Where else but in the markets can short term memory loss be both beneficial and profitable?

John Kenneth Galbraith, an economist, says the financial markets are characterized by…

“…extreme brevity of the financial memory.  In consequence, financial disaster is quickly forgotten.  In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world.  There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].

Major European shares end the session higher.

Indices rebound from Monday’s plunge

The major European indices are ending the session higher. With the exception of the FTSE 100, the indices have risen for 4 consecutive days and all erased Monday’s sharp declines.

The provisional closes are showing:
  • German DAX, +0.99%
  • France’s CAC, +1.41%
  • UK’s FTSE 100, +0.93%
  • Spain’s Ibex, +1.1%
  • Italy’s FTSE MIB, +1.23%
EUrope’s STOXX 600 index increased 1.14% to an all-time high of 461.75.
In other markets as European traders look to exit for the week:
  • Gold continues to trade above and below the $1800 level. It is currently trading at $1800.85 that’s down $-4.55 -0.25%.
  • Silver is trading down $0.14 -0.55% $25.24
  • WTI crude oil futures are trading marginally lower at $71.83. It’s high price reached $72.11 while the low extended to $71.42
  • Bitcoin is trading up about $170 or 0.53% $32,400. The high price reached $32,915. The low extended to $32,056

UK July flash services PMI 57.8 vs 62.0 expected

Latest data released by Markit/CIPS – 23 July 2021

  • Prior 62.4
  • Manufacturing PMI 60.4 vs 62.5 expected
  • Prior 63.9
  • Composite PMI 57.7
  • Prior 62.2

UK business activity miss on expectations and decline quite considerably from June as firms widely report that staff and raw materials shortages dampened conditions, hindering the recovery pace after the reopening in April.

This is certainly a spot to watch now for the UK and will likely dampen any hopes of a more hawkish tilt by the BOE as we look towards the August meeting.
Markit notes that:

“July saw the UK economy’s recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook.

“Although business activity continued to grow, aided by the easing of lockdown restrictions to the lowest since the pandemic began, the rate of expansion slowed sharply to the weakest since March.

“Transport, hospitality and other consumer-facing services companies were the hardest hit, though manufacturing also saw growth weaken markedly during the month.

“Although the July flash survey only covered three days of the full easing of covid restrictions, any imminent re-acceleration of growth in August looks unlikely due to a steep slowing in overall new order growth recorded during July.

“Concerns over the Delta variant have meanwhile overshadowed the passing of “freedom day”, and were a key factor alongside Brexit and rising costs behind a sharp slide in business expectations for the year ahead, which slumped to the lowest since last October.

“The PMI indicates that GDP growth will likely have slowed in the third quarter, after having rebounded sharply in the second quarter.

“Firms’ costs rose at a rate unprecedented in over 20 years of survey history as supply shortages pushed up the price of goods, suppliers of services hiked prices and employee pay continued to rise.”

Eurozone July flash services PMI 60.4 vs 59.5 expected

Latest data released by Markit – 23 July 2021

  • Prior 58.3
  • Manufacturing PMI 62.6 vs 62.5 expected
  • Prior 63.4
  • Composite PMI 60.6 vs 60.0 expected
  • Prior 59.5

A solid bump in business activity with the strongest rise in over 15 years observed in the services sector. Supply chain disruptions dampened manufacturing output but overall conditions are still relatively robust to start Q3.

Prices for goods and services continue to run at a record pace, reaffirming higher cost inflation pressures. Meanwhile, backlog of work rose at a joint-survey record amid capacity constraints. Markit notes that:

“The eurozone is enjoying a summer growth spurt as the loosening of virus-fighting restrictions in July has propelled growth to the fastest for 21 years. The services sector in particular is enjoying the freedom of loosened COVID-19 containment measures and improved vaccination rates, especially in relation to hospitality, travel and tourism.

“Supply chain delays remain a major concern for manufacturing, however, constraining production and pushing firms’ costs higher. These higher costs have led to a near record increase in average selling prices for goods and services, which is likely to feed through to higher consumer prices in coming months.

“The survey also highlights how the delta variant poses a major risk to the outlook. Not only have rising case numbers led to a slide in business optimism to the lowest since February, further covid waves around the world could lead to further global supply chain delays and hence ever higher prices.”

Fed’s Powell rated as the most negative of the last three chairs of the Bank

Reuters report on research using artificial intelligence and voice analytics that scores current Federal Reserve System Chair Powel the most negative of the ;last 3 chairs.

And Yellen having the most neutral tone, and ... Ben Bernanke before that a comparative cheerleader.
The authors of the research … found that the Fed chair’s emotional tone at news conferences influences stock prices independent of the meaning of the words used
  • The effect, as much as 200 basis points on the S&P 500
bernanke yellen

Just waking up? Here’s the TL;DR version of the European Central Bank decision

The ECB did not change any policy setting. The ECB provided long-winded forward guidance, the TL;DR on this is that rate hikes from the Bank are way, way off in the future – don’t even think about thinking about it. PEPP … will continue at its current pace in addition to the asset buying program already in place.

At her presser, ECB President Lagarde hinted a debate over QE may occur at the September meeting (this meeting will be accompanied by the release of new forecasts).
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