11 August 2021
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US Senate passes infrastructure bill


By Emirates NBD Research


  • The US Senate passed President Joe Biden’s USD 1tn infrastructure spending plan yesterday, which earmarks USD 550bn in spending over the next five years. The vote passed with significant bi-partisan support (69-30 in favour of the bill, from a chamber which is split evenly down party lines). It aims to improve the US’s aging infrastructure system, including roads, bridges, and internet connectivity, with around half of the provision representing new spending. The bill will now go to the House of Representatives, where its passage is likely to be more fractious from both sides of the chamber. House Democrats have been calling for greater spending on human capital to be included as part of the initiative, which Republicans are likely to push back against.
  • US nonfarm productivity, which measures hourly output per worker, increased by 2.3% y/y last quarter, while data for the first quarter was revised lower to show productivity rising at a 4.3% y/y instead of the previously reported 5.4% y/y, according to data released yesterday by the Labor department. Compared to the second quarter of 2020, productivity rose at a 1.9% q/q. Hours worked increased by 5.5% y/y last quarter, accelerating from a revised 4.0% y/y growth pace in the first quarter. Overall output is now 1.2% above pre-pandemic levels but hours worked remain 2.8% below it. Hourly compensation rose at a 3.3% y/y rate last quarter, following a revised 1.4% y/y growth pace in the first quarter. Compensation increased at a 2.0% q/q rate compared to the first quarter of 2020.
  • Small business owners across the US grew less confident in the economic recovery in July, according to the National Federation of Independent Business (NFIB) Optimism Index, which fell 2.8 points to a reading of 99.7 as labour shortages remained an issue. Six of the 10 index components declined, three improved and one was left unchanged. 27% of businesses plan to create new jobs in the next three months, down one point from the month prior, the NFIB survey showed. The quality of labour ranked as businesses' “single most important problem," with 26% of respondents selecting it among 10 issues. Some 57% of respondents said they had few or no qualified applicants for open jobs in July. Businesses also highlighted inflation as a worry, with 44% planning to increase prices in the next three months, which was unchanged from June's record high reading.
  • Germany’s ZEW economic research institute said its survey of investors' economic sentiment fell to 40.4 from 63.3 points in the previous month, the third monthly decline in a row. That comes as fears that rising Covid-19 infections and a fourth wave of coronavirus cases could curtail the recovery in Europe's largest economy. A separate ZEW gauge of current conditions rose to 29.3 from 21.9 in July. Germany has recorded more than 3,000 cases a day in the last week, bringing the total to 3.79 million. The nationwide seven-day incidence rose on Tuesday to 23.5 per 100,000 people, up from 23.1 on Monday.

Today’s Economic Data and Events

15:00     BR BCB Copom Meeting Minutes                                

16:30     US Core CPI (MoM) (Jul) Forecast 0.40%

18:30     US Crude Oil Inventories Forecast -3.102M

Fixed Income

  • Treasury markets were generally devoid of data to support a move higher or lower but they nevertheless extended recent losses with yields rising across the curve. The yield on 2yr USTs gained nearly 2bps to 0.2283% while the 10yr added more than 2bps to close at 1.349%.
  • There was more hawkish commentary from Fed officials, this time from Chicago Fed president Charles Evans who said that the US economy would reach the threshold of ‘substantial further progress’ later this year and that tapering of asset purchases could begin in 2021. Markets will focus on the US inflation print later today for any further impetus to when the Fed will announce the start of its policy normalization.
  • Emerging market bonds showed little action overnight with yield moves in South African and Indian markets held to around 1bps or less. Turkish 10yr yields came off by 4bps to 17.045% ahead of a decision from the TCMB this week.


  • The dollar extended gains for a third day running, with the DXY index adding 0.12% overnight to 93.055. The US CPI report later today will largely set the tone for subsequent moves with markets expecting price growth to stabilize at around 5.3% y/y for July. A miss could open up the dollar to reverse some of its recent gains, however.
  • EURUSD has fallen for seven of the last eight trading days, declining by 0.14% overnight to 1.172. Anxiety over the delta variant and risks to growth are weighing on near all currencies, even if the Eurozone is managing to open up its economy carefully.
  • USDJPY also extend recent gains, adding 0.25% overnight to push near to 110.60 which it has already broken above in early trade today. Sterling’s losses were more muted, essentially holding flat at 1.3843 with a downward bias.
  • Commodity currencies were the relative outperformers with gains for CAD, AUD and NZD, spurred on by a snap back in oil and commodity prices.


  • There were new record highs hit on Wall Street yesterday, with both the S&P 500 and the Dow Jones closing at record levels as they gained 0.1% and 0.5% respectively. The NASDAQ lost -0.5%.
  • The STOXX 600, the composite European index, also hit a new record close as it gained 0.4%. The FTSE 100 closed up 0.4%, while the smaller cap FTSE 250 added around half a percent to a record close.
  • Within the region, the DFM and the ADX closed lower (-0.2% each) but the Tadawul gained 0.9%. The EGX 30 closed up 0.5% and is now up 0.1% ytd having recouped earlier losses.


  • Oil prices managed to reverse their losses from earlier in the week with Brent moving back up above USD 70/b and WTI adding 2.7% to close at USD 68.29/b. Both are treading water in early trading today. Overnight, the API reported a draw in US crude inventories of less than 820k bbl although the market was helped along by a modest draw in gasoline stocks.
  • Gold prices continue to make way for higher UST yields with prices stabilizing overnight, albeit with a negative tilt. Among the other metals markets, PGM markets were both higher with platinum moving back up above USD 1,000/troy oz and palladium adding 1.5% to USD 2,647/troy oz. Industrial metals were higher nearly across the board although iron ore futures have extended their current swoon, falling almost 22% since the start of August.

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Written By


Emirates NBD Research Research Analyst

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