Eurozone Industrial Production; update from Bunzl
Europe is primed for a positive open on Monday, on expectations
the Fed will maintain its dovish message later this week. In Asia,
most major stock benchmarks were higher, along with the dollar and
oil, but gold prices lost further ground and Treasury yields were
European shares should extend gains on Monday, with the Stoxx
Europe 600 likely to push further into record territory, as
investors look ahead to an expected dovish Fed meeting this
"There's probably some chance of a bit more of a
'let's-see-what-they-have-to-say type of approach," said Jim Baird,
chief investment officer of Plante Moran Financial Advisors. The
big question is whether policy makers will come forward with
details about their thinking around an eventual tapering of the
Fed's bond-buying program, offering investors "more of a peek
behind the curtain," he said.
Several Fed officials have said the Fed should begin
contemplating when it would be appropriate to discuss easing up on
purchases. Investors also have been parsing details surrounding
"The question now is, is this the beginning of a 1970s-style
spiraling of prices, in which case that would be very bad for the
markets," said Eric Diton, president of The Wealth Alliance, which
oversees more than $1.2 billion of assets. The market appears to
think inflation spikes will be transient as the shortages of goods
in the pandemic will prove temporary, according to Mr. Diton.
Stocks to Watch: Royal Dutch Shell is reportedly reviewing its
holdings in the largest oil field in the U.S., according to reports
Sunday. The potential sale could include all of Shell's 260,000
acres in the Permian Basin, mostly in Texas, as the company
refocuses on existing production elsewhere and transitions to
lower-carbon ventures, Reuters reported, citing unnamed people
familiar with the matter. Such a sale could raise as much as $10
billion, CNBC said, also based on an unidentified insider familiar
with the talks. The sale was not expected to be imminent.
The dollar continued to strengthen against other major
currencies on Monday, albeit in thinner trading volumes in Asia,
with markets in China and Hong Kong closed for holidays.
DailyFX.com said for the week ahead, investors will likely focus on
U.S. retail sales and the FOMC meeting.
Capital Economics said the dollar should strengthen against most
currencies over the next 12-18 months, as Treasury yields rise
continue to rise.
"To a large extent, that view is based on our forecast for a
relatively uneven global economic recovery in which the U.S.
economy outperforms thanks to its significantly larger policy
stimulus," said Capital Economics economist Jonathan Petersen. A
fall in commodity prices should also lift the dollar, he said.
Beyond 2022, the dollar could reverse its gains as yield gaps
shift in favor of the rest of the world as other economies catch up
with the U.S., he said. The dollar is "moderately overvalued,"
warranting a gradual depreciation over the medium term.
JPMorgan economist Michael Feroli has told clients the Federal
Reserve is likely to lift rates sooner than expected, due to
reduced risks from the coronavirus pandemic and rising inflation
expectations. "We are bringing forward our expectations for liftoff
to late 2023."
Mr. Feroli also expects some "perfunctory" discussions about
tapering asset buying. "If we are correct that they talk about
tapering, then our best guess is that we learn about that
discussion in the chair's prepared remarks at the start of the
press conference," he said, adding "we would also expect Powell to
quickly follow this up by observing that the economy is still some
ways away from meeting the 'substantial further progress'
The Russian central bank could raise interest rates by a further
75-100 basis points later this year, pushing the ruble higher, said
Unicredit. The central bank on Friday raised its key rate by 50
basis points to 5.50% and said increased inflationary risks could
lead to further rare rises at upcoming meetings.
The prospect of further rate rises, combined with higher oil
prices, should lift the ruble further this year, said Unicredit
analyst Artem Arkhipov. However, inflation should ease next year,
prompting the bank to become more "dovish" and reduce the real
inflation-adjusted policy rate to around 100-150 basis points, he
said. "This could lead to moderate pressure on the RUB if other
central banks turn more hawkish in 2022."
Treasury yields traded in line with Friday's close of 1.462%,
with inflation remaining in the center of the debate.
Bank of America worries that temporary inflation could last long
enough to have lasting effects. "These 'temporary' pressures will
probably persist for many months and could become embedded in
inflation psychology." The bank said even though there are reasons
to dismiss much of current inflation as temporary, "it will remain
important to monitor whether transitory inflation passes through
into stronger persistent inflation."
A slowdown in new euro-denominated bond issuance could boost
corporate bond spreads, said Mizuho. Euro corporate-bond supply was
very low Thursday due to the European Central Bank's policy
decision and "it will be important to see now whether, on the back
of ECB dovishness, deal flow picks up again in the coming
If not, "the summer lull may come sooner rather than later,
which would feed into even greater momentum for credit spread
tightening," said analysts at the bank.
