A look at the day ahead from Saikat Chatterjee.
World stocks are holding at record highs, Australia and New Zealand are striking an upbeat tone and a fresh push higher in oil prices to their highest since 2018 sets the tone for Tuesday.
The Kiwi dollar is the strongest performing currency after a strikingly strong survey of business conditions prompted investors to wager a rate hike could come as early as November.
Across the Tasman Sea, the Reserve Bank of Australia said it would pare the pace of its bond buying from September, sending stocks swooning and short-dated bond yields shooting higher.
That decision puts the RBA in a small but growing club of central banks stepping back from massive pandemic-era stimulus. Betting on an economic recovery, an index of world stocks is holding at record highs after notching five consecutive months of gains. Citigroup (NYSE:C) strategists expect a 39% global EPS growth in 2021, up from 26% at the start of the year.
But there's also some caution after Chinese tech stocks remained under the microscope after the powerful Cyberspace Administration of China ordered an investigation into Didi Global Holdings just days after it lists in New York. Stock futures in Europe and the U.S. predict a cautious start.
And for those on inflation watch, a fresh rise in oil price could bring alarm. A breakdown in talks between Saudi Arabia and the United Arab Emirates plunged OPEC+ into crisis and sent crude oil climbing towards $80 a barrel, its highest levels in nearly three years.
British Prime Minister Boris Johnson late Monday set out plans to end social and economic COVID-19 restrictions in two weeks' time, a test of whether a rapid vaccine rollout offers enough protection from the highly contagious Delta variant.
Meanwhile, coronavirus infections in Spain have nearly doubled from the previous weekend, official data shows, as the Delta variant drives a surge among unvaccinated young people.
Key developments that should provide more direction to markets on Tuesday:
- $8.7 billion battle for Britain's Morrisons intensifies with a third private equity group entering fray.
- Italy's Ali Group said it raised its offer to buy Welbilt (NYSE:WBT), a U.S. food service equipment maker.
- Construction PMIs: Germany, France, Italy, Eurozone.
- Germany ZEW Economic Sentiment survey, Eurozone retail sales.
- Sweden’s PM Lofven on cusp of forming another government.
- Bond auctions: Belgium, Spain, Switzerland, United Kingdom.
- U.S. Composite Final PMI June, ISM non-manufacturing PMI.
- ECB’s Andrea Enria speaks with Italian Senate Finance Commission.
Central bank balance sheet https://graphics.reuters.com/EMERGING-RATES/rlgvdrxoevo/chart.png