MARKET WRAPS
Stocks:
European stocks rose Thursday as investors digested earnings and
ahead of the Bank of England's latest monetary policy decision.
The pan-continental Stoxx Europe 600 rose, but London's FTSE 100
wavered around flat with mining shares among the worst
performers.
The Bank of England's latest monetary policy decision, economic
forecasts and minutes are due. Investors expect policies to remain
on hold and are awaiting signals on when the central bank could
begin to pull back on stimulus measures.
"We'll be looking for signs, anything from the BOE that adds to
the hawkishness in the developed-market central bank narrative,"
said Arun Sai, multiasset strategist at Pictet Asset Management.
Earlier this week, the Reserve Bank of Australia said it would go
ahead with its plan to taper its bond-buying program despite an
uptick in Covid-19 cases.
Among European equities, Germany's Siemens rose close to 5%
after raising its full-year outlook and reporting revenue that beat
analysts' expectations. Bayer slipped over 5% after it posted a net
loss and said earnings continued to be affected by litigation costs
for its Roundup weedkiller.
In the U.K., miners fell with Anglo American, Rio Tinto and BHP
Group falling 1.7%, 1.4% and 1.0% respectively. WPP was the top
riser, up 3.1%, after the advertising giant swung to a pre-tax
profit for the first half and raised its full-year guidance.
Rolls-Royce shares gain 1.1% after the engine maker said it
returned to a pre-tax profit in the first-half. Evraz climbs 0.9%
after the steelmaker reported its first-half net profit more than
doubled.
U.S. Markets:
Stock futures edged up ahead of new data on the trade deficit
and unemployment claims that could provide fresh insights into the
pace of the economic recovery.
The major stock indexes have wobbled in recent days amid
concerns that the rebound may be slowing and the Delta variant of
Covid-19 is leading to a surge in cases. Fresh data Wednesday
showed that the private sector added half as many jobs in July as
economists expected. Despite the volatility, the S&P 500 is
still hovering near its all-time high, boosted by strong quarterly
results from the biggest businesses.
"We're pretty positive, we think that the earnings data is very
strong," said Caroline Simmons, U.K. chief investment officer at
UBS Global Wealth Management. Equity markets can continue to climb
by 5% to 10% over the next year, she said.
The continued signs of weakness in the labor market also
suggests that the Federal Reserve will hold off on scaling back its
easy money policies for now, Ms. Simmons added.
"Unemployment is higher than it was pre-pandemic, and central
banks feel there is still excess capacity in the labor market," Ms.
Simmons said. "When it comes to it, we believe that monetary
tightening will be relatively gradual, well flagged, and actually,
equities will probably be able to absorb it."
Pharmaceutical company Moderna, food giant Kellogg and media
conglomerate ViacomCBS are slated to report their results ahead of
the opening bell. Novavax, Beyond Meat and American International
Group are scheduled to post earnings after markets close.
Data on the U.S. trade balance for June is due at 8:30 a.m. ET.
Economists expect the trade deficit to have widened after
preliminary figures showed record goods imports with Americans
buying more from overseas.
Data on jobless claims, seen as a proxy for layoffs, are set to
be released at 8:30 a.m. ET. The figures released last week showed
a moderate decline in claims, but they remain in a range that is
nearly double the pre-pandemic average.
Forex:
The dollar traded flat as investors exercise caution ahead of
the release of July's U.S. nonfarm payrolls report on Friday.
"The Federal Reserve has signalled clearly that it wants to see
stronger employment growth to encourage it to begin tapering
quantitative easing, which makes Friday's nonfarm payrolls report
even more important for U.S. dollar direction in the near-term,"
MUFG Bank currency analyst Lee Hardman said.
ADP private payrolls data trailed expectations on Wednesday,
which will have triggered downward revisions to forecasts for Labor
Department's nonfarm payrolls report, he said. The DXY dollar index
traded flat at 92.2400.
Sterling rose as traders await the Bank of England's policy
decision. RBC Capital Markets currency strategist Adam Cole notes
that BOE policymaker Michael Saunders and the central bank's Deputy
Governor Dave Ramsden recently discussed paring back bond
purchases, although it is unlikely a majority will vote for this
yet.
"A substantial part of the government's fiscal support is being
withdrawn at the end of September and we think risk management
considerations mean that there is still a majority in favor of
continuing with quantitative easing as planned."
The BOE is likely to vote 6-2 to maintain QE, with Saunders and
Ramsden the only outliers, which could be disappointing for some
sterling investors, Cole said.
Bonds:
In bond markets, the yield on the benchmark 10-year Treasury
note edged up to 1.187% from 1.183% on Wednesday.
