MARKET WRAPS
Watch For:
Germany GfK consumer climate survey; U.K. Nationwide House Price
Index; U.S. Advance Economic Indicators Report; U.S. interest rate
decision; updates from Banco Santander, Deutsche Bank, BASF,
Telefonica Deutschland, Metro, Atos, Prada, Capgemini, Safran,
Traton, Total, Babcock, ASM International, Rio Tinto,
GlaxoSmithKline, Barclays, British American Tobacco, Smurfit Kappa,
Equinor, ITV, Hiscox.
Opening Call:
Stocks could waver around flat at open, Chinese stocks fall
again in early Asia trade. Dollar weakens ahead of FOMC meeting.
Oil, gold, and copper rise.
Equities:
European stocks are set to waver around flat Wednesday ahead of
a busy day in earnings and as markets await the outcome of the U.S.
Federal Reserve's two-day meeting later.
Chinese stocks fall in early trade, extending losses into a
fourth session, as gains for banks are outweighed by weakening auto
shares.
The meltdown in China is weighing on investors' appetite for
stocks in other markets, but the contagion effect is likely to be
limited, according to Altaf Kassam, head of investment strategy for
State Street Global Advisors in Europe.
"The drag on sentiment will be there because China has been the
engine of global growth for years now and seeing its stock market
suffer like this is going to put a question mark on global growth,"
Mr. Kassam said. "Anything that weighs on global growth is going to
have an effect on markets, but it is going to be a second-order
story for global markets."
U.S. stocks slipped from records Tuesday, breaking a
five-session winning streak for all three major indexes.
Losses in big tech stocks like Amazon.com and Google parent
Alphabet weighed on the market, while shares of airlines and cruise
companies also lagged behind.
A powerful rally has sent the S&P 500 up 17% in 2021, while
the Nasdaq Composite has gained 14%.
"I wouldn't write this off to anything more than taking a little
bit of a breather after the pretty good rally that we saw last
week," said Jason Vaillancourt, co-head of global asset allocation
at Putnam Investments.
Investors in recent weeks have cheered strong corporate results
and upbeat guidance from some of the largest American
businesses.
At the same time, they are considering risks posed by the highly
transmissible Delta variant of Covid-19, supply-chain problems, a
spike in inflation and cooling economic growth.
"We've been characterizing this market as a jetliner that has
lifted off and is coming out of the Covid-19 air pocket, but is
still trying to find an appropriate cruising altitude," said Kara
Murphy, chief investment officer at Kestra Holdings. "We are seeing
economic data going from great levels to good levels: that is still
indicative of economic growth."
An increase in Covid-19 cases across the U.S. is leading some
investors to question whether the economic recovery will be as
robust as anticipated. The Centers for Disease Control and
Prevention recommended Tuesday that vaccinated people return to
wearing masks in public indoor spaces in places with high or
substantial transmission of Covid-19.
"Not only the Delta variant but other variants are going to be
here," said Loreen Gilbert, chief executive of WealthWise Financial
Services. "How are businesses going to adjust, how are individuals
going to adjust, as the coronavirus continues on?"
Investors were watching earnings reports after the market close
Tuesday from tech behemoths. Microsoft posted another quarter of
record sales, while Alphabet reported a surge in revenue powered by
thriving sales from advertising. Apple posted a record
spring-quarter profit as customers embraced new iPhones and other
devices.
In corporate news, BHP's unexpected takeover offer for Noront
Resources reflects BHP's desire to increase output of commodities
used in batteries, said Macquarie.
"The move to acquire Noront Resources is a surprise, although at
just C$325 million, accounts for circa 0.1% of BHP's market
capitalization," Macquarie said.
Noront owns the Eagle's Nest nickel, copper and platinum group
metals project, as well as other exploration assets. BHP's only
nickel exposure is its Nickel West operation in Australia.
"Given the comparatively small scale of Eagle's Nest, we suspect
BHP's acquisition is more focused on Noront's substantial
exploration tenement portfolio in the Ring of Fire," Macquarie
said.
Forex:
The U.S. dollar weakened against some major currencies, while
the WSJ Dollar Index slid 0.1%, as the Delta variant shakes
confidence in the economic recovery and American authorities revive
some mask-wearing mandates.
Markets expect the Fed to advance monetary tightening
discussions Wednesday, a process that could potentially strengthen
the greenback.
"We continue to think that the U.S. dollar will rise further in
the second half of the year," Capital Economics said, "as the
divergence between the US and other major economies in terms of
growth and, especially, inflation persists."
The USD slid 0.2% to the euro, 0.6% versus the yen and 0.4%
against the British pound.
The forint should extend its current gains over the next two
months as the country's central bank is set to raise interest rates
further, TD Securities said.
Hungary's central bank on Tuesday lifted its benchmark rate by
30 basis points to 1.20% and TD analysts expect another rate rise
of 30 basis points in August followed by a 15 basis point increase
in September.
"Whether we see more hikes after that, may ultimately be
determined by the forint's trajectory against the euro," the
analysts said. "We do however see risks skewed toward more
tightening," they said.