Oil futures continued to push higher in Asia, after they tallied
a third-weekly gain to finish at a more than two-year high on
The market "can't ignore the clearly bullish signal" from the
IEA report, in which the energy agency called for more oil to be
produced by OPEC+ "to meet the oil demand recovery of 2022," said
Louise Dickson, oil markets analyst at Rystad Energy.
"Supply conservatism by OPEC+ has supported oil prices since
last year and is the reason prices have now reached such highs,"
she said in a daily note. "There is definitely room for OPEC+ to
boost output from the second part of this year and as long as this
doesn't happen, there is a definite upside for oil prices."
Data from Baker Hughes on Friday suggested that U.S. production
may soon rise, as the number of active U.S. rigs drilling for oil
was up by six at 365 this week.
Gold extended Friday's decline, with strength in the dollar
helping to send prices to their lowest finish in more than a
Prospects that the Fed could be less dovish at this week's FOMC
meeting also soured the mood in Asia. Recent gains in labor and the
red-hot inflation figure raise the risk that the Fed will be less
dovish, although expectations remain that it will stick to its
'inflation is transitory script' is high, said OANDA.
The precious metal is likely to trade in the $1,870-$1,900 range
in the run-up to the FOMC decision, said OANDA.
Copper prices were steady on continuing uncertainty over the
presidential election outcome in Peru, the world's No. 2 producer
of the base metal.
The results won't be finalized until a process for contested
votes is completed, but Pedro Castillo's lead over Keiko Fujimori
is raising concerns that the leftist candidate might raise taxes on
mining companies, and jeopardize the planned capital expenditures
needed to increase supply in the longer term, said TD
Recently, the three-month LME copper contract was little changed
at $10,005.50 a metric ton.
TODAY'S TOP HEADLINES
G-7 Leaders Rally to Biden's Call to Challenge China
CARBIS BAY, England-Leaders of the Group of Seven wealthy
democracies called on China to respect human rights but stopped
short of an outright condemnation of Beijing, as President Biden
sought to build momentum for an international coalition to counter
Chinese influence in the world.
A 25-page joint statement released by leaders of the G-7 nations
on Sunday-covering issues ranging from pandemic recovery to the
global economy, tax, trade and girls' education-asked China "to
respect human rights and fundamental freedoms, especially in
relation to Xinjiang and those rights, freedoms and high degree of
autonomy for Hong Kong." The same section of the statement said the
G-7 would continue to consult on how to challenge China's behavior
in the global economy.
Markets Are Leaving Little Room for the Fed to Be Wrong on
Investors have faith in the Fed. Over the past three months
consumer prices, excluding volatile food and energy, have risen 2%,
equivalent to a shockingly high annual rate of 8.2%. Rather than
panic and dump bonds, investors have piled into Treasurys and
pushed 10-year yields back down to where they stood in late
February. Confidence in the central bank is absolute.
To be fair, the Fed is probably right: This burst of inflation
is probably transitory. The reopening of the economy released a
surge of pent-up demand, while supply bottlenecks are restricting
production and distribution. As things get back to normal inflation
should calm down.
Europe Keeps Aiding Companies to Avoid Surge of Covid-19
Rousselle Industrie SA, a maker of machinery for paint
manufacturers in northern France, almost collapsed in 2020 after
the pandemic disrupted supply and its clients' businesses.
The 10-person company was saved by the equivalent of $360,000 in
loans under a government program that guaranteed debt and deferred
interest payments for 12 months.
Regulators Tell Banks It Is Time to Stop Using Libor
Regulators are ramping up efforts to end Libor trades by
The Commodity Futures Trading Commission last week told brokers
that facilitate derivatives trading among large banks that they
should stop using Libor, or the London interbank offered rate, as a
reference rate by July 26. The Tuesday announcement could
accelerate the push to phase out the troubled interest-rate
benchmark, which underpins trillions of dollars worth of financial
contracts. Authorities decided several years ago, after a
widespread Libor-rigging scandal, that it should disappear by the
end of 2021.
Israel Gets New Government to End Netanyahu's 12-Year Rule
TEL AVIV-A new Israeli coalition government led by
commando-turned-tech entrepreneur Naftali Bennett ended Benjamin
Netanyahu's 12-year run in power, but now faces the difficult tasks
of reviving an economy battered by the Covid-19 pandemic and
preserving a fragile cease-fire with Palestinian militant group
Mr. Bennett of the right-wing Yamina party took over as prime
minister Sunday after his new, wide-ranging coalition was backed by
60 lawmakers in the 120-member Knesset, ending months of stalemate.
