Growth Fears, ECB, Jobless Claims, Olympics Blow - What's Moving Markets
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Geoffrey Smith in his article for Investing.com (Reuters).
"1. The ECB's Big Reveal
The European Central Bank will unveil its new monetary policy strategy after over a year of head-scratching, aiming to convince markets that it can still deliver price stability after a decade of consistently undershooting its target.
Advance leaks suggest that the bank will change its inflation target to a more explicit 2%, removing the asymmetric bias implicit in its current mantra of “close to, but below, 2% over the medium term.” Analysts say that will give it more leeway to allow temporary overshooting of its target, akin to the Fed’s now-explicit tolerance of temporary overshooting.
2. Jobless claims to hit new low
U.S. initial jobless claims are expected to have fallen to a new post-pandemic low of 350,000, from 364,000 last week.
The numbers are due for release at 8:30 AM ET. They come a day after the Labor Department’s monthly job openings survey for May showed that layoffs had already reached a record low as a newly-reopened service sector scrambled for workers.
The claims numbers will be substantially more up to date than the JOLTs survey, but may still struggle to reinforce confidence in a recovery that appears to be flattening out, not least due to the slowdown in vaccinations that has left midwestern states in particular vulnerable to the fast-spreading delta strain of Covid-19.
3. Stocks set to open sharply lower after tapering hint
U.S. stock markets and bond yields are set to open sharply lower as investors unwind previous bets on strong growth and relatively high inflation continuing into the medium term.
The yield on the U.S. 10-Year note has plummeted to 1.26%, its lowest since February, while the dollar has strengthened to a three-month high as the global safe-haven bid strengthens. The dollar strengthened after the minutes from the last Federal Reserve meeting bolstered expectations that it will may start reducing its asset purchases later this year.
4. The pandemic strikes back - at the Olympics
The delayed 2020 Summer Olympic Games will take place without spectators, after Prime Minister Yoshihide Suga declared a state of emergency for the prefecture of Tokyo due to rising cases of Covid-19.
The decision had been widely expected, as new infections in the Tokyo prefecture have been rising for nearly a month and hit their highest level since mid-May on Wednesday. Japan has been slow to vaccinate its population so far, with barely a quarter of the population receiving even one jab.
5. Oil tumbles despite another big inventory draw; EIA data eyed
Crude oil prices slumped on global growth concerns, notwithstanding the prospect of a tighter physical market in the near term due to disagreements over output policy at OPEC.
U.S. crude futures were down by more than 1% during the overnight session but pared their gains to be down only 0.9% at $71.58 a barrel by 6:15 AM ET. Brent futures were down 0.7% at $72.95 a barrel."