Watch For:

Federal Reserve Bank of Philadelphia President Patrick Harker, Federal Reserve Bank of St Louis President James Bullard and Federal Reserve Bank of Dallas President Robert Kaplan to speak at Fed Week.

Opening Call:

Stock futures rose Monday, pointing to a rebound following a tumultuous week that saw the Dow drop by the most in more than seven months.

Stocks appear poised to recover some ground at the start to the week. Investors' risk appetite took a hit last week after Federal Reserve officials signaled that they may raise interest rates sooner than they had previously anticipated. The comments prompted a pullback in prices on stocks, lumber and gold last week, before they ground higher on Monday.

"There are no very strong convictions in the market for the time being," said Nadège Dufossé, head of asset allocation strategy at asset manager Candriam. "The market is really focused on the evolution of rates and central bank comments."

Stocks are likely to remain at roughly current levels, albeit with increased choppiness, if market sentiment doesn't shift in some way, she added.

Higher economic growth and inflation in the coming months is likely to support stocks because Americans will increase spending on goods and services when pandemic restrictions ease, said Fahad Kamal, chief investment officer at Kleinwort Hambros. Technology stocks and long-dated government bonds are likely to outperform if growth and inflation slow after 2023, he added.

"For most investors, looking across the asset landscape, there still remains no alternative to equities," Mr. Kamal said. "Hiring is happening and normality is returning, and all of that is really positive for cyclicality. That is never going to happen in a straight line. As last week showed, there is huge volatility still in equities."


The dollar is likely to rise further, especially against low-yielding currencies such as the euro and the Japanese yen, as expectations grow that the Fed will start raising interest rates earlier than previously thought, said ING.

Last week, the Fed unexpectedly forecast rate increases during 2023, while on Friday, St. Louis Fed President James Bullard said he expects interest rates to start rising in 2022.

ING said the market is currently pricing the first U.S. rate rise around November 2022.

These expectations could lift the DXY dollar index--which is "heavily weighted towards European low-yielders"--towards the late-March high of 93.44, from a current level of 92.1110. EUR/USD could fall towards 1.1700, from 1.1892 currently, ING said.

Bitcoin fell 7% from its 5 p.m. ET level on Friday to $32,991.09 Monday. Ether, the second-largest cryptocurrency by market cap, shed more than 8% of its value and joke cryptocurrency dogecoin fell more than 11% to about 25 U.S. cents. The digital assets in recent weeks have come under pressure as China has intensified a clampdown on bitcoin mining.

The euro is likely to fall towards $1.18 on the prospect of a move toward monetary policy tightening in the U.S. while the eurozone retains ultra-accommodative policy, UniCredit said.

On Friday, Federal Reserve Bank of St. Louis President James Bullard said he expects interest rates to start rising in 2022, earlier than the central bank's revised forecast at Wednesday's meeting.

UniCredit also notes comments by Italian Prime Minister Mario Draghi calling for economic stimulus in European countries to bring growth back to pre-pandemic levels.

"The prospect of the Fed accelerating tapering while the eurozone is still considering additional stimulus does not bode well for the common currency," the Italian bank said.


In bond markets, the yield on the 10-year Treasury note ticked down to 1.423%, from 1.449% Friday. The 10-year yield has dropped for five consecutive weeks, its longest stretch of declines since August 2019.

"It is completely linked to the decline in inflation expectations," Ms. Dufossé said. "The market is not pricing overheating anymore in the U.S. economy. Investors think the Fed will be able to contain any overheating in inflation."

The so-called yield curve flattened, with shorter-dated yields rising to reflect higher rate expectations, while longer-dated yields fell because higher interest rates in the near term would likely mean slower growth and lower interest rates further into the future. The biggest moves have been in the difference between 2-year yields and 30-year yields since last Wednesday.

Central banks are likely going to try to brace markets for an eventual removal of monetary accommodation and the U.S. Fed is leading the way on that front by signalling two rate increases in 2023, said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management.

The first step on what will be a long road to a rate hike will likely need to be a tapering and ceasing of asset purchases, he said, expecting tapering possibly starting late this year. "With enough lead-time, the market can take a taper in stride," he said.


Oil prices edged higher on hopes for strong summer demand and after a hardliner won the Iranian elections. The victory of cleric Ebrahim Raisi in Iran's elections could delay a nuclear deal, said analysts at ANZ.

"The possibility of Iranian oil hitting the market in the short term...looks unlikely," they wrote in a note.

