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The agenda: Investors await ECB and BoJ tomorrow
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There’s an end of term feeling in the markets today.
I don’t think any traders have actually turned up with a Kerplunk set, but they could be forgiven for risking a quick game of Top Trumps across their trading terminals.
In short, there’s not much going on today.
So with nothing to scare investors right now, global markets remain at their highest ever levels. MSCI’s gauge of shares around the world has risen this morning, putting it on track for its fifth daily rise in a row.
But although the summer lull is nearly upon us, we’re not there quite yet, class.
Investors need to prepare for a busy Thursday, when the Bank of Japan and the European Central Bank both hold monetary policy meetings. They could move move the markets, if policymakers offer any hints that monetary policy will be tightened soon.
In particular, the ECB could provide fresh guidance on when it will start to taper its bond purchase scheme. Any bullish comments from president Draghi could send the euro spiking.
Mihir Kapadia, CEO of Sun Global Investments, says:
Any comments which are perceived are more hawkish then expected could result in further pressure on the US dollar. The dollar is also weaker against the yen and the pound.”
Over in Asia, optimism over China’s economy, following this week’s GDP figures, has pushed shares higher.
Holger Zschaepitz
(@Schuldensuehner)Good morning from Berlin. Global stocks retest record highs. Asia mkts rise on China optimism. #Euro bulls cautious ahead of ECB on Thursday pic.twitter.com/epX0z2jEs8
The US dollar is languishing around a 10-month low today, following Donald Trump’s inability to get healthcare changes though Congress.
Investors are increasingly sceptical that that the president can implement tax reforms or push through a big infrastructure spending bill.
As Michael Hewson of CMC Markets puts it…
The Trump administration is also helping by appearing to undermine the US dollar at every available opportunity with what can only be described as either incompetence or sheer stupidity. Another failure to enact policy reforms this time on health care is raising serious questions as to whether this administration will deliver on any of the promises it made at the end of last year, with serious doubts now being expressed about tax and banking reform.
It seems that even with a majority in both Houses the Republicans appear unable to even agree amongst themselves as to what is best for the US economy. It appears that the US government is giving the UK government a run for its money in the incompetence stakes. It doesn’t help that neither country has a competent opposition to offset this.
President Draghi will certainly have his work cut out in keeping a lid on the euro at this rate, as the market gears up for tomorrow’s ECB rate meeting, with a move to the $1.2000 level a distinct possibility on a break of $1.1620 and last year’s high.
The agenda:
It looks like a quiet day, but we do get new eurozone construction figures, US housing data, and new oil inventory figures this afternoon….
- 10am BST: Eurozone construction output for May
- 1.30pm BST: US housing starts and building permits
- 3.30pm BST: US crude oil inventories
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