at CIBC, forecast the EUR/USD pair at 1.17 for the third quarter and at 1.15 by the first quarter of 2022. Euro traders initially tried to rally during the course of the trading session on Thursday but gave back the gains at the 1.1850 level. The Euro initially tried to rally during the course of the trading session on Thursday but found the 1.1850 level to be a bit too resistive, as we have seen multiple times. Ultimately, this is a market that I think continues to see the “waterfall effect” as we just simply drift lower. At this point in time, the market is likely to see the lows tested, and if we break down below there, we could go to the 1.17 level underneath. After that, the market could very well go looking towards the 1.16 level, which was a major support level previously. On the other hand, the market could rally enough to scare people to the upside, but we would need to clear the 1.19 level. Furthermore, we would have to break above the 200 day EMA, and at that point in time could open up the possibility of a move towards the 1.20 handle. Furthermore, the 50 day EMA is starting to reach down towards the 200 day EMA, perhaps causing a potential “death cross” in the future. All things being equal, it is very likely going to be a “sell the rallies” type of situation going forward, as the US dollar continues to look like it is ready to take off to the upside. If that is going to be the case, then we will almost certainly see it in this marketplace as the Euro would fall apart. In general, I would anticipate that the market remains somewhat downbeat in, but obviously very choppy which is in general the basic attitude of this pair under most circumstances anyway.

Market Roundup

European stocks eased from all-time highs on Tuesday ahead of a key U.S. inflation reading, but British banks kept UK’s FTSE 100 afloat after a central bank move to scrap curbs on dividends. The pan-European STOXX 600 index slipped 0.1% after hitting a record high in early trading. Barclays, HSBC, and Lloyds Banking Group rose between 1.1% and 1.8% after the Bank of England scrapped pandemic-era restrictions on dividends from top lenders. UK’s FTSE 100 rose 0.3%, while other main regional indexes fell. Investors are awaiting U.S. consumer price data for June — set to be released later in the day — to see if the recent rise in prices is persistent and strong enough to spur a faster-than-expected policy tightening by the Federal Reserve. “We are less interested in when the peak is and much more interested in how enduring price pressures are likely to be,” RBC Capital Markets analysts wrote in a note. Among individual stocks, Finnish telecom equipment maker Nokia jumped 6.6% after it said it planned to raise its full-year outlook. Swiss watchmaker Swatch Group rose 2.0% as it returned to profit in the first six months of 2021 and its sales jumped more than 50%. Rival Richemont climbed 0.4%. Meanwhile, major U.S. banks, including JPMorgan and Goldman Sachs, will report earnings later in the day. European reporting season will kick into high gear later this month, with analysts expecting second-quarter profit for STOXX 600 companies to more than double from a year ago, as per Refinitiv IBES data. Norwegian chipmaker Nordic Semiconductor surged 6.2% as its quarterly profit doubled. Miners like Rio Tinto, Anglo American and BHP Group got a boost from rising metal prices after better-than-expected trade data from top consumer China. Healthcare stocks fell 0.7% after a near 1% surge in the previous session. Frankfurt-listed shares of genetic testing company Qiagen NV dropped 3.0% after it lowered its outlook on weaker demand for COVID-19 tests. German drug packager Gerresheimer declined 7.0% after its quarterly earnings report disappointed investors.

Gold

Gold is having a solid month. The precious metal fell slightly on Monday after notching its third straight weekly gain as investors flock back to the safe-haven asset amid concerns around the global economic recovery. Gold prices are up nearly 2% in the last three weeks, hovering around $1,800 on Monday. Gold is entering a seasonally strong period, Newton Advisors President and founder Mark Newton told CNBC’s “Trading Nation” on Friday. Typically, the metal bottoms in June or July, then moves sharply higher by early fall, Newton said. Though higher interest rates and a stronger dollar could cap gold’s gains, a move above $1,855 would fuel another leg higher, he said. Conversely, “under 1750, we could actually have a pullback into late July near March lows. That should be an excellent time to buy gold,” he said. Importantly, the Core Price Index, which excludes food and energy, also rose 0.9% (after a 0.7% increase in the previous month). It shows that inflation is accelerating not only because of higher energy prices but also due to more structural, underlying trends.

Oil

Crude oil prices weakened Monday as concerns that rising Covid-19 cases will slow the global recovery outweighed the possibility of a tight market as top producers squabble about production levels. U.S. crude futures traded 1% lower at $73.80 a barrel, while the Brent contract fell 0.9% to $74.86. U.S. Gasoline RBOB Futures dipped 0.7%, to $2.2750 a gallon. “After a brisk May and great June, I’m starting to feel like we’re going to see gasoline demand relax a bit more, I think we’ve seen our peak (July 4), and it’s unlikely we’ll exceed it,” tweeted Patrick de Haan, an analyst at GasBuddy. That said, prices are still not far removed from the highs last reached in October 2018, helped by the tightening of oil supplies globally.

Malta-‘Government will listen to all stakeholders to choose right options for Malta’s future’

Silvio Schembri says that the Government is willing to listen to all stakeholders to ensure a sustainable economy for Malta, but given its size, the country needs to be selective in order to choose the best projects possible. The strategy is based on five pillars which provide the outline for Malta’s economic vision, which are Sustainable Economic Growth, Infrastructure and Investment, Education and Employment, Environment, and Governance and Rule of Law. “We need to build an economic vision in order to have a sustainable future. We are seeing that we involve the primary ministries in all of the vision we have announced. Never until today could we appreciate the economic synergy of all stakeholders due to the Covid-19 pandemic,” the Minister said.

Timberland Invest Ltd

Research & Marketing Department

Source:

Reuters.com, Nasdaq.com, Fxstreet.com, Investing.com

Date:

July 16th, 2021


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