European stocks rose Wednesday as investors awaited fresh guidance from the Federal Reserve.

Travel stocks were boosted by loosening travels restrictions, while banking names also lifted markets. Barclays rose almost 4% in London after the U.K. bank reported a rise in quarterly profit that surpassed analysts' expectations. "Understandably the reliance upon their investment banking division does highlight why we are likely to continue seeing underperformance for the UK banks compared with their US counterparts," said Josh Mahony at IG.

"However, with the government mitigating much of the economic fallout of the pandemic, and spending likely to gradually increase, banking stocks remain a strong pro-cyclical pick going forward," he added.

In the U.S., the stock market is hovering near all-time highs, with investors betting on strong corporate earnings, the economic rebound, and continued support from central banks' easy monetary policies.

Their optimism has been tempered in recent days by concerns about the Delta variant of Covid-19, China's regulatory crackdown and the risk of persistently high inflation.

"There is a general fishing for direction right now," said Aoifinn Devitt, chief investment officer at Moneta Group. "The strong underpinning of the market is that there is a lot of capital waiting on the sidelines, waiting for an opportunity to enter, and that means any corrections are very short lived."

The market's biggest vulnerability right now is that stocks can't trade at current valuations without continued support from the Fed, Ms. Devitt added.

U.S. Markets:

Stock futures traded mixed, as investors awaited the outcome of the Fed meeting and more corporate results, on the heels of results from Apple and other tech titans.Fed officials are set to conclude their two-

day policy meeting on Wednesday, with a statement due to be released at 2 p.m. ET. The focus will be on any signals from Chairman Jerome Powell about whether policy makers are accelerating deliberations over how and when to pare back on their easy-money policies, and any shift in the Fed's view on inflation.

"If Powell is being honest, every economist has been surprised about how high inflation has been, and there is no sign of it coming off just yet, " said Brian O'Reilly, head of market strategy for Mediolanum International Funds. "But they are going to look through this. There will be no change, but they are at the stage where they are starting to talk about talking about tapering."

Ahead of the opening bell, Class A shares in Google's parent company, Alphabet, rose almost 2% after the technology giant said late Tuesday that its profits had surged to a record. Shares in Apple fell 0.8% after the largest American company by market value warned that its rate of growth will likely slow.

Thermo Fisher Scientific, Spotify Technology, Pfizer, McDonald's, Bristol-Myers Squibb and Boeing are among a host of large companies set to release earnings ahead of the opening bell. Facebook, Qualcomm, PayPal Holdings and Ford Motor are due to post reports after markets close.


The dollar will move materially if the Federal Reserve mentions the spread of the Delta coronavirus variant or a tapering of asset purchases in its policy statement later Wednesday, BK Asset Management said.

"If the Fed includes concerns about the Delta variant, the dollar could extend its slide quickly, and if they shrug off those worries and officially acknowledge that taper is coming, the dollar will soar," BK forex strategist Kathy Lien said.

Fed Chair Jerome Powell will be pressed to discuss both topics even if they don't make it into the policy statement, she said.

The dollar could fall if the Fed's guidance on asset purchases is left unchanged in a policy decision later Wednesday, Commerzbank said.

Many market participants expect the Fed to signal it could scale back stimulus soon by dropping the word "substantial" from its statement that it will maintain the current pace of asset purchases until "substantial further progress" has been made towards its goals, Commerzbank currency analyst Ulrich Leuchtmann said. "But that is not our house view." That means the dollar should end the day lower, Leuchtmann said.

The fall in U.K. coronavirus cases is a promising development for the pound in the near-term because it could be years before the real economic impact of Brexit becomes clear, Commerzbank said.

Leaving Brexit uncertainty aside, an abatement of the pandemic "speaks for positive real economic impulses," which should support the pound, Commerzbank currency analyst Esther Reichelt said.

"However, the Bank of England's rather dovish stance should put a stop to further significant GBP gains for the time being."


The yield on the benchmark 10-year Treasury note rose to 1.256% from 1.235% on Tuesday.

The Fed is likely to leave rates, the pace of asset purchases and guidance all unchanged at its decision on Wednesday, said UniCredit. A formal discussion about tapering asset purchases will start at the current meeting, said UniCredit, although it doesn't expect any clear hint on the timing or composition of tapering.

"There are a range of views on the FOMC regarding tapering, and it will likely take a while to build a consensus," UniCredit said.

The Italian bank's analysts add that the FOMC also wants to gather more clarity from data, while the spread of the delta variant favors caution.


Oil prices were higher, leaving both benchmarks 0.6% and 0.3% below the level at which they began the week. Gentle gains follow API inventory data released Tuesday that showed a larger than expected drawdown in U.S. crude stocks, according to OANDA's Jeffrey Halley.

Traders will watch out for EIA data released later Wednesday.

