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The Conference Board announced on Thursday its Leading Economic Index (LEI) for the U.S. rose 0.7 percent m-o-m in June to 115.1 (2016 = 100), following a revised 1.2 percent m-o-m gain in May (originally a 1.3 percent m-o-m jump).

Economists had forecast an increase of 0.9 percent m-o-m.

“June’s gain in the U.S. LEI was broad-based and, despite negative contributions from housing permits and average workweek, suggests that strong economic growth will continue in the near term,” noted Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “While month-over-month growth slowed somewhat in June, the LEI’s overall upward trend - which started with the end of the pandemic-induced recession in April 2020 - accelerated further in Q2. The Conference Board still forecasts year-over-year real GDP growth of 6.6 percent for 2021 and a healthy 3.8 percent for 2022.”

The report also revealed the Conference Board Coincident Economic Index (CEI) for the U.S. went up 0.4 percent m-o-m in June to 105.5, following a 0.5 percent m-o-m advance in May. Meanwhile, its Lagging Economic Index (LAG) for the U.S. was unchanged m-o-m in June at 105.8, following a 0.6 percent m-o-m growth in May.

The European Commission (EC) reported on Thursday its flash estimate showed the consumer confidence indicator for the Eurozone fell by 1.1 points to -4.4 in July from an unrevised -3.3 in the previous month.

Economists had expected the index to increase to -2.5.

Considering the European Union (EU) as a whole, consumer sentiment also deteriorated by 1.1 points to -5.6.

Despite this month’s declines, both indicators remained above their pre-pandemic levels.

The National Association of Realtors (NAR) announced on Thursday that the U.S. existing home sales rose 1.4 percent m-o-m to a seasonally adjusted rate of 5.86 million in June from a revised 5.78 million in May (originally 5.80 million). This represented the first rise in five months.

Economists had forecast home resales growing to a 5.90 million-unit pace last month.

In y-o-y terms, existing-home sales climbed 22.9 percent in June.

According to the report, three of the four major regions recorded m-o-m gains in existing-home sales in June and all four areas registered double-digit advances in y-o-y terms. The median existing-home price for all housing types in June was $363,300, up 23.4 percent y-o-y. This was the second highest level recorded since January 1999 and marked 112 straight months of y-o-y gains.

Single-family home sales stood at a seasonally-adjusted annual rate of 5.14 million in June, being up 1.4 percent m-o-m and up 19.3 percent from one year ago. The median existing single-family home price was $370,600 in June, up 24.4 percent from June 2020. Meanwhile, existing condominium and co-op sales were recorded at a seasonally-adjusted annual rate of 720,000 units in June, up from 710,000 in May and up 56.5% from one year ago. The median existing condo price was $311,600 in June, an annual advance of 19.1 percent.

"Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales," noted Lawrence Yun, NAR's chief economist. "Home sales continue to run at a pace above the rate seen before the pandemic."

The Chicago Federal Reserve announced on Thursday the Chicago Fed national activity index (CFNAI), a weighted average of 85 different economic indicators, came in at +0.09 in June, down from a revised +0.26 in May (originally +0.29), pointing to a moderation in economic growth in the previous month.

At the same time, the index’s three-month moving average fell to +0.06 in June from +0.80 in May.

According to the report, three of the four broad categories of indicators used to construct the index made positive contributions in June, but two categories deteriorated from May. Production-related indicators made a marginal positive contribution of +0.01 to the CFNAI in June, down from +0.26 in May. Employment-related indicators contributed +0.09 to the CFNAI in June, down from +0.15 in the previous month. The contribution of the sales, orders and inventories category to the CFNAI improved to +0.06 in June from -0.04 in May. Elsewhere, the personal consumption and housing category contributed -0.08 to the CFNAI, up from -0.11 in May.

U.S. stock-index futures traded flat on Thursday, as disappointing weekly jobless claims data offset a raft of mostly upbeat corporate earnings.

