In This Article:
By Geoffrey Smith
Investing.com -- The European Central Bank may hike rates by more than it signaled on Thursday, lifting the euro. The housing market remains under the spotlight with building permits and housing starts data for June. Netflix, Johnson&Johnson and Lockheed Martin all release results. And oil prices come under pressure again as China's COVID case count rises. Here's what you need to know in financial markets on Tuesday, July 19.
1. ECB set to discuss 50 bp rate hike, euro bounces off lows
The euro rose and European Central Bank will look at raising its official interest rates by 50 basis points at Thursday’s meeting, newswires reported citing unnamed sources.
The ECB had so far only guided for a 25 basis point increase, but has been negatively surprised by repeated overshoots in inflation, the latest of which was confirmed earlier by Eurostat at an annual rate of 8.6%. Even excluding volatile energy and food effects, the cost of living was up 4.6% from a year earlier, more than twice the ECB’s target.
Eurozone bond markets took the news stoically, still in suspended animation while awaiting the outcome of Mario Draghi’s negotiations to keep his coalition government together. Draghi sealed an important deal on Monday to import extra natural gas volumes from Algeria, although that may not be enough to avert a serious and unpopular decline in living standards this year.
2. Housing market data in focus after NAHB index slump
The U.S. housing market remains in the spotlight after the biggest ever monthly drop in the National Association of Homebuilders’ index of activity in the sector.
The index fell to its lowest since the start of the pandemic, with soaring prices and mortgage rates both having a chilling effect on sentiment. Tuesday’s data will focus on building permits and housing starts. Both of these dropped abruptly in May after defying gravity in the previous six months.
Analysts expect a modest bounce in starts but another decline in building permits. Anything markedly stronger than that may revive concerns of a full percentage point hike in U.S. interest rates from the Federal Reserve next week. Fed vice-chair Lael Brainard speaks at 02:35 PM ET.
3. Stocks set to recover from Apple-related selloff; J&J, Netflix earnings eyed
U.S. stock markets are set to open higher later, recovering momentum after a report about Apple (NASDAQ:AAPL) slowing hiring and cutting departmental budgets that cast a pall over the broader market.
By 06:20 AM ET (1020 GMT), Dow Jones futures were up 215 points, or 0.7%, while S&P 500 futures and Nasdaq 100 futures were both up 0.9%. The three main cash indices had all lost between 0.7% and 0.9% on Monday.