Top 5 Things to Know in the Market on Monday, July 27th

Gold prices hit an all-time high as market participants bet on more stimulus from the Fed against an uncertain U.S. economic backdrop. The Republicans' stimulus plans should be published today but are expected to be far away from the Democrat-led House of Representatives' ideas. Durable goods orders are expected to continue recovering, but the U.K. casts doubt on Europe's recovery from the pandemic with a quarantine on travelers from Spain. Here's what you need to know in financial markets on Monday, July 27th.

1 Gold hits record high; silver surges

The price of gold hit a new all-time high, as concern over the health of the U.S. recovery and increasing signs of second waves of coronavirus around the world strengthened demand for the asset that is no-one’s liability.

Gold futures rose as high as $1,939.35 a troy ounce before retracing to trade at $1.938.35 an ounce by 6:30 AM ET (1030 GMT).

Silver futures also surged again in sympathy, rising 6.1% to $24.24 an ounce, the highest since 2013. The Dollar Index, meanwhile, hit its lowest since September 2018.

The prospect of negative real interest rates for the foreseeable future has bolstered the case for non-interest-bearing haven assets, with both gold and silver ETFs registering heavy inflows in recent weeks.

2. U.K. quarantines visitors from Spain

One of the factors underpinning demand for havens is the increasing suspicion that the world isn’t bringing the coronavirus pandemic under control.

China has registered its highest number of new infections since March owing to outbreaks from Xinjian in its far west to Liaoning in the north-east. It’s also tightened lockdowns in Hong Kong, restricting public gatherings to no more than two people (an action that will raise eyebrows in Washington, given the political backdrop).

Of most concern to developed markets, however, is arguably the U.K. decision to impose a two-week quarantine on travelers returning from Spain, a focal point for European summer vacations. Spanish regions including Catalonia have been forced to tighten restrictions on the hospitality sector against a backdrop of evidence showing the impossibility of enforcing social distancing rules.

3. Stocks set to open higher; NXP (NASDAQ:NXPI)'s earnings eyed

However, the idea that ‘bad news is good news’ is again in the ascendant as risk assets get support from speculation that the Federal Reserve will resort to more stimulus at its policy meeting this week.

By 6:30 AM ET (1030 GMT), the Dow futures contract was up 125 points, or 0.5%, while the S&P 500 futures contract was up 0.6% and the Nasdaq 100 futures contract was up 1.2%.

Earnings season is taking a bit of a breather, with the only updates of note coming from NXP, Oaktree Capital, Albertsons and Hasbro (NASDAQ:HAS). In Europe. Software giant SAP beat expectations and Ryanair warned of a tough nine months ahead. Luxury giant LVMH reports after the close.

4. Mnuchin promises stimulus proposals

White House Chief of Staff Mark Meadows said he expects the Republican Party to present its new stimulus proposals in the Senate later today, according to various reports, after losing last week to internal arguments. The Wall Street Journal reported that the GOP-led Senate is likely to propose a bill that extends the $600 weekly unemployment benefit checks to households, but which contains no funds expressly for city and state administrations.

There’s a big gap between that position and the much more expensive proposals drafted by the Democrat majority in the House of Representatives.

Alongside doubts over the stimulus package, sentiment in the U.S. is also at risk from the spread of violent unrest in major cities as the wave of protests sparked by the killing of George Floyd by police morphs into a broader expression of the cultural divide across the country.

5. Durable Goods numbers due; German business confidence rises

Did Americans carry on spending their ‘enforced savings’ in June as they emerged from lockdown? Durable goods data, due at 8:30 AM ET, will give at least a partial answer. Consensus forecasts are for a 7.2% increase, following on from May’s 15.7% rise.

Data from elsewhere in the world continued to point to a moderate recovery. The German Ifo business confidence index increased by slightly more than expected, buttressing the impression made by IHSMarkit’s European PMIs on Friday.

Chinese industrial profits also rose 11.5% on the year in June, although they were still down by more than 12% over the first half as a whole.