Global Stocks:

• Pandemic continues to cast a shadow, especially as delta variant constitutes growing source of uncertainty
• Delta could dampen the recovery, particularly in services
• Inflation has picked up, although this increase is expected to be mostly temporary
• We expect manufacturing to perform strongly, even though supply bottlenecks are holding back production in near term
• Delta variant could dampen recovery in services
• We expect economic activity to return to its pre-crisis level in Q1 2022
• But there is still long way to go before the damage to the economy caused by pandemic is offset
• There are still 3.3 million fewer people employed than before the pandemic
• We expect inflation to increase further over coming months and to decline again next year
• Current increase is largely being driven by higher energy prices and by base effects from sharp fall in oil prices at the start of pandemic and impact of temporary VAT reduction in Germany last year; the impact of these factors should fade out by early 2022
• We see risks to economic outlook as broadly balanced
• Our policy measures, including our revised forward guidance, will help the economy shift to solid recovery and, ultimately, bring inflation to our 2% target
• We want to see at least 2% inflation well-ahead of our projection horizon
• We want durable 2% inflation
• Inflation cannot be below 2% for rates to rise
• No one wants to tighten prematurely

(company / ticker / price / change ($/%) / volume)

AT&T (T) assumed with a Sector Perform at RBC Capital Mkts; target $30

Verizon (VZ) assumed with a Sector Perform at RBC Capital Mkts; target $57

Microsoft (MSFT) target raised to $378 from $310 at Citigroup

Chevron (CVX) downgraded to Hold from Buy at HSBC Securities; target lowered to $112

Travelers (TRV) downgraded to Underperform from Buy at BofA Securities; target lowered to $161

Chevron (CVX) upgraded to Buy from Neutral at Redburn

Freeport-McMoRan (FCX) reported Q2 FY 2021 earnings of $0.77 per share (versus $0.03 per share in Q2 FY 2020), beating analysts’ consensus estimate of $0.75 per share.

The company’s quarterly revenues amounted to $5.748 bln (+88.2% y/y), missing analysts’ consensus estimate of $5.827 bln.

FCX fell to $34.02 (-1.82%) in pre-market trading.

The data from the Labor Department showed on Thursday the number of applications for unemployment unexpectedly increased last week.

According to the report, the initial claims for unemployment benefits rose by 51,000 to 419,000 for the week ended July 17. This was the highest reading since the week ended May 15.

Economists had expected 350,000 new claims last week.

Claims for the prior week were revised upwardly to 368,000 from the initial estimate of 360,000.

Meanwhile, the four-week moving average of jobless claims climbed to 385,250 from an upwardly unrevised 384,500 in the previous week.

As for continuing claims, they dropped to 3,236,000 from an upwardly revised 3,265,000 in the previous week. This was the lowest reading since March 2020.

EUR traded mixed against its major rivals in the European session on Thursday, following the release of the European Central Bank’s (ECB) monetary policy statement, which provided a revised forward guidance on its interest rates that reflected its recent strategy review. 

At the July gathering, the ECB’s policymakers decided to leave its ultra-easy policy unchanged, as widely expected. The Bank’s main refinancing rate, marginal lending facility rate and the deposit facility rate were maintained at  0.00 percent, 0.25 percent and -0.50 percent, respectively. The officials also repeated that they would continue the purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of EUR1,850 billion until at least the end of March 2022, and that the purchases under the PEPP over the current quarter were expected over the current quarter to be conducted at a significantly higher pace than during the first months of the year. In addition, the ECB’s staff pledged that net purchases under the asset purchase programme (APP) would continue at a monthly pace of EUR20 billion and to continue to provide ample liquidity through its refinancing operations (TLTRO III).

The key issue was a change to the ECB’s forward guidance on rates that followed after the Bank had upgraded its inflation target to  “a symmetric 2% inflation target over the medium term” at its recent strategy review earlier this month. 

The latest statement said that ECB now expects its key interest rates to remain “at their present or lower levels until it sees inflation reaching two per cent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realised progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilising at two per cent over the medium term.” It was also noted that “this may also imply a transitory period in which inflation is moderately above target.”

