Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Take Five: ECB, earnings galore and 'Freedom Day'

EconomyJul 16, 2021 02:51PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: The headquarters of the European Central Bank (ECB) in Frankfurt, Germany, March 12, 2016. REUTERS/Kai Pfaffenbach

(Reuters) - 1/ ECB DAY

Two weeks after unveiling its closely anticipated strategy review, the ECB will face questions at its Thursday meeting on what its new 2% inflation target might mean for policy.

If the ECB is serious about boosting inflation to 2% (versus close to but below 2% before), surely hefty bond buying will continue for some time? Doves are already arguing that to remain credible, the ECB needs to highlight its room for manoeuvre.

The hawks though are already pressing for tapering stimulus as the economy rebounds. Perhaps concern about a resurgent coronavirus hurting growth will allow ECB chief Christine Lagarde to find common ground at Thursday's meeting. A quiet summer may be around the corner for most, not the ECB.

Reuters poll graphic on euro zone economic outlook: https://fingfx.thomsonreuters.com/gfx/polling/yxmvjzxdjvr/ECB%20final%20July%202021.PNG

2/ OUTLIER

    Many developed economies are pondering tapering emergency stimulus but China has just added more money to its banking system and there's an outside chance the benchmark loan prime rate (LPR) set by Chinese banks could be lowered as early as Tuesday.

    The dual-track economy is seeing supply-side headwinds, growth and exports are peaking, while consumer spending flags. An uncertain regulatory environment for big firms and standoffs with the United States are weighing on investor sentiment.

    After the recent cut to banks' reserve requirements and data showing the economy lost some steam in the second quarter, markets expect a bit of monetary easing even as fiscal policy stays tight.

Graphic: China GDP & rates - https://fingfx.thomsonreuters.com/gfx/mkt/yzdpxlzzgpx/Pasted%20image%201626342515440.png

3/ FIRST FAANG

    The second-quarter U.S. earnings season kicked off with stronger-than-expected numbers from banks, now it's the turn of the tech and consumer giants, including streaming heavyweight Netflix (NASDAQ:NFLX).

    A darling of last year's stay-at-home trade, Netflix shares are up just 2% this year as investors have shifted to stocks which benefit as the economy reopens. Lower production of TV shows and movies during COVID-19 have dented subscriber growth.

Signs U.S. economic growth has peaked have nevertheless been boosting the tech stocks that led markets for much of the past decade so Netflix shares too have rallied of late.

The coming days also see quarterly results from the likes of Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Twitter and Intel (NASDAQ:INTC).

Graphic: "FAANG" stocks in 2021 - https://graphics.reuters.com/USA-STOCKS/NETFLIX/rlgpdrywxpo/chart.png

4/ AS GOOD AS IT GETS?

Europe's results season is starting in earnest, meanwhile, and corporate earnings are expected to have more than doubled in Q2.

Profits of the 600 biggest listed European companies are seen surging 110% between April and June, according to Refinitiv I/B/E/S data.

Yet investors fear this is as good as it will get and that volatility could follow once peak momentum is hit - earnings growth rates of roughly 34% and 28% are expected for the last two quarters of 2021.

There is also the COVID-19 upsurge to contend with. Bourses in Europe, as on Wall Street, are near record highs but any risk of renewed lockdowns could easily knock them off that perch.

Graphic: European earnings - https://fingfx.thomsonreuters.com/gfx/mkt/jznpnyaqbvl/Pasted%20image%201626250481323.png

5/ FREEDOM OR RISK

The British media dubs it "Freedom Day," Germany describes it as a "highly risky experiment". So, who's right about July 19, the day Britain drops its COVID-19-linked activity curbs and mandatory mask-wearing?

Britain's blistering vaccine campaign had made the pound one of this year's best performing G10 currencies, lifted shares in UK hospitality and retail firms and spurred hopes of a swift economic rebound.

But an upsurge in the Delta variant and forecasts for Britain's COVID caseload to reach 100,000 a day by the end of August are stirring unease. Bonds are benefiting from a rush to safety while European travel shares are down 8% in the past month.

Friday's July Purchasing Managers' Index releases may reflect the impact of rising infections on activity. With the likes of Israel and Holland backtracking on reopening plans and Germany retaining curbs until vaccinations rise, just how long Britons enjoy their freedom from lockdown remains to be seen.

Graphic: UK COVID cases - https://fingfx.thomsonreuters.com/gfx/mkt/oakpedkoqvr/Pasted%20image%201626295027784.png

Take Five: ECB, earnings galore and 'Freedom Day'
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email