MARKET WRAPS
Stocks:
European stocks struggled on Wednesday, with fresh data showing
eurozone business activity growing at the fastest rate in 15 years,
while U.S. equity futures inched up. Shares of Pernod Ricard rose
after an upbeat forecast.
Data were swinging into focus for Wednesday, with the IHS Markit
flash eurozone composite purchasing managers index for June
climbing to 59.2 from 57.1 in May, and marking an 180-month high.
That's as economies in Europe continued to reopen and COVID-19
vaccines rolled out across the continent.
"The eurozone economy is booming at a pace not seen for 15 years
as businesses report surging demand, with the upturn becoming
increasingly broad-based, spreading from manufacturing to encompass
more service sectors, especially consumer-facing firms," said Chris
Williamson, chief business economist at IHS Markit, in a comment
accompanying the data.
Among stocks on the move, shares of Pernod Ricard rose 2.7%,
after the French drinks group raised its guidance for fiscal 2021,
citing a stronger-than-expected recovery. Pernod is now forecasting
organic growth in profit from recurring operations for fiscal 2021
of around 16%, up from previous guidance of 10%.
Vodafone shares rose 1%, after the telecoms giant said its
entire European operations will be fully powered by electricity
from renewable sources starting on July 1, as it aims to reach net
zero carbon emissions by 2030.
On the downside, shares of French luxury-goods group LVMH Moët
Hennessy Louis Vuitton fell 1.3%. Pharmaceutical giant
GlaxoSmithKline was another loser, with those shares down 1.5%.
U.S. Markets:
Stock futures ticked higher signaling that the major indexes may
inch toward all-time highs ahead of data on growth in the service
and manufacturing sectors.
Stocks and bonds have steadied after the Federal Reserve
whipsawed markets last week by signaling it might raise interest
rates sooner than previously expected to ward off higher inflation.
A scramble to adjust portfolios in response to that guidance has
subsided, investors say. Fed Chairman Jerome Powell said Tuesday he
has "a level of confidence" inflation will abate, bolstering the
view that it will be many months yet before the central bank shifts
its monetary policy stance.
"We should expect markets to show a heightened sensitivity to
economic data from here on, now that investors have embraced the
idea the monetary cycle is turning," said Paul O'Connor, head of
the multiasset team at Janus Henderson Investors. "We should expect
markets in the months ahead to be more volatile and more uncertain
than they have been maybe over the past six months."
Surveys of purchasing managers at U.S. manufacturing and service
firms are due to be released at 9:45 a.m. ET. Analysts polled by
FactSet expect them to show the economy has continued to grow at a
fast clip in June.
Data on sales of new homes are scheduled for 10 a.m.
Some investors have viewed the shake-up that followed the Fed's
pivot as an opportunity to add to positions in value stocks and
commodity markets such as copper. Sectors such as banking and
energy, along with industrial metals, slid last week after
benefiting from bets on higher growth and inflation for much of the
year.
"There was an overreaction in bond yields and, as a second
derivative of that, in bank stocks," said Matthew Quaife, heat of
multiasset investment management for Asia at Fidelity
International. "Growth will be pretty strong over the medium
term."
Forex:
The dollar was broadly steady, edging higher against the euro
and yen but falling against riskier commodity-linked and
emerging-market currencies after Federal Reserve Chair Jerome
Powell played down inflation risks. While acknowledging short-term
risks of higher inflation, he stressed Tuesday that these would be
temporary.
"After the hawkish surprise from the Fed last week, this should
further help to stabilize the market and translate into a
supportive environment over the summer for those cyclical
currencies where local central banks have opted for meaningful
tightening cycles," said ING.
These include the Brazilian real, Russian ruble, Hungarian
forint and Norwegian krone, it said.
Bitcoin rose 3.3% from its 5 p.m. ET Tuesday level to
$33,973.61. The cryptocurrency briefly dropped below $30,000 on
Tuesday, erasing all of its gains for 2021.
The euro could struggle to rise above key psychological
resistance at $1.2000, said Steen Jakobsen, chief investment
officer at Saxo Bank.
A level of $1.2100 or higher would be needed to indicate a
reversal of the euro's recent selloff. The rebound in the euro from
last week's 2.5-month low of $1.1847 "looks modest," he said.