Market participants’ attention is now turning towards the press conference by the ECB’s President Christine Lagar, which is due at 12:30 GMT.

The European Central Bank (ECB) left its main refinancing rate unchanged at 0.00 percent on Thursday, as widely expected. Its interest rates on the marginal lending facility and the deposit facility were also kept unchanged at 0.25 percent and -0.50 percent, respectively.

In its policy statement, the ECB said:

In support of its symmetric 2%-inflation target and in line with its monetary policy strategy, Governing Council expects key ECB’s interest rates to remain at their present or lower levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at 2% over the medium term. This may also imply a transitory period in which inflation is moderately above target;

Governing Council will continue to conduct net asset purchases under pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022 and, in any case, until it judges that the coronavirus crisis phase is over

Governing Council continues to expect purchases under PEPP over current quarter to be conducted at significantly higher pace than during the first months of the year;

Net purchases under asset purchase programme (APP) will continue at monthly pace of €20 billion. Governing Council continues to expect monthly net asset purchases under APP to run for as long as necessary to reinforce accommodative impact of its policy rates, and to end shortly before it starts raising key ECB interest rates;

Governing Council will continue to reinvest principal payments from maturing securities purchased under PEPP until at least the end of 2023. In any case, future roll-off of PEPP portfolio will be managed to avoid interference with appropriate monetary policy stance;

Governing Council will continue to provide ample liquidity through its refinancing operations (TLTRO III);

Governing Council stands ready to adjust all of its instruments, as appropriate, to ensure that inflation stabilises at its two per cent target over the medium term

FXstrategists at ING note that last week’s comments by the ECB's president Christine Lagarde and the recently published strategy review raised the stakes for today’s ECB policy meeting.

"... we think the distribution of probabilities for EUR/USD are skewed to the downside today. The main reason is that we see a non-negligible risk that the clarifications following the strategy review will lead markets to think that the Bank will increase purchases under the APP while unwinding the PEPP, which ultimately suggests that the pace of tapering for 2022 may well be smaller than previously expected. In addition, we think that any clarification about the new symmetrical inflation targeting will underscore how this will imply a more dovish stance."

"Despite President Lagarde announcing last week how there will be a change in the ECB guidance today, our economists do not think this will be in the sphere of rates forward guidance, which should remain anchored to the lower-bound, but instead on the mix between PEPP and APP, which, as mentioned, could imply a lower net reduction of purchases in 2022. This should underpin the notion that the ECB is not following the Fed in its hawkish trend, and encourage markets to stay broadly bearish the EUR/USD for today when we could see a decisive move into the lower half of the 1.1700-1.1800 area."

"Still, we expect the ECB-Fed policy divergence to fully emerge in 2022 when we expect EUR/USD to give up the gains we still forecast to see in 2H21."

AT&T (T) reported Q2 FY 2021 earnings of $0.89 per share (versus $0.83 per share in Q2 FY 2020), beating analysts’ consensus estimate of $0.79 per share.

The company’s quarterly revenues amounted to $44.045 bln (+7.6% y/y), beating analysts’ consensus estimate of $42.390 bln.

The company also issued upside guidance for FY 2021, projecting adjusted EPS up in low- to mid-single digits, which translates to ~$3.21-3.34, versus analysts’ consensus estimate of $3.14 and revenues growth of 2-3%, which translates to $175.19-176.91 bln, versus analysts’ consensus estimate of $173.93 bln.

T rose to $28.37 (+1.68%) in pre-market trading.

FXStreet reports that S&P Global Platts noted in its latest report that crude oil prices declined on subdued global cues and predicted that the oil market will turn into surplus by early 2022, citing an analysis prepared by the OPEC secretariat that was seen by S&P Global Platts.

“Holding to the agreed production increases will flip the market from deficit to surplus by the first quarter of 2022.“

“The analysis assumes global demand growth of 6 million b/d in 2021 and 3.3 million b/d in 2022.”

“Sees OECD oil inventories ending this year at 122 million barrels below the 2015-2019 average that the group is targeting before rising to 10 million barrels above by the end of 2022.”

