European stocks rose as investors continued to balance positive
earnings news with concerns about how rising COVID-19 cases might
affect the economic recovery.
The monthslong rally in stocks has resumed after markets skidded
at the start of the week in response to concerns about the
fast-spreading Delta variant.
Investors have drawn comfort from rapid earnings growth at the
biggest American companies. Money managers also say governments in
the U.S. and Europe are unlikely to bring in lockdowns that
restrict growth, even if rising cases take the shine off the
"You have an earnings season that is going tremendously well,"
said Seema Shah, chief strategist at Principal Global Investors.
The economic outlook isn't as strong as it was three months ago,
but "the path ahead is not that negative and certainly there is a
lot of buying the dip," she added.
Ms. Shah is keeping a close eye on what executives are saying
about their ability to pass higher input costs to customers instead
of taking the hit in profit margins. The flip side: If many
companies succeed in feeding costs through, inflation will take
longer to subside, which could prompt concerns about higher
interest rates and knock the market.
Technology stocks continued to curry favor with investors, with
more positive earnings news late Thursday from Twitter and Snapchat
A strong performance by technology stocks has come amid rising
concerns linked to the highly contagious delta variant of
coronavirus that is contributing to a spread of COVID-19 cases in
the U.S., notably in states that have seen lower vaccinations.
"Investors are unsure what this update means for the economy's
recovery in the coming months. Investors should keep in mind that,
at the height of the coronavirus pandemic, tech stocks provided a
haven for distressed investors due to their higher-than-average
earnings performance," said Naeem Aslam, chief market analyst at
AvaTrade, in a note to clients.
"Responding with the same strategy, investors are moving away
from stocks positively correlated with economic cycles to tech
stocks in an attempt to hedge their risk," he said.
Meanwhile, U.K. composite PMI for July, which fell to 57.8 from
62.4 the previous month, signals that the economic recovery has
paused amid the rise in Covid-19 infections, said James Smith,
developed markets economist at ING.
The survey compiled by IHS Markit is consistent with other
high-frequency data of weakened mobility and spending, and there
could be more signs of people socializing less in the coming weeks,
ING expects U.K. GDP to expand by 1.5% in 3Q on quarter, though
there are downside risks. "There's little doubt that further
progress in the recovery really relies on Covid-19 prevalence
falling again," Smith said. "It's a reminder that the recovery is
likely to be far from smooth, " he said.
Stock futures rose, putting major indexes on track for weekly
gains with large technology stocks driving the rally.
American Express, oil-field services firm Schlumberger, NextEra
Energy and industrial conglomerate Honeywell International are
among the companies due to report earnings before the bell in New
York. Of the roughly 110 companies in the S&P 500 that have
posted results for the second quarter, 85% have topped analysts'
profit forecasts, according to FactSet.
Snap's stock leapt 17% in premarket trading on revenue that more
than doubled in the second quarter and the fastest user growth in
Twitter shares rose over 5% in premarket trading after the
social-media company reported a 74% increase in revenue in the
second quarter compared with a year before. Intel's stock fell 1.8%
after Chief Executive Pat Gelsinger said he sees the global
semiconductor shortage potentially stretching into 2023.
Survey data on the manufacturing and service sectors, due at
9:45 a.m. ET, will offer fresh cues on the outlook for the economy.
Economists say the U.S.'s growth spurt likely peaked in the spring,
but still expect a strong expansion to continue into 2022.
Any declines in the dollar will be limited in the near-term as
global coronavirus concerns boost demand for safe havens and U.S.
business and consumer confidence remain strong, ING said.
"The immediate focus remains on the breakout of the Delta
variant particularly in those countries where vaccination rates are
low and the only recourse to policymakers is fresh lockdowns," ING
This issue is acute in emerging markets so it's no wonder
portfolio flows into those regions have gone into reverse and
provided support to the dollar, they said.