Prices for both varieties have risen over 40% so far this year on strong demand expectations. "The rebound in demand in the northern hemisphere summer is so strong that the market is becoming increasingly concerned about further sharp drawdowns on inventories," said ANZ.

Copper prices continued their selloff as investors fear tighter monetary policy is on the way. Three-month copper on the LME was down 0.8% at $9,073.50 a metric ton.

The metal has now dropped over 11% so far this month after a hawkish turn from the Fed. The Fed's James Bullard said late last week that the central bank could raise rates as early as next year. Those comments have helped intensify the selloff for copper, said Anna Stablum at brokerage Marex.

Investors said comments from Fed officials are now likely to be of key focus until the central bank's officials meet at the next Jackson Hole Symposium in late August.

Gold prices stabilized after ending the week sharply lower as the Fed said it would raise rates sooner than expected.

The precious metal has found support from falling bond yields which have pared back on the gains they made last week after the Fed's meeting.

Some investors have also used the low gold price as a buying opportunity, said Carsten Fritsch, commodities analyst at Commerzbank, pointing to inflows into gold ETFs on Friday.

The SPDR Gold Shares ETF saw inflows of over $632 million on Friday, the biggest one-day gain since January, according to data from FactSet.



Vivendi Agrees to Sell 10% of Universal to William Ackman

Vivendi SE on Sunday reached an agreement for a 10% investment in Universal Music Group by William Ackman's Pershing Square Tontine Holdings, valuing the world's largest music company at about $40 billion.

In an email to UMG employees, CEO Lucian Grainge called the investment a "strong validation." The deal-previously reported on by The Wall Street Journal-follows a 20% stake investment by Chinese internet giant Tencent and comes days before Vivendi shareholders will vote on the potential listing of 60% of UMG shares on the Euronext Amsterdam stock exchange.


Westlake Chemical to Buy Boral's North America Building Products Business for $2.15 Billion

Westlake Chemical Corp. will buy Boral Ltd.'s North America building products business for $2.15 billion, the companies said.

Houston-based Westlake, a manufacturer of petrochemicals, polymers and building materials, said the acquisition will nearly double its building products business and improve the diversity of what it sells.


American Airlines Cuts Some Flights to Avoid Potential Strains

American Airlines Group Inc., which rapidly increased flying to meet a surge in travel demand, is trimming some flights to alleviate potential strains on its operations.

The number of flights being culled is relatively small, amounting to about 1% of planned flying in the first half of July, the company said. But scrapping roughly 950 flights from the schedule is the latest sign of how tricky it has been for airlines to scale up after a year of depressed demand. The changes also illustrate how companies are trying to adjust to the post-pandemic normal, with the rapid rise in travel pressuring vacation-rental operators and rental-car companies as well.


Deutsche Bank Jumps Back Into Payments With Fiserv Deal

Deutsche Bank AG wants to get back into the suddenly valuable business of digital payments, nearly a decade after getting out of it.

Germany's largest lender is setting up a joint venture with U.S. payments giant Fiserv Inc. to offer customers payments-processing services. The joint venture will allow Deutsche Bank's business clients to accept payments from customers, both in person and digitally, through Fiserv's platform called Clover, which reads credit cards, debit cards and mobile wallets, and records orders and inventory.


Live-Stream Shopping App Ntwrk Hires Its First Chief Marketing Officer

The company behind Ntwrk, an app that sells limited-edition merchandise during live-streamed videos often hosted by celebrities, has hired its first chief marketing officer and is planning its first major ad campaign.

Ntwrk executives want to raise awareness of the app and its live-stream shopping experience, said Jason Brown, the newly named CMO at Ntwrk, which is operated by Commerce Media Holdings LLC. Founded in 2018, Ntwrk describes itself as a Home Shopping Network or QVC for younger consumers on mobile platforms.


North Face Owner Pulled Xinjiang Criticism, Then Reinstated It

In late March, the maker of North Face jackets and Vans sneakers quietly took down a statement raising concern about allegations of forced labor in China's cotton-rich Xinjiang region. Rival fashion company H&M had just been erased from China's internet for a similar statement.

Three other big apparel companies also pulled or altered statements critical of Xinjiang from their websites in the days that followed the boycott of H&M, according to a Wall Street Journal analysis. At Denver-based VF Corp., though, executives quickly convened to deliberate over what they felt was the right thing to do, according to a person familiar with the matter. Twenty-four hours after pulling its statement, the company posted a new, shorter statement reaffirming its stance.


