The prospects for US inflation and future Federal Reserve policy tightening are in the spotlight ahead of Tuesday’s consumer price data (the most important inflation indicator) and Fed Chairman Jerome Powell’s statements on Wednesday and Thursday. Concerns about the Delta variant of the new coronavirus are also adding to the tension in the financial markets. However, the S&P 500 Index made a new all-time high on Friday, and other indices also increased significantly. This week, the second-quarter reporting season begins in the US stock market.
The G-20 countries agreed to a 15% global digital tax. This is historic across-the-board tax reform. The main purpose is to end the situation where large IT corporations such as Apple, Google, Amazon, and Facebook only pay tax in the countries they are registered, but not in the countries where they generate revenue. Previously, many companies registered their headquarters in countries with lower taxes.
European stock markets closed with confident growth on Friday, despite a rise in cases of the new Delta strain in Great Britain and Portugal. The European automakers became the leaders of growth again. Published on Friday, the UK GDP data showed a slowdown in the economy. This week, consumer price data in Britain, Germany, and the Eurozone will be in the focus of investors.
Oil rebounded slightly from a 3-day decline on Friday. OPEC+ representatives have not reached an agreement about increasing oil production in August. Considering the growing demand for fuel in summer, this factor will play in favor of rising oil prices. But uncertainty in the oil market is increasing.
Gold decreased on Friday due to a slight increase in US government bond yields (inverse correlation). The fundamental picture for the precious metals remains unchanged, in favor of higher prices. Still, ahead of the inflation data and Powell’s speech to Congress, gold and silver may behave unpredictably.
Asian markets are rising again with record highs on Wall Street and policy easing in China that have helped overcome recent fears of a slowing global recovery. Interest rate decisions from the central banks of Japan, New Zealand, and South Korea are expected this week. Investors will also watch China’s GDP data for the second quarter.
Main market quotes:
- S&P 500 (F) 4,369.55 +48.73 (+1.13%)
- Dow Jones 34,870.16 +448.23 (+1.30%)
- DAX 15,687.93 +267.29 (+1.73%)
- FTSE 100 7,121.88 +91.22 (+1.30%)
- USD Index 92.10 -0.31 (-0.34%)