FXStreet reports that FX Strategists at UOB Group suggest that NZD/USD could still slip back to the 0.6870-region in the next weeks.

24-hour view: “We expected NZD to ‘consolidate and trade between 0.6895 and 0.6950’ yesterday. NZD subsequently dipped to 0.6894 before rebounding strongly to 0.6977. The rebound appears to be overdone and NZD is unlikely to strengthen further. For today, NZD is more likely to trade between 0.6920 and 0.6980.”

Next 1-3 weeks: “We did not anticipate the sharp bounce that came close to our ‘strong resistance’ level at 0.6985 (high of 0.6977). The sharp rebound has resulted in a rapid loss in momentum but as long as 0.6985 is not breached, there is still a slim chance for NZD to move lower to 0.6870. In order to revive the flagging momentum, NZD has to move and stay below 0.6920 within these 1 to 2 days or a break of 0.6985 would not be surprising.”

Dow (DOW) reported Q2 FY 2021 earnings of $2.72 per share (versus -$0.26 per share in Q2 FY 2020), beating analysts’ consensus estimate of $2.43 per share.

The company’s quarterly revenues amounted to $13.885 bln (+66.2% y/y), beating analysts’ consensus estimate of $12.769 bln.

DOW rose to $60.57 (+1.41%) in pre-market trading.

The latest survey by the Confederation of British Industry (CBI) revealed on Tuesday the UK manufacturers' order books decreased slightly in July.

According to the report, the CBI's monthly factory order book balance declined to +17 in July from +19 in the previous month. Economists had forecast the reading to come in at +16.

The CBI also reported that output volumes in the three months to July grew at the joint-fastest pace on record (+37, record since 1995). It was also expected that output growth will accelerate further next quarter (+44), marking the strongest expectations for growth on record.

In other survey results, average costs growth in the quarter to July accelerated to its fastest since April 1980 (+73). Costs growth was seen to ease next quarter, despite remaining quick by historical standards (+56). Numbers employed in the quarter to July (+24) grew at their quickest rate since October 1973. Headcounts were forecast to increase at a slightly faster pace next quarter (+28).

Business optimism growth remained strong by historical standards, despite slowing from last quarter (+27 from +38 in April).

FXStreet reports that FX Strategists at UOB Group noted EUR/USD still risks further pullbacks in the next weeks.

24-hour view: “We highlighted yesterday that “downward pressure has eased and the risk of a sustained decline in EUR is not high” and we expected EUR to “trade within a 1.1750/1.1800 range”. Our view was not wrong even though EUR traded within a slightly wider range than expected (1.1750/1.1804). The underlying tone has improved somewhat and EUR could edge higher for today. However, any advance is likely limited to a test of 1.1815. The strong resistance at 1.1835 is unlikely to come under threat. Support is at 1.1775 followed by 1.1750.”

Reuters reports that according to data published by the country's statistics office, consumer spending on credit and debit cards in Britain fell by 5 percentage points in the week to July 15 from the week before.

Aggregate credit and debit card spending, based on data from payment processors provided by the Bank of England, fell to 92% of its February 2020 average level, the Office for National Statistics said.

Reuters reports that BoE Deputy Governor Ben Broadbent said that a current spike in consumer goods prices does not point to a longer-term persistence in inflation, and the Bank would do better to focus on labour market signals.

"While we know it's going to go further over the next few months, I'm not convinced that the current inflation in retail goods prices should in and of itself mean higher inflation 18-24 months ahead. The outlook for aggregate demand growth still matters. And for all the usual reasons and more, the Monetary Policy Committee will have to pay very close attention, parsing the official data as best it can, to the numbers in the labour market," Broadbent added.

RTTNews reports that survey results from the statistical office Insee showed that French manufacturing confidence strengthened to the highest level in more than three years in July largely driven by the assessment of foreign orders and personal production expectations.

The manufacturing sentiment index advanced to 110 in July from 108 in June. This was the highest score since April 2018 and above economists' forecast of 107.

