MARKET WRAPS

Watch For:

Eurozone Manufacturing PMI; UK CIPS / Markit Manufacturing PMI; updates from HSBC Holdings, Heineken.

Opening Call:

Stocks could open higher. Asia stocks mixed, U.S. stock futures rise. Dollar strengthens. Oil slides, Gold down.

Equities:

European stocks are set to start the month higher Monday as investors weighed growth data from China.

Chinese stocks were mixed in early Asia trade, as signs of a Covid-19 resurgence in some areas of the country weigh on investor sentiment, IG said.

A private gauge of China's manufacturing activity in July fell to a post-Covid-19 low as heavy floods, a resurgence in Covid cases and power shortages in some cities weighed on output and new orders.

The Caixin China purchasing managers index dropped to 50.3 in July from 51.3 in June, Caixin Media Co. and researcher Markit said Monday. July's reading was the lowest in the past 16 months, but still held above the 50 mark that separates expansion from contraction.

The result points in the same direction as a competing official gauge that tracks large state factories more closely. The reading for July was 50.4 versus 50.9 in June, China's statistics bureau said Saturday. The official survey of manufacturers has a much larger sample than the Caixin survey.

A monthslong rally in U.S. stocks has slowed down in recent weeks on worries about the outlook for the economy, which some investors worry may stumble as coronavirus case counts rise again. Lingering concerns over China's clampdown on its internet and technology businesses, as well as lofty expectations for corporate earnings, also weighed on sentiment this week.

Amazon.com's disappointing sales report late Thursday and weaker outlook rattled Wall Street further, investors say.

"There are so many crosscurrents going on at the moment influencing markets," said Sebastian Mackay, a multiasset fund manager at Invesco. "We've entered a more volatile period for markets, but markets will continue to move higher because we're still seeing economic growth."

Forex:

The U.S. dollar strengthened a little against major currencies, with the WSJ Dollar Index gaining 0.3% to break a four-day losing streak and end the month basically flat.

Markets focus on new threats from Covid-19 while waiting for Chairman Powell's Jackson Hole remarks at the end of August.

Investors are looking at inflation dynamics as the economy seems less robust than previously thought and the Fed remains dovish, making it less likely that currency-supporting monetary tightening would come very soon.

Bonds:

The 10-year Treasury ended July with the largest decline since March 2020, losing 0.204 percentage point to 1.239%, as investors reevaluate the economic outlook in face of renewed threats from Covid-19's Delta variant.

The benchmark is down for four consecutive months, shedding more than half of a percentage point in the period. The prospect of extended fiscal stimulus is pared by expected monetary tapering, while new lockdowns can't be ruled out.

"The toxic mix of supply shortages, demand-sapping price hikes, and virus uncertainty will counter some of the thrust from excess savings, record wealth, and rising employment," BMO said.

Energy:

Oil fell in morning Asian trade amid concerns over the rising number of Covid-19 Delta cases worldwide. Amid the surge in cases of the highly contagious variant, travel demand is also being hit by lower vaccination rates in places like Indonesia and Thailand, though improving U.S. demand may lend oil prices some support, ANZ said.

Traders were watching OPEC oil supplies closely as quotas rise by another 400 thousand barrels a day in August under the new production agreement, ANZ said.

Metals:

Gold declines in early Asian trade after making some gains last week following the Fed's dovish tone. U.S. 10-year Treasury yields have continued to trend below 1.30%, which could make gold look more appealing with lower opportunity costs, IG said. The brokerage puts near-term support for gold prices at $1,800 an ounce.

Copper rose in early Asian trade because of signs of strong demand in developed economies, but ANZ said prices could be dragged down due to the selloff in Chinese stock markets spilling over into base metals.

The bank said the regulatory crackdown on China's technology and education industries is causing investors to dump other risky assets. It noted that this is exacerbated by China selling part of its reserves of metals to increase market supply. The three-month LME copper contract rose 0.2% to $9,748/ton.

   
 
 

TODAY'S TOP HEADLINES

China Caixin Manufacturing PMI Drops to 16-Month Low

A private gauge of China's manufacturing activity in July fell to a post-Covid-19 low as heavy floods, a resurgence in Covid cases and power shortages in some cities weighed on output and new orders.

The Caixin China purchasing managers index dropped to 50.3 in July from 51.3 in June, Caixin Media Co. and researcher Markit said Monday. July's reading was the lowest in the past 16 months, but still held above the 50 mark that separates expansion from contraction.

   
 
 

Senators Push to Wrap Up Bipartisan Infrastructure Bill This Week

WASHINGTON-Senators wrapped up the construction of a roughly $1 trillion infrastructure bill, racing to pass it through the chamber by the end of the week and send it to the House, where its fate is intertwined with a $3.5 trillion package of Democratic priorities.