Bonds:
U.S. Treasury yields for long-dated debt slid lower Tuesday,
despite a stream of robust economic data.
Saxo Bank sees a 70% chance that French President Emmanuel
Macron will be re-elected in April 2022 for a second five-year term
after defeating National Rally's leader Marine Le Pen, said
director Christopher Dembik.
Since Le Pen dropped her controversial proposal to exit the
euro, risk building in French bond markets is likely to be more
modest than in 2017, he said.
"We expect the OAT-bund spreads to widen by 30-35 basis points
in early 2022 but to remain far from levels reached during the
previous presidential election (up to 80 basis points)," he
said.
Energy:
Oil rose in Asia ahead of weekly U.S. petroleum inventory data
and the outcome of the FOMC's two-day meeting.
The market is now eyeing weekly U.S. inventories, with
expectations of a 2.5-million-barrel drawdown, ANZ said.
Also, markets are keenly awaiting the statement following the
conclusion of the FOMC meeting, though it's widely expected that
the Fed won't be in a hurry to adjust its accommodative monetary
policy, ANZ said.
Metals:
Gold rose in early Asian trade, but gains may be limited ahead
of the outcome of the FOMC's two-day meeting later in the global
day. There's investor caution ahead of the meeting which could
offer details on stimulus tapering, Phillip Futures said.
The Fed is likely to affirm that a strong U.S. recovery and
plans for an eventual policy shift are both ongoing, it adds.
Copper rose in early Asian trade after ending the previous
session lower as the rout in Chinese technology stocks spilled over
into base metals, according to ANZ. A drop in risk appetite sparked
a sell-off on the Shanghai Futures Exchange which extended into the
London session on the LME, it said.
"This comes as the market faces a soft patch in demand amid the
normal seasonal slowdown," the bank added. Nevertheless, it noted
that supply of base metals including copper remains "relatively
constrained" which should offer some support to prices.
The three-month LME copper contract rose 0.5% to $9,805/ton.
TODAY'S TOP HEADLINES
Lawmakers Say Infrastructure Deal Within Reach
WASHINGTON-Lawmakers expressed renewed optimism Tuesday that
they were close to reaching a deal on a roughly $1 trillion
infrastructure package as they worked through a series of 11th-hour
holdups.
After a day of partisan sniping over last-minute disputes,
lawmakers said Tuesday they were approaching resolution to some of
the issues that had bogged down the final stretch of negotiations.
But they still hadn't finished their talks, weeks after the group
announced that they had agreed to a loose framework for a deal.
Credit Suisse Expected to Publish Details of Archegos
Failures
Credit Suisse Group AG is likely to publish an investigation as
soon as Thursday into the breakdown that led to massive losses from
family office Archegos Capital Management, people familiar with the
matter said.
The detailed report could become public around the time Credit
Suisse reports second-quarter earnings, the people said. The report
focuses on problems in the bank's risk management unit, human
errors in judgment and unheeded risk in concentrated positions,
some of the people said.
Vaccination Rates Drive Global Economic Growth Prospects, IMF
Says
The economic outlook is diverging for countries based largely on
how well they are rolling out Covid-19 vaccinations, according to
new forecasts released Tuesday by the International Monetary
Fund.
Economic prospects are improving for advanced economies, where
nearly 40% of the population has been vaccinated, despite
challenges from new variants of the coronavirus, the IMF said. At
the same time, far lower vaccination rates have left emerging and
developing economies more vulnerable to additional waves of the
pandemic and the associated economic fallout.
Durable-Goods Orders Advanced in June as U.S. Economy Continues
to Grow
Orders for cars, appliances and other durable goods increased in
June, signaling continued strength in the U.S. economy as
manufacturers continue to deal with shortages in parts and labor
and confront higher material costs.
New orders for products meant to last at least three years
increased 0.8% to a seasonally adjusted $257.6 billion in June as
compared with May, the Commerce Department said Tuesday. Economists
surveyed by The Wall Street Journal had estimated a 2% gain.
Is Tesla the Meme Stock of Yesteryear?
For years, Tesla stock charged ever higher despite weak
operating results. So far in 2021, that pattern has reversed
itself.
Australian Inflation Spiked in 2Q, But Jump Is Likely to Be
Temporary
SYDNEY-Australian consumer prices rose 0.8% in the second
quarter, fanned by rising fuel costs, the Australian Bureau of
Statistics said Wednesday.
Annual inflation increased to 3.8% in the second quarter, up
sharply from the 1.1% rise marked in the first quarter and largely
in line with the result expected by economists.
U.S. Home-Price Growth Rose to Record in May
Home-price growth climbed to a new record in May, as low
mortgage interest rates continued to drive robust homebuying
demand.
The S&P CoreLogic Case-Shiller National Home Price Index,
which measures average home prices in major metropolitan areas
across the nation, rose 16.6% in the year that ended in May, up
from a 14.8% annual rate the prior month. May marked the highest
annual rate of price growth since the index began in 1987.