The overall order book balance rose to -2 in July from -7 in the previous month. Likewise, the balance of opinion on export order books advanced to -10 from -16.

Manufacturers are also being optimistic about their own production for the next three months. The corresponding balance advanced to 21 from 18 in June. Meanwhile, the general production expectations index fell to 20 in July from 25 in the previous month.

The overall business confidence index that comprises the responses of business leaders from sectors namely, manufacturing, construction, services, retail trade and wholesale trade, dropped marginally to 113 in July from 114 in June.

CNBC reports that the European Central Bank’s new inflation target and its possible effects on monetary policy will be the key topic of today's meeting.

Hopes are high that the euro zone’s central bank will come up with a dovish surprise as President Christine Lagarde keeps stressing the need for a forceful policy response to avoid a de-anchoring of inflation expectations.

The ECB effectively hiked its inflation target from “below but close to 2%” to a symmetric 2% target over the medium term, which means that both overshooting and undershooting is allowed but “not desirable.”

Since the euro zone’s financial crash, consumer price growth has averaged at just 1.2%. In other words, despite all the extraordinary measures deployed amid the sovereign debt crisis, inflation has not achieved the ECB’s target over the last decade.

While some expect more than just tweaks in the ECB’s forward guidance this week, others expect a real sea change to come later this year once there is more clarity about the region’s economic trajectory and the evolution of the coronavirus pandemic.

“We think policymakers’ commentary over the past week suggests that the ECB will go beyond just changing the forward guidance at its meeting on 22 July,” said Luigi Speranza, chief global economist at BNP Paribas, in a recent research note.

“Our bias is to think that we will get greater clarity on the post-PEPP environment as well, underscoring the ECB’s message of persistent accommodation,” he said.

FXStreet reports that UOB Group’s FX Strategists noted USD/CNH is expected to keep the side-lined theme between 6.4400 and 6.5000 in the next weeks.

Next 1-3 weeks: “We highlighted yesterday that the ‘current movement is viewed as part of a consolidation and USD is likely to trade sideways for now’. We added, ‘looking ahead, the upside risk appears to be greater but USD has to close above 6.5000 before a sustained advance can be expected’. USD subsequently dropped sharply and took out the support at 6.4680. The price actions suggest that USD is still in a consolidation and it could USD could trade sideways between 6.4400 and 6.5000 for now.”

Bloomberg reports that Scott Minerd, chairman and chief investment officer of Guggenheim Investments, said that U.S. stocks could tumble 15% or more by the end of October in a challenging period for markets.

“September and October are likely to be very rough this year” for stocks, Minerd said. “Maybe a pullback of 15% or slightly more.”

A faster-than-expected tapering of asset purchases from the Federal Reserve and the increasing spread of the delta variant are both major risk factors for stocks, Minerd said.

Minerd also expects cryptocurrencies to remain challenged in the coming months. He sees Bitcoin falling further to “something in the neighborhood of $15,000, and said “a lot of this stuff is just junk.”

During today's Asian trading, the US dollar was trading steadily against the major currencies.

The ICE index, which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell by 0.01%.

The index is holding near the maximum levels of the current year against the background of high demand for the assets of the "safe haven" due to the rapid spread of the new COVID-19 "delta" strain in the world. On Wednesday, the index rose above 93 points, which was noted only twice earlier this year.

"Currently, the US approach to combating a new strain of coronavirus provides for the activation of vaccination and the introduction of requirements for wearing masks," IG experts note. "This reduces the risk that an increase in morbidity will lead to a new economic downturn."

Nevertheless, it is still necessary to monitor the situation with morbidity, since potential lockdowns and restrictions on business operations remain risk factors for the US economy, experts say.

The US dollar usually strengthens when the pace of economic growth in the US is ahead of the rest of the world, or when the situation in other regions worsens, which contributes to an increase in demand for the US currency and government bonds as "safe haven" assets, experts say. The dollar usually becomes cheaper when the economies of the United States and many other countries of the world simultaneously demonstrate steady growth.

eFXdata reports that Credit Agricole CIB Research discusses the Australian economy trajectory.