Senate Majority Leader Chuck Schumer (D., N.Y.) kept the Senate open through the weekend in a bid to begin considerations of the bipartisan infrastructure package, $550 billion of which is in addition to expected future federal investments in roads, bridges, broadband, and other infrastructure projects. But lawmakers took much of the weekend to complete the text of the bill, finishing the final text Sunday night. Completion of the text will allow lawmakers to begin the amendment process and move to final passage in the coming days.

   
 
 

Economy Week Ahead: Factories, Trade, Employment

The U.S. employment report for July is the focus of this week's economic indicators.

   
 
 

Heavyweight Companies Enjoy Outsize Rewards as Economy Rebounds

Big companies raced ahead during the Covid-19 pandemic, leveraging the changes driven by the deepest business disruption in decades to grab a larger slice of the economic pie.

Now, as the rich world bounces back from the shock, the heavyweights are extending that lead, spending more on investments and acquisitions, snapping up talent, employing big data and leveraging new technologies.

   
 
 

Inflation Is Hot Now, but Investors Are Betting That Won't Last

Investors are betting the inflationary streak that has sent prices of everything from used cars to lumber soaring will fade in the coming years, a reassuring sign for markets struggling to find direction.

Few issues have vexed money managers more this year than inflation. As the global economy has regained its footing, prices for goods and services have risen-in many cases far faster than economists had anticipated. Labor shortages and supply-chain disruptions snarling the global shipping industry have added to inflationary pressures.

   
 
 

Reduction in Fed's Asset Purchases Might Not Spark 'Taper Tantrum'

WASHINGTON-Investors barely reacted last week when Federal Reserve officials signaled they could announce plans to start reducing their bond buying later this year. That was a relief for policy makers eager to avoid a repeat of the market turmoil that erupted in 2013 when the Fed made a similar announcement.

The Fed's next test will come when it outlines a concrete plan for when and how it will scale back, or taper, the asset purchases.

   
 
 

Anthony Fauci Warns on Covid-19 That 'Things Are Going to Get Worse'

The Biden administration's chief medical adviser said he didn't believe the U.S. would return to lockdowns but warned that "things are going to get worse" as a more contagious variant of the coronavirus has led to a surge of new cases.

"We are looking, not I believe, to lockdown but we are looking to some pain and suffering in the future because we are seeing the cases go up," Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said Sunday on ABC's "This Week." He added, "The solution to this is, get vaccinated."

   
 
 

A Popular Bet on Chinese Growth Is Falling Out of Favor

SYDNEY-China's role as a key driver of the Australian dollar is being re-evaluated in global markets, helping send the currency to levels well below where traditional modeling suggests it should be.

Australia has been a cornerstone supplier of commodities used by an industrializing China over decades, which in turn made the country's dollar a favorite bet of currency traders and sovereign-wealth funds seeking exposure to Chinese growth while at the same time managing risk.

   
 
 

Fed's Brainard Says Labor Market Hasn't Satisfied Goals for Reducing Bond Purchases

The U.S. labor market hasn't achieved enough progress to justify a pullback in the Federal Reserve's stimulus program but is on track to reach a key threshold around the end of the year, a top central bank official said in a speech prepared for delivery Friday night.

The Fed cut its benchmark interest rate to near zero in March 2020 and has been purchasing at least $120 billion a month in Treasurys and mortgage bonds to provide extra stimulus to the economy. Officials since the end of last year said those purchases would continue until they see "substantial further progress" toward their goals of low unemployment and stable inflation.

   
 
 

U.S. Blames Iran for Drone Attack on Israeli-Linked Tanker

The U.S. joined the U.K. and Israel Sunday in blaming Iran for a fatal drone strike last week on an Israeli-linked tanker near the coast of Oman in the Arabian Sea, and the U.S. said it would work with allies to develop a response to the incident.

The statement from Secretary of State Antony Blinken marked unusually blunt language from the Biden administration, particularly as it is also seeking to revive a nuclear deal with Iran.

   
 
 

Fired Executive Says Deutsche Bank's DWS Overstated Sustainable-Investing Efforts

Deutsche Bank AG's asset management arm, DWS Group, tells investors that environmental, social and governance concerns are at the heart of everything it does and that its ESG standards are above the industry average.

But behind closed doors, it has struggled to define and implement an ESG strategy, at times painting a rosier-than-reality picture to investors, according to its former sustainability chief and internal emails and presentations seen by The Wall Street Journal.

