Infrastructure Bill, ISM, China Cools, Vaccine Prices - What's Moving Markets

© Reuters.

By Geoffrey Smith

Investing.com -- The Senate agrees on a draft $1 trillion infrastructure bill. The ISM puts out its final PMI for July, while Chinese PMIs provide further evidence of a slowdown, aggravated by the spread of localized Covid-19 outbreaks across a handful of provinces and cities. Square is buying Afterpay for $29 billion.  Earnings season continues with updates from Global Payments (NYSE:GPN), Simon Property (NYSE:SPG) and Loews (NYSE:L), among others, and Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) push through big price increases in new contracts to supply the EU with vaccines. Here's what you need to know in financial markets on Monday, 2nd August

1. Senate agrees infrastructure bill draft

U.S. Senators reached agreement on the wording of a $1 trillion infrastructure bill, which may now be voted on in the Senate as early as this week.

The bill has bipartisan support in the Senate, but is likely to be held up in the House of Representatives, where Speaker Nancy Pelosi has tied it to a separate $3.5 trillion spending package on issues such as fighting poverty and climate change.

Of more immediate economic impact, the Institute of Supply Management will release its final purchasing managers index for July. The flash index had suggested manufacturing activity cooled slightly in the month, but stayed close to historic highs.

2. China’s Covid-19 outbreaks spread; economy slows in July

The delta variant of the Covid-19 virus continues its spread through China. A total of 20 cities and 14 regions have now taken measures of varying strictness to isolate cases in an outbreak that began last week when a flight from Russia arrived at Nanjing airport with an infected passenger.

Chinese data for cases remain extraordinarily low.  There is little available data on how effective the Sinopharm vaccine is against the delta strain. Studies showed it to be less effective than the Pfizer and Moderna vaccines in preventing symptomatic disease.

China’s official and Caixin PMIs added to evidence of the Chinese economy slowing in July, with the Caixin Manufacturing PMI falling to only 50.3, its lowest since April last year

3. Stocks set to open higher as Fed officials reassure; Square to buy Afterpay for $29 billion.

U.S. stock markets are set to start the week higher, at close to new records, after Federal Reserve officials repeated at the weekend that the labor market needs to improve further before the central bank can reduce its bond purchases.

Lael Brainard and Neel Kashkari both warned of potential headwinds from the spread of the delta variant in the U.S., which reported 122,000 new cases on Sunday – the highest since February.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 166 points, or 0.5%, while S&P 500 futures were up 0.6% and Nasdaq 100 futures were up 0.5%.

Earnings season continues with releases from Global Payments, NXP (NASDAQ:NXPI), Simon Property, Williams, Loews and TakeTwo, among others.

4. Pfizer/BioNTech, Moderna force through price hikes

Also in focus later will be Pfizer and Moderna stocks, after they forced through a substantial price increase in a new contract with the European Union for their Covid-19 vaccines.

According to the Financial Times, Pfizer and BioNTech will now be paid 19.50 euros ($23.20) a shot, up more than 25% from their first contract, while Moderna will now be paid $25.50, up over 10% from previously. The deals are for up to a total of 2.1 billion shots through 2023.

BioNTech stock was up over 4% in premarket trading, while Pfizer was up 0.9% and Moderna stock was up 2.3%.

5 Oil falls after Chinese data

Crude oil prices fell on signs of the Chinese economy slowing down, as localized anti-Covid measure started to weigh on fuel demand from commuters and tourists.

By 6:15 AM ET , U.S. crude futures were down 1.5%  at $72.81 a barrel, while Brent futures were down 1.3% at $74.41 a barrel.

Elsewhere in energy markets, European natural gas prices continued to surge amid reduced supplies from Russia at a time when European utilities are usually refilling their storage for the peak winter season.   Reduced supply from North Sea fields and lower availability of U.S.  liquefied natural gas have also contributed to the squeeze, which shows little sign of ending in the near term.