"The growing theme of tightening central banks globally sees
little anticipation that the European Central Bank is about to send
any strong message on that front."
Bonds:
The yield on 10-year Treasury notes ticked up to 1.472% from
1.471% on Tuesday.
The U.S.-German 10-year government bond yield spread doesn't
seem to be correctly pricing a disparity between central-bank
support in the eurozone and the U.S., UniCredit said.
The Italian bank expects this spread to widen in the coming
months to reflect the difference in central-bank support,
especially once the U.S. Fed starts a formal discussion on tapering
of its asset purchases.
In the near term, UniCredit expects Bund yields to remain at
current levels on the back of the European Central Bank's
continuing accelerated pace of asset purchases, while strong data
are likely to drive 10-year U.S. Treasury yields higher and the
10-year UST-Bund spread wider.
The 10-year UST-German Bund yield spread is just below 169 basis
points, according to Tradeweb.
Commodities:
Oil prices rose after data showed U.S. crude oil stockpiles
shrank last week. API's weekly data on U.S. oil inventories
released Tuesday showed stocks fell by 7.2 million barrels last
week. The decline was larger than the consensus estimates, said
Helge Andre Martinsen, senior oil analyst at DNB Markets.
Focus is on OPEC+'s July 1 meeting, amid reports that some
cartel members are considering advocating increasing supply.
"A potential supply hike of 0.5 million barrels a day from OPEC+
for August, will probably be too little too late, as the oil market
will continue in undersupply and further erode OECD oil
inventories," he said.
Copper prices rose as fears of tightening from the Federal
Reserve ease while China outlines plans to sell its metals
reserves.
Three-month copper on the LME was up 0.9% at $9,353.00 a metric
ton. China's state reserve body said it would auction 20,000 tons
of copper, 30,000 tons of zinc, and 50,000 tons of aluminum. The
details helped ease uncertainty about the planned sales which had
been weighing on metals markets.
Gold inched higher in early European trade. However, OCBC noted
the precious metal may break the crucial support at $1,770 this
week if U.S. Fed officials produce more hawkish rhetoric in the
coming days.
EMEA HEADLINES
Apple's Fight for Control Over Apps Moves to Congress and EU
Apple Inc. is stepping up its fight to maintain tight controls
over which apps can be installed onto customers' iPhones, as
political pressure grows in Washington, D.C. and Brussels to upend
those restrictions.
In a report released Wednesday, the company argues that allowing
users to download apps directly onto their iPhones without having
to use Apple's App Store would harm customers by threatening
privacy protections, complicating parental controls and potentially
exposing users' data to ransomware attacks.
Pernod Ricard Raises Fiscal 2021 Guidance
Pernod Ricard SA has raised the guidance for its fiscal year on
the back of a stronger-than-expected recovery.
The French drinks group said Wednesday it now anticipates an
organic growth in profit from recurring operations for fiscal 2021
of around 16%, up from previous guidance of 10%.
Berkeley Group FY 2021 Profit Rose, Proposes Additional
Shareholder Return
Berkeley Group Holdings PLC said Wednesday that profit and
revenue rose for fiscal 2021, revealed a range of new
sustainability targets and proposed an additional shareholder
return of surplus cash.
Swiss Re Sells 6.6% Stake in Phoenix for Roughly $610 Mln
Swiss Re AG is selling a 6.6% stake in U.K. long-term savings
and retirement business Phoenix Group Holdings PLC for 437 million
pounds ($609.7 million).
The Swiss reinsurance company said Wednesday that it has agreed
to a 90-day lock-up period for its remaining stake of around
6.6%.
Heineken Buys 15% Stake in United Breweries, Taking Shareholding
to 61.5%
Heineken NV said Wednesday that it has expanded its shareholding
in Indian conglomerate United Breweries Ltd. to 61.5% from
46.5%.
The Dutch beer company said it acquired an additional 39.6
million shares. Based on the current share price of INR1,429.50,
the acquired stake has a value of 56.67 billion rupees ($763.9
million).
Old Mutual Year-To-Date Profitability Rises on Higher Funds
Under Management
Old Mutual Ltd. said Wednesday that its profitability improved
in the year to date as a result of higher funds under
management.