Gold prices ticked higher ahead of the Fed's monetary policy meeting while base metals were mixed. Three-month copper on the LME fell 0.6% to $9,735.50 a metric ton while aluminum rises 0.4% to $2,496 a ton.



Deutsche Bank Posts Surge in Profit but Faces Headwinds

Deutsche Bank AG's results signaled that the bumper profits accruing to its investment bank may have peaked, exposing the deeper challenges the lender faces two years into a strategic makeover.

The Frankfurt-based bank reported a drop in investment-banking revenue in the second quarter as booming client activity during the pandemic slowed down. Still, net profit surged compared with last year as its business lines held better than expected and the economic rebound in Germany put a lid on souring loans.


Barclays Profit Soars on Investment Banking

LONDON-Barclays PLC Wednesday said its net profit rose in the second quarter, driven by a strong performance in its investment bank.

The London-based bank earned GBP2.11 billion, equivalent to $2.92 billion, in the three months to the end of June, up from GBP90 million in the same period last year.


Rio Tinto Net Profit Jumps on Boom in Commodity Prices

SYDNEY-Rio Tinto PLC reported a record first-half net profit and more than tripled its midyear payout to shareholders, benefiting from a bull run in commodity prices that has stoked inflation expectations around the world.

On Wednesday, the world's second-largest mining company by market value said net profit for the six months through June rose to more than $12.3 billion from over $3.3 billion a year earlier.


German Consumer Confidence Set to Stagnate in August

German consumer sentiment is expected to remain unchanged from the previous month in August, according to data from the market-research group GfK released Wednesday.

GfK's forward-looking consumer sentiment index is set to stay at minus 0.3 points in August, unchanged from July, when it reached the highest level since August 2020. Economists polled by The Wall Street Journal had expected consumer sentiment to rise to 0.5.


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.


BASF Swung to 2Q Profit; Confirms Sales, Outlook

BASF SE said Wednesday that it swung to profit for the second quarter and confirmed sales figures and a raised outlook it provided during preliminary results.

The German chemicals company posted net profit of 1.65 billion euros ($1.95 billion) for the second quarter, from a loss of EUR878 million in the same period a year earlier.


Santander Profit Beat Expectations Amid Lower Provisions

Banco Santander SA said Wednesday that it swung to a profit in the second quarter of the year as revenue grew and provisions fell, and that it is on track to outperform its profitability target for 2021.

The Spanish lender reported a net profit of 2.07 billion euros ($2.45 billion) from April to June, a reversal from a year earlier, when it posted a EUR11.13 billion net loss due to one-off impairments related to the Covid-19 pandemic. Analysts expected profit of EUR1.77 billion, according to a consensus provided by FactSet.


UK Retail Prices Fell at Faster Pace in July

U.K. retail prices fell more sharply in the first week of July due to fierce competition between supermarkets and a steeper drop in nonfood prices, according to the latest report by Nielsen IQ and the British Retail Consortium released Wednesday.

Prices at U.K. stores dropped 1.2% year-on-year between July 1 and July 7, compared with a decline of 0.7% in June, the report found.


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.



Fed Meeting Will Focus on Tapering Timeline

Federal Reserve officials are set to resume deliberations Wednesday about how and when to begin paring their asset purchases amid an economic rebound clouded by supply-chain bottlenecks and rising Covid-19 cases.


Hot Housing Market Lets Banks Sell Mortgage Risk

A red-hot housing market is enabling banks to sell a new kind of bond that shares the risk of mortgage and loan defaults with institutional investors.

Texas Capital Bank recently sold $275 million of securities to investors looking to cash in on the pandemic-fueled boom in home prices. The bonds are backed by short-term loans the bank makes to mortgage lenders. When those lenders' borrowers default, the investors in the bonds effectively cover the loss.


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.


Biden to Propose Buy American Rule for Government Procurements

WASHINGTON-The Biden administration is proposing a rule that would accelerate federal procurement policy to require a higher level of American-made products.

Under an initiative to be announced Wednesday, the government would require that products obtained under the longstanding "Buy American" program have at least 60% of the value of components made in the U.S., up from the current 55% threshold. That would increase to 75% by 2029, White House officials 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.


GOP Bill Attempts to Inject Life Into Stalled Internet Privacy Talks

With work toward a federal privacy law largely stalled for the past 18 months, a top GOP lawmaker is trying to turn back the clock.

Sen. Roger Wicker (R., Miss.) plans Wednesday to introduce the Setting an American Framework to Ensure Data Access, Transparency, and Accountability Act. The new bill from the Senate Commerce Committee's ranking member largely reverts to a 2019 draft bill for ensuring consumers' control over personal data collected or processed by companies.


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(END) Dow Jones Newswires

July 28, 2021 06:15 ET (10:15 GMT)

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