The European Central Bank's new forward guidance released on
Thursday means interest rates will stay lower for longer and the
euro will be seen as one of the preferred funding currencies, ING
"Certainly there was nothing bullish for the EUR in yesterday's
ECB meeting," ING analysts said. The ECB will be pleased that its
trade-weighted euro has fallen to lows seen last July, they
The ECB on Thursday said interest rates would remain on hold
until inflation reaches its 2% target ahead of the end of its
The pound stayed weaker after U.K. purchasing managers' index
data came in worse than expected.
In the bond market, the yield on 10-year Treasury notes ticked
up to 1.279% from 1.264% Thursday.
Inflation-linked bonds could become more attractive with
anticipated inflation-target overshoot in the eurozone in the
second half of the year, said Patrick Barbe, head of European
investment-grade fixed income at Neuberger Berman.
"We conclude the quarterly ECB forecasts are becoming the key
driver of the negative rate policy, which raises some uncertainties
as we expect inflation rate to overshoot the ECB's 2% target in
2H," he said.
This reinforces the attractiveness of inflation-linked bonds and
should lead to being cautious on long-term bonds, he said. He added
that the ECB's policy stability for a longer period should lead to
an outperformance of short- to medium-term bonds.
The ECB's reiration that it expects its main interest rate to
remain low for a long period of time to spur inflation didn't
translare into lower spreads in most rating categories in the
euro-denominated corporate bond market, said Commerzbank.
Euro corporate cash spreads widened slightly from higher-rated
debt down to down to BB-ratedhigh-yield corporate bonds, with only
riskier debt with a high probability of degault--rated at B and
CCC--tightening on Thursday, it said.
"By sticking to updating the Forward Guidance, the ECB failed to
impress, but it also did not disappoint," said head of corporate
credit research Marco Stoeckle.
Oil prices were lower, with both benchmarks having now erased
their precipitous drops from earlier in the week.
With reports suggesting that the next OPEC policy meeting will
not be until September and the market now appearing to have priced
in concerns about the Delta variant, investors will likely return
to taking their cues from demand data next week.
Despite worries over Covid-19, DNB Markets's Helge Andre
Martinsen points to broader signs of recovery, with scheduled
commercial flights continuing to rise and global petroleum
inventories continuing to drop.
LME three-month copper prices rose 0.5% to $9,511 a metric ton,
rising for a fourth straight day as inventories in LME warehouses
continue to drop and the premium paid for the red metal at
warehouses in Yangshan continue to rise, according to Marex
Spectron's Anna Stablum.
Meanwhile, tin continued its climb, up 1.8% $34,650 a metric ton
with "falling inventories, strong regional premiums and tight
forward curves all point to a fast uptick in demand in the U.S. and
Europe," Ms. Stablum added.
In the precious metals complex, London gold was up, with the
U.S. dollar having softened in recent sessions.
Vodafone Shares Rise as Revenue Recovers From Pandemic
Vodafone Group PLC said Friday that its quarterly revenue
rebounded from the hit caused by the coronavirus pandemic last
year, and that it is on track to meet its expectations for the full
Shares in the U.K.-based telecommunications company rose 2.9% in
Thales Raises Sales Guidance After 1H Performance Rebounds
Thales SA upgraded its sales forecast for the year after booking
rising sales and net profit in its first half as activities rebound
from the year before, which was hit by the coronavirus
The French aerospace-and-defense company posted net profit for
the period of 433 million euros ($510.7 million), up from EUR65
million a year earlier. On an adjusted basis, net income stood at
Valeo Swung to 1H Net Profit, But Sales Still Lagged 2019
Valeo SA said Thursday that it swung to a small net profit in
the first half, as sales rose sharply from the previous-year period
but continued to lag the pre-pandemic period.
The French auto supplier made a first-half net profit of 90
million euros ($106.2 million), on sales that rose 31%
like-for-like to EUR8.99 billion, in line with analyst views as
polled by FactSet. Sales remained below the first half of 2019,
Danske Bank Backs Guidance After In-Line 2Q Earnings
Danske Bank AS on Friday backed its full-year outlook after
reporting second-quarter net profit in line with company guidance,
as earnings were boosted by higher fees and lower loan losses.
The lender made a quarterly net profit of 2.79 billion Danish
kroner ($442 million), from DKK2.33 billion last year. The
Copenhagen-based bank had previously guided for net profit of
around DKK2.8 billion.
