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On June 30, 2021, a graph of the German stock market index DAX is shown at the stock exchange in Frankfurt, Germany. JULY 1 – REUTERS/Staff Julien Ponthus gives us a preview of the day ahead. The passing of Donald Rumsfeld, President George W. Bush’s controversial architect of the Iraq war, brought back memories of tense press conferences and unforgettable statements. His 2002 news briefing on Iraq’s purported weapons of mass destruction, as well as his thoughts on “known knowns,” “known unknowns,” and “unknown unknowns,” are noteworthy. On the first day of the second half of 2021, such statements appear to be suddenly pertinent to the two primary concerns of markets: COVID-19 and inflation. We know inflation is rising, but we don’t know if it will be temporary, and we don’t know about unexpected catastrophes like a global agricultural disaster (given Canada’s record heat) or a financial black swan (hello, Archegos!) that might change the monetary policy outlook swiftly. With that in mind, it’s not unexpected that investors are taking their time deciding whether or not to exit the reflation trade in favor of defensive and growth equities ahead of Friday’s US jobs report. Economists polled by Reuters forecast 690,000 new jobs in June, up from 559,000 in May, although the range is wide, ranging from 400,000 to over a million. The dollar touched a 15-month high against the yen and stayed at multi-month highs against other major peers, with 10-year Treasury yields unchanged at around 1.47 percent. Returning to COVID-19, we know that the Delta variation spreads faster, that we don’t know how hard it would damage the global economy, and that this pandemic was the definition of a “unknown unknown” prior to 2019. On that front, there is a lot of uncertainty, as countries ranging from Indonesia to Australia, the United Kingdom to Russia are all dealing with new outbreaks. In Europe, new vaccination requirements for unprotected British tourists have wreaked havoc on travel and leisure stocks. After the S&P 500 set its fifth consecutive record closing high last night, European stock futures remain bullish ahead of the open. Markets should get additional direction on Thursday as a result of the following key developments: – The 181st OPEC Conference begins; BOE Governor Bailey gives a statement; Switzerland France, Germany, and Inflation Germany’s retail sales rebounded in May, according to the PMI, and Sweden’s central bank made a rate decision. – The Russian language Factory activity falls in June. – Japan’s business sentiment is at a 2.5-year high. Julien Ponthus contributed reporting, and Dhara Ranasinghe edited the piece. The Thomson Reuters Trust Principles are our standards./nRead More

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