   
 
 

Covid-19 Vaccine Health Pass Fuels French Protests

French protesters took to the streets for the third consecutive Saturday to protest new restrictions on people unvaccinated against Covid-19, a growing movement that threatens to complicate the country's coronavirus response.

More than 204,000 protesters-many decrying what they called a "health dictatorship" and carrying banners and French flags reading "Freedom!"- marched in cities across France, including Marseille and Lyon, according to estimates from France's interior ministry.

   
 
 

Textbook Publisher Pearson Bets Big on Online Learning

Andy Bird joined education-resource company Pearson PLC as chief executive officer at a time when education was undergoing an upheaval-the middle of the Covid-19 pandemic.

With students around the world suddenly learning from home, the company's online business saw big growth: Enrollment at Pearson's online K-12 schooling offering, Connections Academy, grew by 40%, says Mr. Bird, the former chairman of Walt Disney International.

   
 
 

Belarus Tries to Send Olympic Sprinter Home After Criticism

TOKYO-A Belarusian sprinter who had publicly criticized the country's national coaches at the Tokyo Olympics was taken to an airport in a bid to take her home against her will, she said Sunday, but she didn't board a flight.

"I am asking the International Olympic Committee for help," Krystsina Tsimanouskaya said in a video posted on several Belarusian opposition websites. "They put pressure on me and they try to take me out of the country without my consent. Therefore, I ask the IOC to intervene in this situation."

   
 
 

Square Agrees to Acquire Afterpay for $29 Billion in All-Stock Deal

SYDNEY-Square Inc. has agreed to acquire Afterpay Ltd. in an all-stock deal worth around $29 billion, illustrating how financial technology companies are seeking scale to challenge banks for a bigger slice of the payments industry.

Square said a key attraction of the deal was a growing wariness toward traditional credit among younger consumers, a group particularly hard hit by the Covid-19 pandemic, as lockdowns crushed many hospitality and casual jobs.

   
 
 

Succession Drama Grips Scholastic: CEO's Sudden Death, an Office Romance and a Surprise Will

The longtime head of Scholastic Corp., M. Richard Robinson Jr., died suddenly in June on a walk in Martha's Vineyard. He left behind a surprising succession plan.

He didn't give control of the $1.2 billion publisher to either of his two sons, or his siblings, or his ex-wife, with whom he had rekindled a friendship during the pandemic. Instead, control went to Iole Lucchese, Scholastic's chief strategy officer. She also inherited all his personal possessions.

   
 
 

Chile Workers at World's Biggest Copper Mine Vote to Strike

The union representing workers at Chile's La Escondida copper mine said its members voted to reject the most recent contract offer from the mine's owner and go on strike, potentially risking disruptions to the supply of a key metal as the world's economy continues to recover from the impact of the coronavirus pandemic.

BHP Group Ltd.-controlled Minera Escondida, located in Chile's northern Atacama Desert, is the world's largest copper mine, producing almost 5% of the world's supply of the metal, which is used to make electrical wiring and motors and in construction, among many other applications.

   
 
 

Samsung Takes Intel's Chip-Seller Crown, but Bigger Showdown Looms

Intel Corp. aspires to chip-technology supremacy within four years. But for now, it has fallen from the industry's top spot by one key measure.

In the second quarter, Samsung Electronics Co. overtook Intel as the world's top chip maker by revenue. Given divergent outlooks for their core businesses, the positioning is likely to stay that way in the near future, industry analysts say.

   
 
 

Write to sarka.halas@wsj.com

   
 
 

Expected Major Events for Monday

06:00/GER: Jun Retail Trade

06:30/SWI: Jun Retail Sales

06:30/SWI: Jul CPI

07:00/POL: Jul Poland Manufacturing PMI

07:00/NED: Jul Netherlands Manufacturing PMI

07:00/HUN: Jun PPI

07:00/TUR: Jul Turkey Manufacturing PMI

07:15/SPN: Jul Spain Manufacturing PMI

07:30/CZE: Jul Czech Republic Manufacturing PMI

07:30/SWI: Jul procure.ch Purchasing Managers' Index

07:45/ITA: Jul Italy Manufacturing PMI

07:50/FRA: Jul France Manufacturing PMI

07:55/GER: Jul Germany Manufacturing PMI

08:00/GRE: Jul Greece Manufacturing PMI

08:00/EU: Jul Eurozone Manufacturing PMI

08:30/UK: Jul CIPS / Markit Manufacturing PMI

09:00/MLT: Jun Registered Unemployed

09:00/CYP: May Retail trade

09:00/DEN: Jul Danish PMI

10:00/POR: Jun Industrial production index

16:59/AUT: Jul Unemployment figures

All times in GMT. Powered by Kantar Media and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

August 02, 2021 00:18 ET (04:18 GMT)

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