Live Markets: The price of U.S. recovery

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11/08/2021 08:19

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    THE PRICE OF U.S. RECOVERY (0715 GMT)
    One way or another, Wednesday's U.S. July inflation print
could prove key for markets torn between strong data that
suggests the time for withdrawing stimulus is nearing and
concern that a resurgent delta COVID variant could stall growth.
    For two months, markets have largely ignored strong
inflation prints, buying into the Fed's mantra that a pick-up in
price pressures is temporary. So what's different this time?
    Well for starters, Friday's stronger-than-expected U.S. jobs
data has reignited talk that an improving jobs market will
encourage the Fed to start tapering soon. Note, the Fed's
Raphael Bostic said this week he would only need to see one or
two more job reports like July to vote for tapering.
    And Tuesday's passing of a $1 trillion infrastructure bill
in the Democrat-controlled U.S. Senate is a reminder that upward
pressure on prices could be sustained for longer than
anticipated.  urn:newsml:reuters.com:*:nL1N2PH14T
    Having pushed Treasury yields down (and prices up) for four
straight months, bond investors are clearly uneasy: 10-year bond
yields are up 20 basis points from last week's six-month lows
 US10YT=RR .
    Economists polled by Reuters estimate U.S. inflation rose
5.3% in the 12 months through July, versus 5.4% in June.
    Given that talk of a Fed taper is usually followed by the
word 'tantrum',  it remains to be seen if today's number brings
relief or panic. 
    As markets await the release, the dollar is on firm ground,
world stocks are trading sideways,  European and U.S. stock
futures are flat.
    In corporate news, high materials prices and demand from the
car sector helped Thyssenkrupp  TKAG.DE  swing to an quarterly
operating profit  urn:newsml:reuters.com:*:nL8N2PI0UZ. And Dutch bank ABN Amro  ABNd.AS 
is to resume dividend payments thanks to a strong bounce in net
profit.  urn:newsml:reuters.com:*:nL1N2PI0AT
    
    Key developments that should provide more direction to
markets on Wednesday:
    -  Lenovo Q1 profit more than doubles to beat expectations,
shares jump  urn:newsml:reuters.com:*:nL1N2PI08L
    - NortonLifeLock agrees to buy Avast for up to $8.6 bln
 urn:newsml:reuters.com:*:nL1N2PH2BX
    - German HICP final inflation 
    - Federal Reserve Bank of Kansas City President Esther 
    - George, Atlanta Fed’s Rafael Bostic speaks
    - U.S. auctions: 10-year Treasuries, Germany auctions Bunds
    - US Earnings: Wendy's, e-Bay
    - European earnings: Dialog Semiconductor, Ahold, E.ON,
Vestas, Deliveroo    

    (Dhara Ranasinghe)
    *****
 
    
    EUROPEAN BOURSES LITTLE CHANGED AHEAD OF U.S. INFLATION
DATA(0635 GMT)
    After hitting fresh highs, European shares are seen opening
flat ahead of U.S. inflation data due later today as tapering
talks continue after the Senate passed a massive infrastructure
bill.
    Futures are pointing to a flat start, with Euro STOXX
futures  STXEc1  flat and Britain's FTSE futures  FFIc1  trading
a tad higher.
    The Democratic-controlled U.S. Senate passed a $3.5 trillion
infrastructure bill that immediately kicked off debate on the
spending blueprint for President Joe Bid en's key priorities on
climate change, universal preschool and affordable housing.
 urn:newsml:reuters.com:*:nL1N2PH14T
    Across Asia investors were anxious as the Delta variant is
spreading quickly in many countries, raising fears about local
restrictions on travel and other activity hurting the economic
recovery.
    
    (Joice Alves)
    

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