Half full

Having contrived to ignore the resurgent global pandemic on Tuesday, investors completely blanked it from their minds yesterday. Equity, commodity and energy prices headed higher. The Norwegian krone led the way after four days at the rear and the Japanese yen dropped 2% behind the krone.

Markets are well-known for their ability to focus selectively on the factors that suit their mood at any given time. Over the weekend, investors were concerned about the dreaded Delta Variant. Now, apparently, they are looking at the resilience of corporate earnings and the spreading use of vaccination certificates that will enable a return to business-as-usual. The half-empty glass has miraculously become half full.

It is a similar story with Brexit and the pound. Not so long ago there was considerable angst about the oven-ready withdrawal agreement, and how it would choke trade with Northern Ireland. Yesterday, the spat entered a new phase, with Brexit Minister David Frost wheeling out a new set of demands that the EU alter the treaty in England’s favour. The EU, of course, said no, and investors, having heard it all before, took it in their stride. Sterling is an average of 0.2% firmer, with individual gains of one US cent and two thirds of a euro cent.

Ignoring the numbers

With the best will in the world, investors could not have made much of Wednesday’s economic statistics. Today’s numbers have a little more potential to energise the market but it will not be until Friday that investors have anything really to get their teeth into.

In South Africa, inflation came in almost exactly on forecast at 4.9%. Italian industrial sales in May were 40.2% above the same month last year despite a monthly decline of 1%. Canadian new house prices rose more slowly for the second month in a row, leaving them 11.9% higher on the year. Overnight, NAB’s Quarterly Business Survey found Australian business conditions rising “strongly” in Q2, with the index 12 points higher at a record 32. Business confidence eased slightly, from 19 to 17.

Today’s other data cover US jobless claims and existing home sales, the Chicago Fed’s national activity index and Eurozone consumer confidence. Friday brings a clutch of provisional purchasing managers’ index readings as well as Canadian retail sales, after kicking off with UK retail sales.

Focusing on Frankfurt

There are monetary policy decisions today from the South African Reserve Bank and the European Central Bank. No rate change is expected from either. For obvious reasons, the latter will be of most interest to investors.

Today’s announcement from the ECB will be the first since the bank completed its strategic policy review. There will be a change to the way the ECB provides guidance on what might lie ahead. The assumption – and certainly the hope – is that there will be increased clarity to that guidance. However, if investors are looking for a detailed road map of the scale and timing of future rate adjustments they will very probably be disappointed.

ECB President Christine Lagarde will host her press conference at 1330h. The world will be watching.