Good morning, and welcome to our rolling coverage of the world economy, the financial markets, and business.
Stock markets continue to struggle amid worries about an increase in Covid-19 infections and the global economic recovery, ahead of the US Federal Reserve’s monthly decision later today. Asian markets were mostly down, with Japan’s Nikkei losing 1.1% while Hong Kong’s Hang Seng rose 0.3%, and Europe is also expected to get off to a weak start.
The Fed announces its interest rate decision at 7pm BST and Fed chair Jerome Powell holds a press conference half an hour later.
No changes in policy are expected, but the Fed is expected to reaffirm its super-easy stance and perhaps indicate a willingness to tolerate higher inflation in the long run – which would allow interest rates to stay low for longer.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:
The Fed is not expected to bring any significant changes to its policy stance at this month’s meeting. US policymakers will likely emphasise the lingering risks on the US economy and maintain an ultra-supportive monetary policy to provide support to its economy ravaged by the pandemic.
While investors will continue looking for clues regarding alternative policy tools, including the yield curve control, we do not expect to hear any material progress before September. While there is little room left for enhanced forward guidance, the Fed will follow a clear strategy to support lending and liquidity. The market already digested the Fed’s endeavour to keep the short-term rates low for long. Combined with a solid fiscal support, the Fed won’t move more dovish on its policy for now.
The US dollar has steadied somewhat after its recent slide, slipping 0.14% against a basket of currencies to 93.61. It’s heading for its worst month in nine years.
There is still strong demand for precious metals, with spot gold at $1,957 an ounce, down 0.1%, and silver at $24.32, down 0.99%. Gold hit a new all-time high of $1,980 earlier this week.
On the corporate front, get ready for an earnings bonanza from the UK banks and US tech titans of Apple, Amazon, Google owner Alphabet, Facebook and Twitter in the next few days. Four of the big tech bosses – Amazon’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg and Google’s Sundar Pichai – will appear in Congress today to answer questions about their power and business practices during an anti-trust grilling.
In the UK, Barclays has just released figures for the second quarter and first half. The bank has been forced to put aside another £1.6bn the three months to June to cover bad debts as it prepares for an oncoming wave of customer defaults caused by the Covid-19 crisis, reports our banking correspondent Kalyeena Makortoff. The figure is higher than expected, and pushed pre-tax profits down 75% to £359m.
The economic calendar is light but this morning we’ll be getting consumer credit and mortgage lending figures from the Bank of England for June, which are likely to paint a weak picture.
- 9:30am BST: Bank of England lending figures for June
- 1:30pm BST: US trade for June
- 3pm BST: US Pending home sales for June
- 7pm BST: US Federal Reserve rate decision
- 7.30pm BST: US Fed chair Jerome Powell holds press conference