By Geoffrey Smith
Investing.com -- Bitcoin prices surge on speculation that Amazon (NASDAQ:AMZN) is getting involved in crypto. China redoubles its onslaught against the country's tech sector, with fresh pressure on education technology and food delivery companies. Tesla (NASDAQ:TSLA) reports second-quarter earnings after the close. Stocks are set to open the week lower amid a sustained rise in Covid-19 cases in the U.S., and coffee futures hit fresh seven-year highs after last week's frosts in Brazil. Here's what you need to know in financial markets on Monday, 26th July.
1. Bitcoin surges on Amazon speculation, short-covering
Bitcoin settled into a range just above $38,000, up over 20% from a week ago and its highest level in over a month, as the market digested the implications of Amazon possibly adopting a strategy for payments in cryptocurrency.
It emerged last week that the U.S.’s biggest e-commerce company had advertised a vacancy for a digital currency product lead, sparking speculation that it may be planning to allow the use of crypto to settle transactions. The ad comes only weeks after a change at the top of Amazon, with founder Jeff Bezos handing over to Andy Jassy.
The move higher was amplified by some extreme short-covering: data from Bybt showed that $700 million in short positions were closed over the weekend, according to newswire reports.
2. China confirms new rules for EdTech, takes aim at food delivery
Hong Kong and mainland stocks tumbled as China widened its campaigned on the tech industry over the weekend.
Chinese regulators confirmed plans to force the lucrative online learning business to become ‘non-profit’, in what many interpreted as an attempt to drive down tuition fees. That in turn appears driven by concern at the country’s low birthrate and its looming demographic problems.
In addition, China’s State Administration for Market Regulation published a notice warning food delivery companies to ensure they pay at least the minimum wage and respect the rights of workers.
Local shares in Meituan (OTC:MPNGY), the country’s biggest food delivery company, fell 14% to a 10-month low. Its biggest shareholder Tencent (OTC:TCEHY) fell 7.7% to its lowest in over a year. The Hang Seng index fell 3.9% and the Shanghai Shenzhen CSI 300 fell 2.7%
3. Stocks set to open lower; Tesla earnings eyed
U.S. stock market are poised to open lower, as the ongoing spread of Covid-19 across the U.S. (see below) raises fears of renewed restrictions on business and social life.
The onslaught against Chinese tech companies, meanwhile, continues to put pressure on their American Depositary Receipts.
By 6:15 AM ET (1015 GMT), Dow Jones futures were down 94 points, or 0.3%, just off the record high close of last week. S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.1%.
The day’s earnings highlight comes after the bell when Tesla reports its second-quarter figures. Lockheed Martin (NYSE:LMT), LVMH and Hasbro (NASDAQ:HAS) will all report before that. The only data release of note is new home sales at 10 AM ET, which are expected to have rebounded from an 11-month low in June.
4. U.S. Covid-19 cases hit three-month high; signs of wave peaking in U.K.
The number of Covid-19 cases in the U.S. hit its highest level since April, while the 7-day average rose to a two-month high, with the greatest concentrations of infections now in the south and south-east of the country.
Anthony Fauci, President Joe Biden’s chief medical adviser, said at the weekend that the country is “going in the wrong direction”, as the delta variant of the virus spreads rapidly in communities with low vaccination rates.
Some 30 states still have less than half their population fully vaccinated, according to the Centers for Disease Control and Prevention,
There were also reports over the weekend of fresh outbreaks – albeit far smaller ones – in parts of China. There was more encouraging news from Europe, where the end of the Euro 2020 soccer tournament led to case number falling in the U.K. and the Netherlands, and flattening out in Spain and Portugal.
5. Oil struggles on signs of weak Chinese demand; coffee hits new highs
Crude oil prices started the week poorly, after newswires reported that China will cut official selling prices for diesel and gasoline by nearly 100 yuan a ton, or some $2 a barrel.
The move, which comes after a loosening of monetary policy by China’s central bank, is the latest indication of economic momentum starting to flag in the country that was the first to recover from the initial wave of Covid-19. It also comes after devastating floods hit various parts of China, threatening a dip in near-term demand levels.
By 6:15 AM ET, U.S. crude futures were down 49c, or 0.7% at $71.53 a barrel. Brent futures were down 0.6% at $72.99 a barrel.
Elsewhere in commodities, however, the tone was stronger, with US Coffee C Futures hitting fresh seven-year highs and copper futures rising 1.4%.