US indices closed the week (9-13 August) higher with the S&P 500 and Dow Jones Industrial Average, both inching to new highs by 0.8% and 0.7% respectively while tech-heavy Nasdaq Composite lost ground by 0.1%.

Reflation trades had dominated during a week of light summer trading amid expectations of continued uptick in economic growth with materials up by 2.7%, industrials by 1.4% and financials by 1.9%. That was however capped by growing worries over the impact of the coronavirus Delta spread after a surprising drop in consumer confidence by 13.5% for August, slipping even below the lows reached in April 2020 during the early days of the pandemic.

That led to the slide in the 10-year Treasury yield which closed at 1.29% on Friday. Until then, yields had been trekking higher after stronger jobs reports as well as recent comments from Fed officials on what it would take for the central bank to wind down bond purchases.

The coming week will see the release of the Fed’s minutes from the July Federal Open Market Committee (FOMC) meeting. That will be again scrutinised for clues of taper timing, the first signs of tightening monetary policies and steps toward interest rate increases.

Given the slip in consumer confidence on the back of spikes in virus infections from the more infectious Delta variant – especially in the US southern states of Alabama, Arkansas, Mississippi, Louisiana, Texas and Florida where vaccinated rates are among the lowest – and spotlight on disputes over mask mandates for schools reopening for fall, investors will be turning their focus in the week ahead on the retail sector which accounts for 70% of the US economy.

That will come from July retail sales report as well as earnings from heavyweight retailers such as Walmart, Home Depot, Target and Macy’s which will include forward guidance and updates on hiring practices, dealing with rising prices as well as consumer behaviour in response to the Delta spread.

Other data for the week include the business leaders and home builders surveys, business inventories, housing starts, jobless claims, industrial production and both the Philadelphia Fed and Empire State manufacturing numbers. With the Consumer Price Index (CPI) and Producer Price Index (PPI) up at 5.4% and 7.8% on year respectively in July, the numbers if they continue to look strong will likely raise support for cyclicals and reflation trades.

Final prints for the Eurozone GDP and CPI for the second quarter will also be out in midweek with the GDP expected to remain unchanged from preliminary estimates (13.7% y/y) while the July CPI print may be revised to 2.2% (from prelim estimate of 1.9%).

Key data out of China will be the July numbers for industrial production (Bloomberg estimates +7.9% y/y from +8.3% in June); retail sales (Bloomberg est 10.9% y/y from 12.1% in June) and unemployment rate (Bloomberg est 5%, unchanged from June) with the prime loan rates due on Friday which are expected to remain unchanged though the authorities may elect to trim cut the reserve requirement ratio (RRR) to pump more liquidity back into the system.

Meanwhile, the closure of the Ningbo-Zhoushan container port which is key to servicing shipments to Europe and North America after a single case of Covid-19 was detected will likely put further pressure on global supply networks with all inbound and outbound services affected. It is the second such shutdown this year and analysts have warned that this may not be the last closure as long as China persists with the zero-tolerance stance towards Covid containment.

Longer-term wise, investors will however be looking at the implications of the unveiling of a five-year, 10-point plan last Wednesday which will run to end 2025 that spelt out tighter regulation including those that cover national security and technology after the recent step-up review of tech and online education sectors.

Since the regulatory crackdown which started earlier this year, Alibaba had paid a record $2.8 billion fine for monopolistic practices; Tencent was told to end music licensing deals with global record labels while platforms such as Kuaishou, Taobao and Weibo had been ordered to remove content targeted at child including video gaming.

The plan released by China's State Council and the Communist Party's Central Committee aims to tackle monopolies and “foreign-related rule of law” with regulations relating to China's digital economy, including internet finance, artificial intelligence, big data and cloud computing.

The Ministry of Industry and Information Technology has since also followed up with guidelines for smart cars which mandated that companies seeking to export user or vehicle data must first undergo a data security review and approval would also be needed before upgrading autonomous driving software; while the China Banking and Insurance Regulatory Commission has also unveiled plans to reform the country’s online insurance industry.