Amtrak's Regional Rail Expansion Faces Hurdle From Freight Trains

WASHINGTON-Amtrak and the Biden administration have a $75 billion plan to transform passenger train travel across America-but aside from funding, the biggest challenge might be getting the nation's freight railroads to get on board.

The seven major freight carriers have long resisted calls to make more room on their tracks for trains carrying people rather than coal, grain and steel. Current and former federal officials say the greatest impediment to Amtrak's national expansion could be finding a way to work with freight carriers.


Supply Crunch Risks Extending Into 2022, Stoking Inflation

Supply constraints that have challenged businesses and caused shortages of everything from semiconductors to sweatpants are deepening, adding to pressure on inflation and testing the Federal Reserve's resolve to keep juicing the economy.

Economists and business executives now say those supply-chain disruptions, key labor shortages and resurgent demand driven by multiple rounds of fiscal stimulus will persist through the end of the year, if not longer.


Economy Week Ahead: U.S. Existing-Home Sales, German Business Confidence


U.S. existing-home sales fell in April from the prior month as record-high prices deterred potential buyers. But April sales remained 51.7% higher than the same month a year before. Economists expect another decline in May.


Turbocharged U.S. Economy Attracts Foreign Investors

The extraordinary recovery of the U.S. economy is likely to make the country the world's top destination for overseas investment this year and next, according to new United Nations projections, with foreign businesses drawn by the prospect of a rapid and sustained rebound in consumer spending and the Biden administration's multitrillion-dollar infrastructure plans.

According to U.N. figures published Monday, overseas investments by businesses around the world fell by a third in 2020 from the previous year. The U.S. recorded a 40% fall in investment but narrowly held on to its long-held position as the top destination ahead of China. The U.N. in January estimated that the U.S. had lost the top slot.


China Tweaks Deposit Rate Rules to Guide Funding Costs Down

China has tweaked the mechanism to determine the upper limits on banks' deposit rates, leading to a reduction of longer-term funding rates, as competition for stable sources of deposits has intensified.

The Self-Disciplinary Mechanism for the Pricing of Market-Oriented Interest Rates, backed by China's central bank, said Monday that it has changed how to determine the ceilings on deposit rates by adding certain basis points to the government-set benchmark rate.


Bipartisan Infrastructure Bill Could Lose Gas-Tax Rise, Senator Says

WASHINGTON-A proposed infrastructure spending plan may be hammered out without a measure raising the gasoline tax, a key Republican lawmaker said Sunday, suggesting the removal of an obstacle to a nearly $1 trillion infrastructure plan pushed by a bipartisan group of lawmakers.

Sen. Rob Portman (R., Ohio), one of the lead Republicans in the group, said a higher gasoline tax may not be in the final package, citing opposition from the Biden administration.


Tight Labor Market Returns the Upper Hand to American Workers

Low-wage workers found something unexpected in the economy's recovery from the pandemic: leverage.

Ballooning job openings in fields requiring minimal education-including in restaurants, transportation, warehousing and manufacturing-combined with a shrinking labor force are giving low-wage workers perks previously reserved for white-collar employees. That often means bonuses, bigger raises and competing offers.


Breaking Up Japan Inc.'s Love Affair With Itself

Japan's corporate-governance reform has been a long, often painful process. But there has been some recent progress on one perennial complaint: massive cross-holdings that empower management and tend to weigh on returns.

Nonfinancial companies on the Tokyo Stock Exchange's first section booked 610 billion yen ($5.3 billion) of gains from sales of securities for the six months ending in March, a 92% year-over-year rise, according to Goldman Sachs. And 137 companies reduced such cross-shareholdings in the fiscal year ending in March, a 59% increase from a year earlier, noted the bank.


Iran's New Hard-Line President Poised for Pivotal Role in Nuclear Talks

When Iranian diplomats resume talks with Western officials to revive a battered nuclear deal, one name will stand out on the list of individuals Tehran wants removed from the U.S. sanctions list: Ebrahim Raisi, Iran's president-elect.

The 60-year-old hard-line judge, who won Friday's presidential election in Iran, was sanctioned two years ago by the Trump administration for his close ties to Iranian Supreme Leader Ali Khamenei. As Iran's president-elect, Mr. Raisi has emerged in a pivotal role that could determine the fate of the 2015 multination accord.


Troubled Companies Take Page From AMC Playbook in Seeking Stock-Market Lifelines

The frenzied stock-buying activity that may have saved AMC Entertainment Holdings Inc. from bankruptcy is opening up a potential escape hatch for other troubled borrowers as well.

