July 5 - A look at the day ahead from Danilo Masoni. The first full week of July kicks off with investors starting to feel somewhat dizzy after Friday’s goldilocks U.S. jobs report eased rate hike worries, propelling world stocks to new record highs.
The rise comes after an already spectacular first half that saw the S&P 500 score its second best run since 1998. But at these unchartered levels, one may wonder what or who could possibly drive equities any further.
With mutual funds near decade-low liquidity ratios and asset allocators likely selling into strength, Morgan Stanley says retail is now the marginal buyer. It estimates retail investors have bought over $170 billion of U.S. equities year to date.
So, with Wall Street closed on Monday for the Independence Day holiday, world equities look a little directionless, while the dollar is taking a breather after recent gains ran into a speed bump after Friday’s U.S. jobs report.
European futures pointed to tentative gains later on as the spreading delta virus variant caused concerns ahead of the key summer holiday season. In Asia, the Nikkei was hit by a surge in infections in Tokyo, just weeks before the Olympics.
And a resurgence of COVID-19 cases in southern China also meant that growth in the country’s services sector slowed sharply to a 14-month low in June. Final June PMI data in Europe is released later.
Oil markets are also in focus with crude prices falling on OPEC+ disagreements that could lead to major producers pumping up volumes to grab market share. Discussions in the group continue today.
In corporate news, eyes remain on Didi Global after the Chinese ride-hailing giant warned a regulatory order that its app be removed from app stores in China could hurt revenue.
In a sign of hope for the travel sector, a group of infrastructure investors proposed a $16.7 billion buyout bid for the Sydney Airport, one of Australia’s biggest-ever buyouts.
Key developments that should provide more direction to markets Monday:
- China: growth in June services hits 14-month low
- Kuroda stresses BOJ’s readiness to ease more to beat pandemic pain
- France: May industrial output
- France, Germany, euro zone: June final PMI
- Bank of Israel rate decision
- ECB speakers: Andrea Enria and Luis de Guindos
- U.S. markets closed for Independence Day (July 4)
- Bank of Canada Business Outlook
Reporting by Danilo Masoni, Editing by Dhara Ranasinghe