Investment strategists began to consider a new pessimistic scenario: economic growth has reached its limit. With the rapid spread of the Delta variant of the new crown virus and the central bank is already discussing tightening monetary policy to control inflation, more and more people are beginning to worry that the financial market has become too optimistic. This change in mentality was evident in the performance of various assets on Monday. S&P 500 index futures fell 1%, and small-cap stocks fell sharply. In Europe, the main benchmark stock indexes fell more than 2%, with energy, banking and travel stocks falling the most. US Treasuries rose, and the 10-year Treasury yield fell to 1.23%.

The spread of the delta variant of the coronavirus has raised doubts about the optimistic assumption of economic recovery. Not only has it triggered a plunge in global stock markets, but the yields of US long-term Treasury bonds have also fallen to their lowest level in several months. In the unusually active bond market transactions, the market's expectations of the Fed's interest rate hike were further pushed back, and the benchmark 10-year Treasury bond yield fell 12 basis points to 1.17%. This is a level that has not been seen since the beginning of February, and a huge gap from the 14-month high of 1.77% reached in March. Some traders may now start to pay attention to 1%-a barrier that has not been lost since late January.

U.S. President Joe Biden stated that he believes that the rise in U.S. inflation is temporary, and he has told Fed Chairman Powell that he respects the independence of the Fed. Biden said at the White House on Monday that the recent price hikes are “temporary” but that the Fed “should take whatever steps it deems necessary to support a strong and lasting economic recovery”. Biden's remarks come as Republicans are criticizing his economic agenda, saying that increasing government spending will cause inflation to run out of control. The United States recorded the largest price increase in more than 12 years last month, and consumer prices rose 5.4% year-on-year.

U.S. Treasury Secretary Janet Yelon urged the U.S. financial regulators to speed up research on new rules for regulating stablecoins. This cryptocurrency has grown rapidly recently, but is largely unregulated. The President's Financial Markets Working Group met on this issue on Monday. The Treasury Department said in a post-meeting announcement that “the minister emphasized the need to act quickly to ensure that there is an appropriate US regulatory framework.” The working group “is expected to make recommendations in the next few months.” The announcement said that participants “discussed The rapid growth of stablecoins, the potential use of stablecoins as a means of payment, and the potential risks to end users, the financial system, and national security."

Catherine Mann, Monetary Policy Committee Member of the Bank of England, gave a speech when testifying before the Finance Committee of the British Parliament. "The role that monetary policy can play is that it is not too early to tighten." “We can learn our lessons in the period after the global financial crisis. At that time, there were people who worried about rising inflation, people worried that inflation would last, and people were skeptical about the sustainability of the debt burden.”

The Bundesbank pointed out that this quarter's economic growth is expected to accelerate and it is expected to return to the level before the epidemic soon. The agency issued a monthly report that did not mention the floods that caused severe damage to western Germany. ING Groep N.V. issued a report stating that the overall impact of the disaster on the German economy may be limited. “The overall economic impact is expected to be limited; although the retail and hospitality industries that have been under pressure during the epidemic will definitely not be overlooked,” Carsten Brzeski of ING said in the report. The German Central Bank report released on Monday predicts strong growth in GDP in the second quarter, and the growth rate is expected to accelerate further in the third quarter.

The confidence of US builders fell to an 11-month low in July, affected by rising raw material prices and continued supply shortages. According to the National Association of Home Builders/Wells Fargo data released on Monday, the confidence of builders fell for the second consecutive month, from 81 in June to 80. Bloomberg survey economists expect the index to be flat with last month's median value. The data highlights how rising raw material costs and supply chain disruptions prevent builders from quickly replenishing the inventory of saleable homes. Low mortgage interest rates stimulated a surge in demand from buyers, but demand for housing exceeded supply, forcing house prices to soar.

Dow Jones quoted U.S. officials and people familiar with the matter as reporting that the U.S. is considering stricter sanctions on Iran’s oil exports to China in order to increase the possibility of reaching a nuclear agreement.

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