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Nasdaq deja vu

Economy16 minutes ago (Jun 30, 2021 03:55AM ET)

(C) Reuters. FILE PHOTO: The Nasdaq logo is displayed at the Nasdaq Market site in New York September 2, 2015. REUTERS/Brendan McDermid/File Photo

A look at the day ahead from Danilo Masoni.

The tech-heavy Nasdaq has emerged as the stand-out mover as June draws to an end, up 5.6% so far and set for its best monthly run since November last year.

Yet another record high close overnight is no coincidence given reassurances from the U.S. Federal Reserve after its mid-month hawkish shift, while the Delta variant has recreated that deja vu feeling of pandemic-related economic uncertainty.

So while travel and cyclical stocks have felt the heat, the combined market cap of the five biggest U.S. tech plays (Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT)) has climbed closer to a gigantic $9 trillion, which is about 35% of nominal GDP.

But the reopening trade is far from dead and once end-month window dressing by investment managers trying to look smarter about their choices is over, some pundits expect confidence in the economic recovery to regain momentum.

A taste of that came from top Wall Street banks raising dividends after passing the Fed’s stress test. Morgan Stanley (NYSE:MS) delivered a big surprise that boosted its shares. Confidence in strong corporate earnings growth is intact.

The day ahead however sees cyclical-tilted European equities heading south with futures down around 0.2% amid rising COVID-19 infections in the UK and elsewhere. U.S. stock futures point to a steady start for Wall Street.

Japan’s Nikkei erased its gains as domestic infections surged ahead of the Olympics next month. In Australia, officials extended lockdown and social distancing measures to contain the Delta variant, putting the Aussie under pressure.

Focus will turn to the June eurozone flash inflation data and the U.S. ADP employment report, which could set the tone for Friday’s non-farm payrolls data. Ahead of that, the dollar steadied near recent peaks.

Finally, it’s worth keeping an eye on market warning signals. The SKEW index, which tracks demand for crash protection, hit a record high on Friday, indicating concern among institutional investors of a black-swan shock. The index was last just below that peak.

Key developments that should provide more direction to markets Wednesday: * China manufacturing slows as supply shortages roil Asiaindustry * Japan’s May factory output records biggest drop in a year * UK final Q1 GDP -1.6% Q/Q * Eurozone, France, Italy June flash CPI * U.S. ADP * Canada PPI * SNB releases Q1 FX purchases data

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