COVID Delta upsurge keeps stock and commodity bulls in check
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[July 12, 2021] By
Sujata Rao
LONDON (Reuters) - An upsurge in new
infections caused by the Delta coronavirus variant capped equity and
commodity price gains on Monday, with Wall Street tipped to open lower
and bond yields holding just above multi-week lows.
Markets are also jittery at the start of an eventful week that will see
the U.S. second-quarter earnings season kick off, the release of
inflation data in several countries, and testimony by Federal Reserve
Chair Jerome Powell which will be scrutinised for any talk of tapering.
MSCI's all-country equity index closed last week in the red but rose
0.2% on Monday, lifted by hefty gains across Asia where markets tracked
Friday's record close on U.S. stocks. Asia-Pacific shares outside Japan
rose 0.7% while Japan's Nikkei bounced 2.2%.
Chinese blue chips rose 1.1%.
But worries over the outlook were highlighted by warning from the
finance ministers of the world's 20 largest economies that recent
improvements in the global economy could be derailed by fast-spreading
COVID-19 variants such as Delta.
A Reuters tally https://graphics.reuters.com/world-coronavirus-tracker-and-maps
of new COVID-19 infections shows them rising in 69 countries, with the
daily rate at 478,000.
Graphic: Delta variant gains ground -
https://fingfx.thomsonreuters.com/
gfx/mkt/yxmvjzndqvr/Pasted%20image%201625172226841.png
The variant is responsible for record rises in infections in Australia
where another lockdown looks imminent. South Korea has put its capital
Seoul under the toughest anti-COVID curbs so far while cases continue to
rise across Asia and Europe.
"There is a bit of a global coordination problem with different
countries vaccinating at a different pace. The question is how well
vaccinated you are and vaccinations are pretty low across much of Asia,"
said Colin Asher, senior economist at Mizuho in London.
Asher said however that for Western markets, with better vaccination
rates, monetary policy would be the main focus.
U.S. inflation data due Tuesday will be particularly watched after the
recent bond rally which sent U.S. 10-year Treasury yields 15 basis
points lower at one point.
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An investor looks at an electronic board showing stock information
at a brokerage house in Beijing, August 27, 2015. REUTERS/Jason
Lee/File Photo
While markets have since stabilised, yields are not far off 4-1/2 month
lows at 1.35%, pressured at least partly by investors' rethinking
bullish sentiment.
Futures for the U.S. Nasdaq, Dow Jones and S&P 500 were a fraction lower
while a pan-European equity index slipped 0.2%
Commodity prices too were subdued, with Brent crude futures slipping
half a percent. London-traded copper, nickel and aluminium also fell,
though China's Friday move to ease policy supported Shanghai metal
futures.
China's decision to cut banks reserve requirements appeared to reflect
policymakers' view that the economy was losing momentum. The cut will
release the equivalent of $154 billion into the economy.
EARNINGS WEEK
Investors are eager to assess whether the earnings season will support
Wall Street's run higher, with the S&P 500 .SPX up roughly 16% for the
year so far, underpinned by the expected earnings surge.
Expectations for a 65% rise from the same 2020 quarter, according to
Refinitiv. JPMorgan, Goldman Sachs, Bank of America and other big banks
kick off results from Tuesday.
Graphic: Q2 expected to see peak results for U.S. companies -
https://graphics.reuters.com/USA-STOCKS/EARNINGS/
jbyprzbqype/chart.png
On currency markets, the U.S. dollar inched higher against a basket of
currencies at 92.17 while the yen, which firmed last week to a
three-week high against the greenback, eased 0.14% .
The euro firmed to $1.188 from last week's low at $1.1780. It did not
react to comments by European Central Bank President Christine Lagarde
that the bank will change its guidance on policy at its next meeting and
show it is serious about reviving inflation.
(Reporting by Sujata Rao; additional reporting by Wayne Cole in Sydney,
editing by Angus MacSwan)
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