1/ ECB DAYTwo weeks after releasing its much-anticipated strategy review, the ECB will confront concerns at its Thursday meeting about the implications of its new 2% inflation target for policy. If the ECB is serious about raising inflation to 2% (from close to but below 2% previously), then massive bond purchases must be expected to continue for some time. Doves are already suggesting that the ECB needs to emphasize its flexibility for manoeuvre in order to maintain credibility. The hawks, on the other hand, are already pushing for the reduction of stimulus as the economy improves. Perhaps ECB president Christine Lagarde’s concern over a resurgent coronavirus damaging growth will allow her to find common ground at Thursday’s meeting. For the most part, a calm summer is approaching, but not for the ECB. – After September, the ECB will stop buying pandemic vaccines; COVID-19 varieties are the most dangerous. find out more 2/ OUTLIERWhile many Western economies are considering reducing emergency stimulus, China has recently increased the amount of money in its banking system, and there’s a chance the benchmark lending prime rate (LPR) set by Chinese banks could be decreased as soon as Tuesday. Supply-side challenges are affecting the dual-track economy, which is seeing growth and exports peak as consumer spending lags. Investor mood is being weighed down by an uncertain regulatory environment for large corporations and standoffs with the United States. Markets anticipate some monetary relaxation, even as fiscal policy remains tight, following the recent reduction in bank reserve requirements and statistics showing the economy lost speed in the second quarter. – As China’s economic recovery sputters, investors look for more policy relaxation. find out more 3/ THE VERY FIRST FAANG The second-quarter earnings season in the United States began with better-than-expected results from banks, and now it’s the time of the internet and consumer behemoths, including streaming powerhouse Netflix. Netflix shares, a darling of last year’s stay-at-home trade, are up just 2% this year as investors shift to stocks that benefit as the economy reopens. Subscriber growth has been hampered by lower production of TV episodes and movies during COVID-19. Despite signs that U.S. economic growth has peaked, tech stocks, which have driven markets for much of the previous decade, have recently rebounded, and Netflix shares have risen as well. Quarterly results from Johnson & Johnson, Coca-Cola, Twitter, and Intel will be released in the coming days. – On the back of a recovering economy, top U.S. banks have smashed profit forecasts. find out more 4/ Is this the best it gets? Meanwhile, Europe’s earnings season has begun in earnest, with corporate earnings projected to have more than doubled in Q2. According to Refinitiv I/B/E/S statistics, profits of the 600 largest publicly traded European corporations increased by 110 percent between April and June. However, investors are concerned that this is the best it will go, and that instability will follow after peak momentum is reached – earnings growth rates of around 34% and 28% are predicted in the latter two quarters of 2021. There’s also the COVID-19 outbreak to consider. European stock exchanges, like those on Wall Street, are nearing all-time highs, but any threat of fresh lockdowns could easily knock them from their perch. – Europe Inc’s Q2 earnings comeback is likely to be as good as it gets, according to investors. read more 5/ RISK OR FREEDOM The British press refers to it as “Freedom Day,” while Germany calls it a “very dangerous experiment.” So, who’s right about July 19, the day Britain lifts its COVID-19-related activity restrictions and mask-wearing requirements? The pound has risen in value this year as a result of Britain’s aggressive vaccination campaign, which has boosted shares in UK hospitality and retail companies and raised optimism for a quick economic recovery. However, an increase in the Delta variety, as well as predictions that Britain’s COVID caseload will surpass 100,000 per day by the end of August, are causing concern. Bonds have benefited from a flight to safety, while European travel stocks have dropped 8% in the last month. The impact of growing infections on activity could be reflected in Friday’s Purchasing Managers’ Index data. With countries like Israel and Holland retreating on reopening plans and Germany maintaining restrictions until vaccination rates rise, it’s unclear how long Britons will be free of lockdown. – ‘Anxiety day’ or ‘Freedom day’? COVID-19 restrictions will be lifted in England. find out more Lewis Krauskopf reported from New York, Vidya Ranganathan from Singapore, Sujata Rao, Julien Ponthus, and Dhara Ranasinghe from London; Dhara Ranasinghe compiled; Catherine Evans edited. The Thomson Reuters Trust Principles are our standards./n
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