"Half of Australia’s population is already in lockdown in order to try and contain the virus. So, what matters the most for the currency at the moment is when the lockdowns will end; the retail sales data shows the damage they are already doing to the economy. Indeed, if Sydney’s lockdown lasts longer than six weeks, real GDP in Q3 will contract. The market already expects the RBA to not taper its asset purchases further in November, so now it is a question of how long until the next taper or even if the RBA reverses its July tapering of asset purchases," CACIB adds. 

FXStreet reports that FX Strategists at UOB Group said that USD/JPY could now trade within the 109.50-110.70 range in the short-term horizon.

Next 1-3 weeks: “We noted yesterday that ‘downward momentum has waned but only a break of 110.20 would indicate that USD is unlikely to weaken further’. USD subsequently broke 110.20 and rose to 110.38. Downward pressure has dissipated and USD is unlikely to weaken further. The recent sharp but short-lived swings have resulted in a mixed outlook and USD could trade within a 109.50/110.70 range for now.”

EUR/USD

Resistance levels (open interest**, contracts)

$1.1922 (1847)

$1.1888 (1668)

$1.1862 (178)

Price at time of writing this review: $1.1793

Support levels (open interest**, contracts):

$1.1751 (1995)

$1.1720 (5454)

$1.1683 (10607)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 6 is 62756 contracts (according to data from July, 21) with the maximum number of contracts with strike price $1,1700 (10607);

GBP/USD

$1.3883 (1375)

$1.3848 (995)

$1.3818 (107)

Price at time of writing this review: $1.3728

Support levels (open interest**, contracts):

$1.3669 (687)

$1.3649 (900)

$1.3625 (517)

Comments:

- Overall open interest on the CALL options with the expiration date August, 6 is 14446 contracts, with the maximum number of contracts with strike price $1,3850 (1375);

- Overall open interest on the PUT options with the expiration date August, 6 is 19611 contracts, with the maximum number of contracts with strike price $1,3400 (1680);

- The ratio of PUT/CALL was 1.36 versus 1.42 from the previous trading day according to data from July, 21

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

RTTNews reports that survey data from the National Australia Bank showed that Australia's business conditions rose to a record high in the second quarter, while confidence eased slightly.

The business conditions index rose strongly by 12 points to a record 32 points in the second quarter. Meanwhile, the business confidence index dropped to 17 from 19 in the preceding quarter.

Business conditions were still in negative territory in the third quarter of 2020, and now, three quarters later, they were at a record high, a testament to how rapid the recovery has been from last year's recession, Alan Oster, NAB group chief economist, said.

"A pleasing aspect of the survey is how broad-based the strength in conditions and confidence was - whether you look by industry or by state they are all above average, and in many cases well above," said Oster.

Reuters reports that according to Refinitiv data, global venture capital investments are at record levels this year, boosted by a surge in equities, higher liquidity and an increased interest in sectors that have benefited from the coronavirus pandemic.

Global venture capital funds invested $268.7 billion so far in 2021, far outstripping their total investments of $251.2 billion a year earlier.

The bulk of those deals were in software, e-commerce, digital healthcare and fin-tech companies, whose products and services have seen strong demand during the pandemic, data showed.

Late-stage startups have attracted the lion’s share of the funds, with venture capital firms pumping in $195.3 billion, or about 73% of their total investments, while early-stage companies have received $73.4 billion.

Rock-bottom interest rates, a rush to diversify their portfolios and a string of successful exits have also prompted global investors to set aside more money for venture capital funds this year.

U.S. venture capital funds raised $70 billion in the first half of the year, a 65% increase from a year earlier, according to Refinitiv data. Asian and European funds raised $16.1 billion and $8.2 billion, respectively, much higher than in 2020.

“This record breaking year for venture capital funding globally is the result of the creative economy being a legitimate asset class and investors knowing they need to have an allocation,” said Jeff Ransdell, managing director of Miami, Florida-based Fuel Venture Capital said.

“Companies are simply staying private longer than ever before, so the wealth creation is largely in the private sector at the moment.”