The African financial-services group reported results from
operations of 2.68 billion rand ($188 million) for the five months
to end-May, up 52% from a year earlier. Funds under management as
at May 31 rose to ZAR1.164 trillion from ZAR1.105 trillion a year
ago.
Vodafone Says Its European Operations Will Be Fully Powered by
Renewables From July
Vodafone Group PLC said Wednesday that its European operations
will be fully powered by electricity from renewable sources
starting on July 1, as part of its plan to reach net zero carbon
emissions by 2030.
The U.K. telecommunications company said it is committed to
achieve the same milestone in Africa by 2025.
GFG Alliance, Credit Suisse Agree to Standstill Amid
Refinancing
GFG Alliance Wednesday said it has penned a standstill agreement
with Credit Suisse on the Australian unit that includes its Whyalla
steelworks to complete a refinancing of that business following the
collapse of Greensill Capital.
The six-week standstill between GFG and Credit Suisse Asset
Management will enable GFG to complete a full refinancing of the
unit, Liberty Primary Metals Australia, which also includes mining
assets, according to an emailed statement from GFG.
U.S. Seizes Internet Domains Tied to Iran's Government
WASHINGTON-More than 30 web domains linked to the Iranian regime
were seized by U.S. agencies on Tuesday, a U.S. government official
said.
The U.S. seized sites operated by government-run PressTV as well
as social media channels affiliated with Iran-backed militias in
Iraq. The seizures come as the Biden administration is in the midst
of negotiations over Tehran's nuclear program and follow the
election of a new president who has rebuffed calls from Washington
to curb its support for proxies fighting across the region.
France's Macron Pushes Controls on Religion to Pressure
Mosques
PARIS-President Emmanuel Macron is redrawing the line that
separates religion and state, in a battle to force Islamic
organizations into the mold of French secularism.
In recent months, his administration has ousted the leadership
of a mosque after temporarily closing it and poring over its
finances. Another mosque gave up millions in subsidies after the
government pressured local officials over the funding. A dozen
other mosques have faced orders to close temporarily for safety or
fire-code violations.
GLOBAL NEWS
Fed's Powell Plays Down Inflation Threat
WASHINGTON-Federal Reserve Chairman Jerome Powell said it's
highly unlikely that inflation will rise to levels seen in the
1970s but acknowledged significant uncertainty as the economy
reopens.
While the Fed anticipated that the end of the pandemic would
temporarily push up inflation this year, Mr. Powell said Tuesday on
Capitol Hill that the increases in prices have been larger than
central bankers had expected and may prove more persistent. But he
underscored his view that shortages-including of used cars,
computer chips and workers-will fade over time, bringing inflation
closer to the Fed's 2% long-run target.
Derby's Take: New York Fed Boss Isn't Worried About Reverse Repo
Surge
A tsunami of cash continues flooding into a once obscure Federal
Reserve facility, and the central bank official closest to it isn't
concerned in the slightest bit.
Over recent weeks, cash, largely from money-market funds but
also from banks and government sponsored entities, has poured into
what the Fed calls its reverse repo facility. After years of
obscurity and disuse, interest in the facility increased in the
spring. Ahead of last week's Federal Open Market Committee meeting,
the facility was seeing inflows of half a trillion dollars a
day.
Amazon and Other Tech Giants Race to Buy Up Renewable Energy
The race to secure electricity deals for power-hungry data
centers has tech companies reshaping the renewable-energy market
and grappling with a new challenge: how to ensure their investments
actually reduce emissions.
Amazon.com Inc. said it planned Wednesday to announce
commitments to buy 1.5 gigawatts of production capacity from 14 new
solar and wind plants around the world as part of its push to
purchase enough renewable energy to cover all of the company's
activities by 2025.
The Bonds That Cried Major Default Risk
The villagers in "The Boy Who Cried Wolf," bored of their
shepherd boy's constant false alarms, refuse to come to his aid
when a wolf finally does appear. There may be a lesson in the fable
for investors in Chinese property giant Evergrande and the
country's real-estate market more broadly.
Heavily leveraged Evergrande is in the midst of yet another
financial squeeze. The company announced Sunday and Monday that it
has recently sold almost $1 billion of holdings in two
companies-internet services firm HengTen Networks and smaller
real-estate developer China Calxon. Fitch Ratings cut Evergrande's
credit rating Tuesday from B+ to B, noting the company's seemingly
limited access to capital markets and growing dependence on less
stable shadow-banking loans.