More companies with steep financial challenges are seeking a lifeline from equity markets, eager to capitalize on the surge of interest in stock buying from nonprofessional investors. Earlier this month, coal miner Peabody Energy Corp., offshore drilling contractor Transocean Ltd. and retailer Express Inc., all announced plans to sell stock, betting equity markets will support them despite heavy debt loads, recent losses and industry headwinds.


Facebook, Alphabet Keep Rising; Apple, Netflix Fade

Big tech stocks are going their own ways in 2021.

It is a far cry from last year, when the so-called FAANG stocks took a commanding role in a market driven by the coronavirus pandemic.


Tokyo Olympics to Allow Spectators at Summer Games

TOKYO-The Summer Olympics in Tokyo will include up to 10,000 Japanese spectators at each event, organizers said, despite advice by leading doctors that the Games would be safer without crowds.

Monday's decision clears up the final major uncertainty about the Games ahead of the opening ceremony on July 23. Officials said in March that foreign spectators wouldn't be permitted to travel to Japan to attend the Olympics.


Supreme Court Signals Expansion of Religious Exemptions From Laws

WASHINGTON-With all nine justices voting to exempt a Catholic social-service agency from Philadelphia's nondiscrimination policies, the Supreme Court sent a message Thursday that secular interests will increasingly have to give way to some religious rights. The question now is how many-and how fast.

For three conservative justices, not fast enough. "We owe it to the parties, to religious believers, and to our colleagues on the lower courts to cure the problem this Court created," Justice Neil Gorsuch wrote in a concurring opinion Thursday, joined by Justices Clarence Thomas and Samuel Alito. They argued that it was time to overrule a 1990 precedent holding that religious believers can't invoke the First Amendment to exempt themselves from neutral laws that apply to the public at large.


Bipartisan Infrastructure Bill Could Lose Gas-Tax Rise, Senator Says

WASHINGTON-A proposed infrastructure spending plan may be hammered out without a measure raising the gasoline tax, a key Republican lawmaker said Sunday, suggesting the removal of an obstacle to a nearly $1 trillion infrastructure plan pushed by a bipartisan group of lawmakers.

Sen. Rob Portman (R., Ohio), one of the lead Republicans in the group, said a higher gasoline tax may not be in the final package, citing opposition from the Biden administration.


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None scheduled

Economic Indicators:

None scheduled


Expected Major Events for Monday

05:00/JPN: May Convenience Store Sales

12:30/US: May CFNAI Chicago Fed National Activity Index

17:59/UK: May Aluminium Production report

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


Expected Earnings for Monday

Ennis Inc (EBF) is expected to report for 1Q.

Powered by Kantar Media and Dow Jones.



Alaska Air Group Raised to Outperform From Peer Perform by Wolfe Research

BancorpSouth Bank Raised to Buy From Neutral by DA Davidson

Biogen Raised to Overweight From Neutral by Piper Sandler

CAI International Cut to Neutral From Buy by B. Riley Securities

Cimarex Cut to Equal-Weight From Overweight by Morgan Stanley

Compass Minerals Cut to Underweight From Neutral by JP Morgan

Constellation Brands Cut to Mixed From Positive by OTR Global

Crinetics Pharmaceuticals Raised to Overweight From Neutral by JP Morgan

CuriosityStream Cut to Underperform From Buy by B of A Securities

Delta Air Raised to Outperform From Underperform by Wolfe Research

Devon Energy Cut to Equal-Weight From Overweight by Morgan Stanley

EQT Corp Cut to Equal-Weight From Overweight by Morgan Stanley

Everest Re Cut to Neutral From Buy by Citigroup

Host Hotels & Resorts Raised to Overweight From Equal-Weight by Capital One

Lennar Raised to Overweight From Neutral by JP Morgan

Marathon Oil Raised to Equal-Weight From Underweight by Morgan Stanley

National Health Investors Raised to Market Perform From Underperform by BMO Capital

Occidental Petroleum Raised to Overweight From Equal-Weight by Morgan Stanley

Saia Raised to Overweight From Equal-Weight by Wells Fargo

Shockwave Medical Cut to Equal-Weight From Overweight by Wells Fargo

Sykes Enterprises Cut to Neutral From Buy by Sidoti & Co.

Troubled Companies Take Page From AMC Playbook in Seeking Stock-Market Lifelines

United Airlines Raised to Peer Perform From Underperform by Wolfe Research

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


(END) Dow Jones Newswires

June 21, 2021 06:08 ET (10:08 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.