What to Know About Robinhood's IPO
Robinhood Markets Inc.'s initial public offering is stirring
interest among individual investors.
The trading app, which now has 22.5 million funded accounts and
fueled a number of meme stock rallies in the past year, is urging
its own customers to invest. The company plans to sell its users up
to 35% of its IPO shares, or up to 18.3 million shares. This past
Saturday, the company's executives held a virtual roadshow
specifically for mainstream investors.
Ride-Sharing Startup Swvl Nearing Deal to Go Public With
Female-Led SPAC
Middle East-based ride-sharing technology startup Swvl Inc. is
nearing a deal to go public via a merger with a special-purpose
acquisition company, according to people familiar with the
matter.
Dubai-based Swvl plans to merge with Queen's Gambit Growth
Capital in a deal that values the company at roughly $1.5 billion,
the people said. Swvl was co-founded in 2017 by Mostafa Kandil, who
formerly worked at ride-sharing company Careem, which is now a
subsidiary of Uber Technologies Inc.
Glencore Probe Yields Charges Against Another Former Trader
A former Glencore PLC trader pleaded guilty Monday to what
prosecutors described as a conspiracy to pay millions of dollars in
bribes to officials in Nigeria and elsewhere in exchange for
favorable contracts with a state-owned oil company.
Anthony Stimler, a U.K. citizen who worked for a Glencore
subsidiary on the commodity trading company's West Africa desk,
pleaded guilty to conspiring to violate the U.S. Foreign Corrupt
Practices Act and conspiring to commit money laundering, court
filings show. The guilty plea was reported earlier by Bloomberg
News.
Saudi Arabia to Impose Covid-19 Vaccine Mandate
RIYADH-Saudi Arabia is set to impose one of the world's most
sweeping vaccine mandates in an attempt to combat hesitancy toward
the Covid-19 shots in the kingdom, as governments globally try to
confront a new surge in cases of the Delta variant.
People in Saudi Arabia will need to show proof on a mobile app
that they have received at least one vaccine dose to enter public
and private institutions beginning Sunday, including schools,
shops, malls, markets, restaurants, cafes, concert venues and
public transportation. From Aug. 9, Saudi citizens will need two
doses to travel abroad.
U.S., Russian Officials to Hold Talks on Future Arms Control
Agenda
The Biden administration will take its first step toward
defining its future arms control agenda with Moscow when senior
U.S. and Russian officials meet Wednesday for strategic stability
talks in Geneva.
The talks, which were agreed to by President Biden and Russian
President Vladimir Putin at their summit meeting last month, will
be led by U.S. Deputy Secretary of State Wendy Sherman and Russian
Deputy Foreign Minister Sergei Ryabkov.
Water Protests in Iran Test Country's Leaders
Weekslong Iranian protests over water scarcity present an early
test for incoming president Ebrahim Raisi, who takes office next
week amid mounting challenges including a grinding economic crisis
and stalled nuclear negotiations with the West.
The protests, which began nearly two weeks ago in the oil-rich
southwestern province of Khuzestan, center on accusations that the
Iranian government is diverting water to drill for oil, service
other provinces and drive the area's ethnic Arabs off the land.
Protesters have shouted "We are thirsty," while some chanted
against Supreme Leader Ayatollah Ali Khamenei and the Islamic
Republic.
Apple Profit Sets Record on Strong iPhone Sales
Apple Inc. posted the biggest spring-quarter profit in its
45-year history, leading a streak of record-setting earnings for
technology companies even as the pandemic continues to weigh on the
global economy.
Not to be overlooked, Google parent Alphabet Inc. and Microsoft
Corp. also said Tuesday that their quarterly earnings excelled,
underscoring how the pandemic has shifted life and work online and
strengthened some of the world's biggest and wealthiest
companies.
Write to sarka.halas@wsj.com
Expected Major Events for Wednesday
06:00/EU: Jun New Commercial Vehicle Registrations in Europe
statistics (EU27 + EFTA3)
06:00/GER: Aug GfK consumer climate survey
06:00/NOR: Jun Retail Sales
06:00/GER: Jun Foreign trade price indices
06:00/UK: Jul Nationwide House Price Index
06:45/FRA: Jul Consumer confidence survey
07:00/SVK: Jun PPI
07:00/HUN: Jun Employment & unemployment
07:30/SWE: Jun Retail sales
08:00/ITA: Jul Consumer Confidence Survey
08:00/ITA: Jul Business Confidence Survey
08:00/AUT: Jul Austria Manufacturing PMI
10:00/IRL: Jun Retail Sales Index
16:59/SWI: 1Q Locational & Consolidated banking statistics,
preliminary data
23:01/UK: Jun UK monthly automotive manufacturing figures
All times in GMT. Powered by Kantar Media and Dow Jones.
Write to us at newsletters@dowjones.com
We offer an enhanced version of this briefing that is optimized
for viewing on mobile devices and sent directly to your email
inbox. If you would like to sign up, please go to
https://newsplus.wsj.com/subscriptions.
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
July 28, 2021 00:19 ET (04:19 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.