A rising monetary tide is lifting all the market boats. The US dollar and bonds fell, and European and US stocks rose, on better continental activity data and optimism that the US will soon pass another fiscal stimulus package. Crude oil rose on lower inventories. However gold hit a fresh record high just below US $2,045, indicating some investors remain concerned about the growth outlook.

UK, French, German and Italian services and composite PMIs all showed expansion in July, albeit from reduced levels. These follow US and Chinese numbers that paints the same picture. While measures such as production and employment continue to reflect high levels of economic damage, the pick-up in activity fuels hope for a second half recovery. The US Federal Reserve’s Dallas president said he expected a rebound over the rest of the year, dependent on unemployment support and the path of the virus.

The two major political parties in the US are at loggerheads over extending coronavirus fiscal programs. The sticking point is the amount of support for the unemployed – with the Democrats at $600 per week and the Republicans at $400. A senior Republican said “if there’s no deal by Friday, there’ll be no deal”. Investors appeared to interpret the statement as a step towards a deal.

The US corporate reporting season hit the 80% mark overnight, and companies continue to jump the low earnings bar. Profits are running 22% ahead of forecasts. Moderna shares fell 4% despite reporting above consensus and telling shareholders it had $400 million in vaccine deposits. Borg Warner, Humana, Discovery and Resmed all fell within the 80%+ of companies that have reported ahead of estimates.

The Reserve Bank of India faces a tough call on interest rates today. The latest reads shows inflation at 6.1%, and Industrial Production falling 19.5%. Does the RBI cut and risk inflation getting out of control, or keep rates on hold and watch the economy tank? In contrast the Bank of England is expected to hold rates at 0.1%. Analysts expect no change to its quantitative stimulus after extending the program in June.