Hello. The Group of Seven summit kicks off, markets face inflation fears and the UK’s reopening is about to be delayed. Here’s what moves the markets.
The Group of SevenThe summit, which is being held in Cornwall, UK, will kick off fully on Friday. British Prime Minister Boris Johnson and US President Joe Biden met ahead of the event, Johnson telling Bidendid not push him to restore relations with the EU, following last week’s tensions over Northern Ireland and the Brexit deal. Elsewhere, leaders are expected to confirm plans for additional doses of the Covid-19 vaccine and there will be a lot of attention on green targets, includingclimate finance and ambitious plans to accelerate the transition toelectric car.
The European Central Bankrenewed its commitment to accelerate bond buying even as policymakers adopt a more optimistic view of the risks facing the European economy. ECB President Christine Lagarde said the bank remains bullish on inflation, although some members are said to haveraised the prospect of upside risks. The policy decision coincided with data on consumer prices in the United States whichexceeded expectations and fueled fears that inflation could build up more as the economy rebounds. theHowever, the Treasury bill market seems to support the idea that inflation will be transient.
British Prime Minister Boris Johnson ison the verge of delaying the final lifting of virus restrictions in the country, which is due to take place on June 21. Johnson is expected to announce next week whether the final restrictions will be lifted, but a recent spike in cases in the country is expected to force an overhaul and deal a blow to hospitality and entertainment businesses. The airline industry, meanwhile, is pushing for afaster restart of UK-US travel, calling on leaders to go beyond thetentative promises made this week to resume flights. Carriers also wantoverturn EU compensation laws after paying billions in refunds in lockdowns last year.
Bitcoin and other cryptocurrencies are relatively stable before Friday, following a series of developments for the market. International banking regulators have decided to classify Bitcoin as theriskier assets, taking cryptos further into the mainstream financial world. Elsewhere, the outlook is blurry: JPMorgan sees somebearish signals; cyberattacks demanding ransoms in Bitcoin havefaded hopes that policymakers will turn to digital assets; and the International Monetary Fund has warned of the challenges posed byEl Salvador adopts Bitcoin as legal tender.
To come up…
European equity futures point to a slightly positive opening after amixed day in Asia. The S&P 500 hit a new record in the United States. There is a handful of economic data, including UK industrial production, while the earnings calendar is calm. Bank of England Governor Andrew Bailey and British Chancellor of the Exchequer Rishi Sunak speak at an event with the BIS Innovation Hub, as the Bank of Russia delivers its rate decision. And the delayed Euro 2020 football tournament kicks off, with Italy and Turkey the first game.
What we read
This is what caught our attention over the past 24 hours.
And finally, here’s what interests Cormac Mullen this morning
Often overlooked by investors, global consumer staples appear to be struggling to emerge from a long period of underperformance. An MSCI industry gauge is once again testing its post-pandemic downtrend against the global stock index, a breach of which would open the door to a further rise. The cohort hit a relative 13-year low in March and has since consolidated. Well known as a defensive sector, core stocks have suffered relative to their consumer discretionary counterparts, which analysts say will benefit more from excess savings madness when economies fully reopen. But with question marks over the peak of global growth and some analysts suggesting we are in a shorter cycle than usual, increased exposure to commodities might be prudent. Bank of America noted “furious” short coverage in commodities last month in its survey of fund managers – a good sign that at least some investors believe the period of underperformance is over. With other financial market havens doing well recently, from Treasuries to gold, maybe it’s time for commodities to do the same in the stock market.
Cormac Mullen is a multi-asset reporter and editor for Bloomberg News in Tokyo.
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