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Take Five: Australian Fares, Fed Minutes, and Summer Unknowns

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LONDON – Below are five big themes that are likely to dominate the thinking of investors and traders in the coming week.

1 / ADVANCED THINKING

With the markets in the second half of 2021, can the fast and furious streak of the last 15 months continue?

The first half saw spectacular action: Oil soared 45%, a ‘meme’ action loved by hobbyist traders rose more than 2,500%, Brazil’s currency went from zero to hero. But all that stimulus money also means that US inflation is now annualizing by 8% from an average of just 3% over the past 100 years.

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As Donald Rumsfeld, who died Tuesday, said about something entirely different: There are many known unknowns. COVID-19 is one, but the BofA acknowledges that only a market downturn would prevent the Fed from tackling the stimulus before the end of the year.

Considering how much the markets love cheap money, the third quarter can be a bumpy ride.

– Fast and furious first half of 2021 keeps financial markets at full throttle

2 / LOWE FOR LONGER

Tuesday’s meeting of the Reserve Bank of Australia is shaping up to be a box office success. The fate of the RBA’s three-year yield target and bond purchase scheme will be decided, and language on the rate outlook will potentially be altered.

At least one clue is implied: either the RBA renews the return target set at the 0.1% cash rate level of the bond lines from April to November 2024, indicating stable rates until then, or it does not. , opening the door for a move earlier.

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Anticipating a takeoff in rates in 2022, investors will watch the unusual post-meeting press conference from Governor Philip Lowe. The US Fed has become more aggressive, perhaps it is time for the hitherto dovish RBA to follow suit.

– SURVEY-Australia c. Bank adopting ‘flexible’ QE, rate hikes observed in 2023

3 / FED CLOCK

Minutes from Wednesday’s June Fed meeting will be scrutinized after a sea change rocked markets last month.

Lawmakers carried their first projected rate hikes to 2023 from 2024 and opened talks on how to end bond buying in the crisis era.

While this should put pressure on risky assets, stocks have since rallied and reached new highs, helped by reassuring words from Fed Chairman Jerome Powell, who reaffirmed his intention to encourage a “broad and wide recovery. inclusive “in employment and don’t raise rates too fast.

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Markets will scrutinize language about rising consumer prices and other signs that officials believe a strong recovery means an end to aggressive political support could come soon. – US consumer confidence at its 16-month high; house price inflation heats up

4 / SUMMER MISSING?

The risks of another summer canceled due to COVID-19 are increasing as the Delta variant increases globally.

The United Nations issued a dire warning that international tourist arrivals will stagnate this year, racking up as much as $ 2.4 trillion in losses, and it has been a tough few days for travel and tourism stocks.

A Southern European corporate travel participation index wiped more than € 500 million ($ 590 million) from its market capitalization in the week ending July 1, Refinitiv data shows.

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But don’t put away the beach towels and sunscreen just yet.

The EU has launched a digital COVID certificate system to open tourism. Germany, for example, could ease travel restrictions in countries where the Delta variant already dominates if it is sure vaccinated people are protected.

– International tourism will not recover until 2023: UN report

5 / GREEN GET BLUE

With just three months left until the German elections, Europe’s key political event this year, polls seem to confirm that the Greens are losing their appeal. Leader Annalena Baerbock faces accusations of plagiarism and questions about her CV, and the party is struggling with a Christmas bonus payout scandal and a setback in the regional elections.

Having risen briefly in the polls after Baerbock was elected as chancellor candidate, the latest polls show the Greens with 20% of the vote, far behind the ruling CDU / CSU Angela Merkel with 30%.

The shifting permutations of Germany’s coalition arithmetic are important for future politics in Europe’s largest economy. Right now, a CDU / CSU-led coalition with the Greens seems likely, a combination that is expected to bring more continuity than change.

But there is still some time.

-The leader of the German Greens rejects the accusations of plagiarism for affecting credibility (1 dollar = 0.8456 euros)

(Information from Tom Westbrook in Singapore, Saqib Ahmed in New York, Marc Jones, Saikat Chatterjee and Karin Strohecker in London; compiled by Dhara Ranasinghe; edited by John Stonestreet)

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In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.

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