Lonza Raises 2021 View; 1H Sales, Core Ebitda Grew
Lonza Group AG said Friday sales and core earnings before
interest, taxes, depreciation and amortization grew in the first
half despite Covid-19 headwinds, and raised its outlook for the
The Swiss life-sciences company posted sales of 2.54 billion
Swiss francs ($2.76 billion) for the period, up from CHF2.24
billion a year earlier.
Vodacom Group 1Q Revenue Grew
Vodacom Group Ltd. said Friday that first-quarter revenue rose
as growth in international markets helped to drive service revenue
The South Africa-based telecommunications company said revenue
for the three months ended June 30 was 24.78 billion South African
rand ($1.69 billion) compared with ZAR22.73 billion for the same
period in 2020.
Global Recovery Accelerates, but Delta Variant Clouds
The global economy is expected to surge over the coming months
as Europe begins to catch up with the U.S. and China, but the rapid
spread of the Delta variant of Covid-19 could hold back-but not
Surveys of businesses from across Europe released Friday
recorded the strongest increase in activity for more than two
decades. That suggests the continent is set for the kind of growth
already being experienced by the U.S.
U.K. Consumer Confidence Rises in July, Beating Expectations
Consumer confidence in the U.K. rose in July, edging ahead of
pre-Covid-19 levels, amid the easing of almost all virus-related
restrictions in England and despite a rise in infections across the
Market-research firm GfK's consumer-confidence indicator came in
at minus seven in July, up two points from June. Economists polled
by The Wall Street Journal had forecast an unchanged reading at
Talking Markets: Europe's Economic Recovery Hopes Are Riding on
Unlocking Covid-19 Savings Stockpile
When the pandemic hit Europe, Pablo Jimenez continued working as
usual in his job as a computer scientist, albeit remotely. He was
living in Madrid at the time but decided to quarantine in his
parents' home in Zamora, a smaller city in the west of Spain. He
didn't leave the apartment for four months and didn't have many
expenditures--his bank account grew steadily.
Since the onset of the Covid-19 pandemic, household savings have
surged at an unprecedented rate, fueled by restricted spending
opportunities, combined with increased precautionary deposits owing
to concerns about unemployment. Economists expect a strong rebound
in private consumption thanks to those savings once restrictions
are lifted, which should provide a much-needed boost to the
Grills Are the Latest Fad in a Scorching IPO Market
The searing market for newly public companies has a new
Two leading sellers of outdoor grills and grilling accessories,
Weber and Traeger, both filed paperwork for initial public
offerings earlier this month, while online
grilling-and-outdoor-products retailer BBQGuys on Tuesday agreed to
go public by combining with a special-purpose acquisition company.
The merger values BBQGuys at about $960 million.
Property Investors Bed Down in the Family Home
Wall Street firms are more eager than ever to buy family homes.
If they snap up existing supply rather than help build new
dwellings, they risk killing their latest golden goose.
Last week, Blackstone's real-estate investment trust bought a
portfolio of apartments for $5.1 billion from insurer American
International Group. In June, the investment firm spent $6 billion
on Home Partners of America, a company that owns more than 17,000
houses across the U.S. and offers renters an option to buy.
Private-equity giant KKR launched a new division that will buy
homes to rent them out, Bloomberg reported.
GOP Senators Resist Raising Debt Ceiling as Democrats Push Biden
WASHINGTON-Top Senate Republicans said the GOP may line up
against any effort to raise the government's borrowing limit this
year, adding to the uncertainty surrounding how Congress will
address the issue after the limit is reinstated next month.
Senate Minority Whip John Thune (R., S.D.) said at a press
conference Wednesday that Democratic plans to advance President
Biden's $4 trillion agenda could prompt Republicans to oppose a
debt-limit increase, echoing comments Senate Minority Leader Mitch
McConnell (R., Ky.) made earlier to the media outlet Punchbowl
Singapore's GIC Sees Green Shoots in Uncertain Global
Singapore's sovereign-wealth fund GIC Private Ltd. remains
cautious on uncertainty related to the pandemic and inflation
concerns, but sees new growth opportunities emerging in areas
including technology, sustainability and the reconfiguration of
global supply chains.
