Macro Roundup (Jul 20)

SHANGHAI, Jul 20 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The safe-haven US dollar, yen, and Swiss franc rose on Monday as investors grew nervous about a raging coronavirus variant that could threaten the outlook for a global economic recovery.

The three currencies firmed as benchmark US 10-year Treasury yields dropped to a more than five-month low of 1.176%, with risk aversion spreading across financial markets.

The greenback climbed to a more than three-month peak against a basket of major currencies, but has come off its highs as the yen and Swiss franc gained with the worsening in risk sentiment.

The US dollar though remained sharply higher against risk-sensitive currencies such as the Australian, Canadian and New Zealand dollars.

The yen, meanwhile, climbed to its highest in 1-1/2 months versus the dollar.

On Wall Street, stock futures climbed in overnight trading on Monday after concerns about the spread of Covid-19’s delta variant sent investors dumping equities, especially those directly affected by pandemic restrictions.

Futures on the Dow Jones Industrial Average rebounded 80 points. S&P 500 futures gained 0.3% and Nasdaq 100 futures traded 0.4% higher.

Wall Street suffered a sharp sell-off during regular trading hours as investors feared that the fast-spreading delta coronavirus variant could hinder the economic recovery. The blue-chip Dow tumbled more than 700 points to post its worst day since October, while the S&P 500 fell 1.6% and the Nasdaq Composite dropped about 1.1%.

West Texas Intermediate crude futures fell below the key $70 level Monday for the first time in more than a month as OPEC and its allies agreed to raise output, and as the delta Covid variant threatens global demand.

US oil settled 7.51% lower at $66.42 per barrel for its worst day since September 2020, after trading as low as $65.47 during the session. The contract is now more than 13% below its recent high of $76.98 from July 6, which was the highest level in more than six years. International benchmark Brent crude slipped 6.75% on Monday to settle at $68.62 per barrel.

The group of 23 nations, known as OPEC+, agreed Sunday to increase production by 400,000 barrels each month beginning in August. The output hike will continue through September 2022, at which point the entirety of the nearly 6 million barrels per day the group is still withholding will be back on the market.

The announcement came after the group’s initial meeting July 1 fell apart amid a disagreement between Saudi Arabia and the United Arab Emirates over the latter’s baseline production quota.

Gold inched lower in choppy trading on Monday, as a buoyant dollar offset a slump in Treasury yields to their lowest levels since February.

Spot gold shed 0.2% to $1,807.59 per ounce by 2:06 p.m. ET. US gold futures settled 0.3% lower at $1,809.20.

“Gold is caught in a tug-of-war between a rising dollar that weighs down on the precious metal and a drop in risk appetite, which supports its price,” said Ricardo Evangelista, a senior analyst at ActivTrades.

The dollar index hit a more than three-month high, making gold more expensive for other currency holders, and countering the sharp fall in U.S. benchmark Treasury yields.

Jeffrey Christian, managing partner at CPM Group, also attributed gold’s recent declines to seasonal weakness in investment and jewelry demand.

“A lot of investors are looking at gold and saying gold spiked to a record high in early August last year and it hasn’t come close to regaining the high since then, so there is what we call stale bull liquidation.”

Key economic data slated for release today include China's one-year loan interest rate as of July 20, German PPI annual rate in June, monthly construction permit rate in June in the US and the annualized monthly rate of new housing starts in June in the US.