Fifty-nine lawmakers voted against his coalition and one
At G-7 Summit, Boris Johnson Can't Shake Off Brexit
FALMOUTH, England-For British Prime Minister Boris Johnson, the
Group of Seven summit that he hosted over the weekend was a major
opportunity to showcase the U.K.'s ambitions on the global stage,
putting its years inside the European Union decisively behind
But he couldn't entirely make that happen. Wrangling over Brexit
bled into the meeting, coloring what appeared to be a broadly
Biden and Macron Share Affection and Worldview at G-7 Summit
President Biden and French President Emmanuel Macron threw their
arms around each other as they walked on the beach. Later the two
men shared a tête-à-tête as aides looked on. At one point Mr. Biden
asked Mr. Macron to answer a reporter's question for him.
At the summit of the Group of Seven leaders in Cornwall this
weekend, the two presidents embraced each other, sometimes
literally, as allies on a host of issues-from multilateralism to
fighting climate change-after years of volatility between Mr.
Macron and former President Donald Trump.
Low Taxes Brought Ireland Prosperity. A Global Tax Deal Now
For years, Ireland has prospered from rock-bottom tax rates that
have drawn some of the biggest U.S. companies to set up large
operations on its shores.
Now, an effort led by the U.S. to stop tax-avoidance schemes is
threatening Dublin, as Washington seeks an international agreement
setting a minimum tax rate for big multinational corporations, and
reallocating the right to tax some profits to countries where goods
and services are sold, rather than where they are made.
Africa Awaits Covid-19 Vaccine Donations as Cases Surge
JOHANNESBURG-In Uganda, hospitals have become so overwhelmed
with new coronavirus cases that the sick are dying while waiting
for a bed. In Namibia, all nonemergency surgery has been canceled
to preserve space for Covid-19 patients and military hospitals have
been opened for civilian use. In South Africa's largest city,
Johannesburg, intensive-care wards are filling up and hospitals are
stockpiling oxygen cylinders as infections surge again.
Across Africa, which has received fewer Covid-19 vaccines than
any other continent, countries are confronting a new wave in
coronavirus infections without the inoculations that have turned
the tide of the pandemic in Europe and North America.
Miners Try to Get Covid-19 Vaccines Into Areas Where Shots Are
Mining companies are throwing their weight behind vaccination
efforts as Covid-19 continues to ravage much of the developing
Miners are offering vaccines and bolstering healthcare services
to employees and surrounding communities. The effort is focused on
poorer nations, where healthcare systems are weak, vaccines are
scarce and inoculation campaigns lag far behind those in the West.
Anglo American PLC has said it is spending as much as $30 million
to support the global rollout of Covid-19 vaccines across its
footprint. Other miners, from Glencore PLC to Rio Tinto PLC, have
been offering support to local governments during the pandemic,
from conducting screening and mobile testing to donating extra beds
for hospitals and clinics.
Italy's Illycaffè Sets Its Sights on the U.S. Coffee Market
Andrea Illy, chairman of Illycaffè SpA, and grandson of the
founder, wants more Americans to appreciate his family's coffee. In
a bid to build U.S. brand awareness, the Italian-based company
plans to add about a dozen Illy Caffès and shops this year to its
20 already in service in the U.S.
There are just a few problems-including American taste in
coffee. Most consumers in the U.S. favor giant, sweetened coffee
drinks, rather than Illy's signature small cups of espresso.
Write to firstname.lastname@example.org
Expected Major Events for Monday
05:00/FIN: May CPI
06:00/ROM: Apr Industrial production
06:30/SWI: May Import Price Index
06:30/SWI: May PPI
07:00/SVK: Apr Employment and average monthly wage in selected
07:00/SVK: Apr Turnover in selected branches of economy, incl
Industry & Construction
07:00/TUR: Apr Balance of Payments
08:00/CZE: 1Q Quarterly Balance of Payments
08:00/CZE: Apr Monthly Balance of Payments
09:00/EU: Apr Industrial Production
09:00/LUX: 1Q GDP
10:00/POR: May CPI
12:00/POL: Apr Balance of Payments
15:59/UKR: Apr Trade
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(END) Dow Jones Newswires
June 14, 2021 00:17 ET (04:17 GMT)
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