GIC said in its annual report Friday that it expects global
economic recovery to continue amid fiscal stimulus and
monetary-policy support, albeit at different rates and with a wide
range of potential outcomes over the medium- and long-term.
Western Wildfires Lift Lumber Prices
Lumber prices finally cooled off. Now come the fires.
Forest fires raging in the West are threatening an important
swath of the U.S.'s wood supply, pinching output that has been
under pressure since the Covid-19 pandemic touched off home buying
and remodeling booms and sent lumber prices soaring.
China Rejects WHO Proposal for Second Phase of Covid-19 Origins
TAIPEI-China rejects the World Health Organization's proposal
for a second phase of investigation into Covid-19's origins,
including a potential laboratory leak, and has put forward its own
proposal to seek evidence in other countries, a top Chinese
WHO chief Tedros Adhanom Ghebreyesus presented member states
last week with a plan for further study that would include audits
of laboratories and markets in Wuhan, the Chinese city where the
first cases were identified. He also called for greater
transparency from Beijing.
U.S. Unemployment Benefit Rolls Shrink as States Exit Pandemic
The number of Americans receiving jobless payments fell this
month to the lowest level since early in the coronavirus pandemic,
but first-time applications rose as supply constraints persist in
the auto industry.
Continuing payments made through all unemployment benefit
programs fell by 1.3 million in the week ended July 3, to 12.6
million, the Labor Department said Thursday. That was the lowest
level since late March 2020, when new programs responding to the
pandemic first came online.
Democrats Unify Behind Climate Corps, Vague on Details
A NEW CIVILIAN CLIMATE CORPS has become a central progressive
demand for the Democrats' budget reconciliation package, and party
leaders seem poised to go along. Climate groups and elected
officials alike see it as a combination of several top priorities:
a tangible response to climate change, a broad-based jobs program
aimed especially at young people and people of color, and a test
case for Franklin Delano Roosevelt-style populism that President
Biden is so eagerly trying to emulate. Like the Depression-era
Civilian Conservation Corps, it would employ Americans on
climate-focused public-works projects like reforestation.
Tokyo Olympics Opening Ceremony to Skip Usual Razzle-Dazzle
TOKYO-The opening ceremony of the Olympics on Friday is set to
look and feel very different from the bustling celebrations that
opened previous Games, with no crowd, no special effects and no
stadium-wide synchronized dancing.
Only about half the athletes competing at the Games will be
Companies Face Growing Legal Risks Over Ransomware Data
A cancer patient in Ireland is suing a hospital in Cork after
his data was exposed online following a ransomware attack on the
country's healthcare system. The suit reflects the legal and
financial risks for organizations hit in such cyberattacks.
Legal fallout from ransomware attacks heightens the pain that
victim organizations experience after potentially suffering
interruptions to business, losing access to data and taking a
reputational hit, according to experts. In addition, some companies
suffer financial losses and might pay hackers a ransom fee and face
regulatory fines for privacy and security violations.
U.S. Vaccine Panel Signals Preliminary Support for Covid-19
A panel of health experts advising the U.S. government on
vaccines expressed preliminary support for giving Covid-19 boosters
to immunocompromised people, but said they were waiting for
regulatory action before making a formal recommendation.
A work group of the Advisory Committee on Immunization Practices
panel also on Thursday endorsed the continued use of J&J's
vaccine, despite a recent warning about a low risk of a rare
neurological disorder among people taking the shot.
New Zealand Halts Quarantine-Free Travel With Australia for
WELLINGTON, New Zealand-New Zealand will halt quarantine-free
travel with Australia for eight weeks because of increased risks
from the Covid-19 Delta variant, Prime Minister Jacinda Ardern said
The travel bubble with Australia was already halted with New
South Wales, Victoria and South Australia states, which are
battling outbreaks of the virus and together make up about
two-thirds of Australia's population.
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(END) Dow Jones Newswires
July 23, 2021 06:38 ET (10:38 GMT)
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