China Investigates Bulk Commodity Prices and Supplies
China's top economic planner and market regulator have sent
teams to investigate recent price and supply trends of bulk
commodities, the latest move by Beijing to rein in the sector's
sharp rally this year.
The groups, made up of officials from the National Development
and Reform Commission and the State Administration for Market
Regulation, will visit various cities and provinces to find out
more about spot trading in commodities and the recent upstream
supply and price changes, the NDRC said Wednesday.
Bank of Thailand Keeps Rate at Record Low
Thailand's central bank left its benchmark interest rate
unchanged at a record low, as the Covid-19 pandemic continued to
weigh on the economy.
The Bank of Thailand said Wednesday that its policy committee
voted unanimously to maintain its one-day repurchase rate at
0.50%.
Delta Covid-19 Variant Could Be Dominant in U.S. in Two to Three
Weeks, Study Says
The highly transmissible Delta variant of the Covid-19 virus is
spreading so rapidly in the U.S. that it could become the dominant
strain in the next two to three weeks, researchers said, adding
urgency to the nationwide vaccination drive.
The Delta strain, which first emerged in India in late 2020 and
is also known as B.1.617.2, will probably make up 50% of Covid-19
infections in the U.S. by early to mid-July, said William Lee, vice
president of science at population genomics company Helix and an
author of the new analysis.
Daly Says It Is Critical for Fed to Understand Risks of Climate
Change
Federal Reserve Bank of San Francisco leader Mary Daly said
climate change has the potential to reshape the economy and because
of that, the issue is becoming a part of how central bankers need
to think about their monetary policy choices.
Climate change is on a path to bring "economic upheaval,
boosting innovation, output, and jobs in green sectors, while
reducing them in carbon-intensive ones," Ms. Daly said in a virtual
appearance.
Fed Officials Stress Bond Buying Isn't Aimed at Boosting Housing
Market
Federal Reserve Bank of New York President John Williams said
central bank bond buying is designed to help create widespread easy
credit conditions and isn't directly targeted at supporting the
housing market.
Mr. Williams, in a Bloomberg television interview Tuesday, was
responding to a question about whether the central bank may want to
rethink its $40 billion a month of mortgage bond purchases. This
buying, which is joined with $80 billion a month in Treasury
buying, is coming at a time of strength in the housing market,
which has caused some to question whether the central bank should
still offer such aid.
North Korea Gives the U.S. the Cold Shoulder on Nuclear
Talks
SEOUL-In nuclear diplomacy with the U.S., North Korea is playing
hard to get, for now.
The Kim Jong Un regime this year has rebuked the Biden
administration's outreach for engagement, without detailing what
might woo them back to talks beyond vague demands. As diplomacy
stalls, Pyongyang is adding to its nuclear arsenal, which President
Biden has called the biggest foreign-policy threat facing the
U.S.
Illicit Covid-19 Drugs Bound for Mexico Seized by U.S.
Authorities
Federal authorities have seized at U.S. airports unauthorized
versions of the Covid-19 treatment remdesivir destined for
distribution in Mexico, the latest effort by the government to root
out criminal activity related to the pandemic.
Counterfeit or generic versions of remdesivir, an antiviral
manufactured by Gilead Sciences Inc., are arriving in the U.S. by
plane from Bangladesh and India and being smuggled by individuals
to Mexico for patients willing to pay top dollar for the drugs,
people familiar with the investigation said.
U.S. Seizes Internet Domains Tied to Iran's Government
WASHINGTON-More than 30 web domains linked to the Iranian regime
were seized by U.S. agencies on Tuesday, a U.S. government official
said.
The U.S. seized sites operated by government-run PressTV as well
as social media channels affiliated with Iran-backed militias in
Iraq. The seizures come as the Biden administration is in the midst
of negotiations over Tehran's nuclear program and follow the
election of a new president who has rebuffed calls from Washington
to curb its support for proxies fighting across the region.
Write to sarka.halas@wsj.com
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(END) Dow Jones Newswires
June 23, 2021 06:24 ET (10:24 GMT)
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