A bond market rally that drove yields sharply lower has prompted
Pictet Asset Management to take profits on U.S. Treasuries and it
has also reduced them to "neutral" from "overweight".
The downward move in bond yields was initiated by signs that the
U.S. economic growth had started to peak, Pictet AM says. However,
the bond rally was partly technical, helped by an unwinding of
short positions, it said.
"With real yields also having hit all-time lows, investors have
additional reasons to believe the market is richly valued,
particularly at a time when the Fed is seen to be thinking about
the first stages of monetary tightening," Pictet AM said.
Commodities:
Oil prices fell after both benchmarks recorded significant
losses Wednesday. Those declines have come as market players
continue to revise their demand expectations amid the spread of the
Delta variant, said DNB Markets' Helge Andre Martinsen.
In addition, Energy Information Administration data showed a
surprise large build in U.S. crude inventories, although "the key
reason for the unexpected rise in crude inventories was the
continued inflated net crude imports level," Martinsen said.
Separately, Saudi Aramco raised its selling prices for the U.S.
and Asia but cut them for Europe, demonstrating the speed with
which demand expectations for various regions have changed in
recent months.
LME three-month copper prices were down 0.4% at $9,432 a metric
ton after coming under Delta-variant-related pressure Wednesday
along with the rest of the commodities basket.
On top of that, a strengthening U.S. dollar has also put
pressure on metals, according to ING's Warren Patterson.
For copper specifically, Chile's output rose 2.3% in June from
the same month last year, primarily due to gains at its Codelco
mine, although production so far this year is down 1.2% from the
same period in 2020.
London gold prices were flat after receiving a boost from weak
U.S. jobs numbers.
EMEA HEADLINES
German Manufacturing Orders Rose in June, Beating Expectations
Despite Supply Disruptions
German manufacturing orders rose in June more than expected,
despite widespread supply shortages.
Manufacturing orders increased 4.1% on month in June in adjusted
terms, following a revised 3.2% drop in May, according to data from
federal statistics office Destatis released Thursday.
Bayer Shares Tumble After Second-Quarter Loss
Shares in Bayer AG fell in early trading Thursday after the
company posted a second-quarter net loss and an outlook on Ebitda
before special items which is behind consensus.
At 0815 GMT, Bayer traded 5.2% lower at EUR47.23.
Siemens Raises Forecasts as 3Q Profit, Revenue Beat
Expectations
Siemens AG shares gained on Thursday after the company reported
a rise in third-quarter profit, revenue that beat expectations and
raised its full-year outlook on the back of the global economic
recovery.
Shares at 0835 GMT rose 3.8% to EUR143.04.
Siemens to Buy Software Company Sqills
Siemens AG said Thursday that its Siemens Mobility unit plans to
acquire software company Sqills for 550 million euros ($651.1
million), plus a performance-based factor.
Sqills, based in the Netherlands, is active in cloud-based
inventory management, reservation and ticketing software for
public-transport operators.
Glencore Raises Shareholder Returns; Commodity Prices Boosted 1H
Profit
Glencore PLC said Thursday that it will increase 2021
shareholder returns to $2.8 billion, as higher commodity prices
boosted profit and free cash flow in the first half of the
year.
The natural-resources major said that it will pay a $530 million
special cash distribution in September--equivalent to $0.04 a
share--and launch a $650 million share buyback to be completed by
the release of its full-year results next year.
WPP PLC Swung to 1H Pretax Profit; Raises 2021 Guidance
WPP PLC on Thursday reported a swing to pretax profit for the
first half of the year and raised its full-year guidance.
The London-based advertising group also said that it will
buyback 350 million pounds ($486.1 million) worth of shares in the
second half of this year.
Adidas Shares Fall After 2021 Guidance Upgrade
Shares in Adidas AG traded lower on Thursday after the German
sporting-goods company raised its targets for sales and
profitability for the year, an upgrade that had been expected
according to analysts.
At 0832 GMT, Adidas traded 4.2% lower at EUR322.05.
Zalando Shares Slide As 2021 Outlook Disappoints
Shares in Zalando SE dropped in early morning trading as the
Berlin-based online retailer reiterated targets for the year at a
time when investors were hoping for a meaningful upgrade, analysts
said.
At 0830 GMT, Zalando shares traded 8.8% lower at 88.86 euros
($105.20).
Merck KGaA Posts Higher 2Q Earnings, Sales; Raises 2021
Outlook
Merck KGaA on Thursday posted higher earnings and sales for the
second quarter and raised its outlook for the full year.
The German pharmaceuticals-and-chemicals company posted
after-tax profit of 747 million euros ($884.3 million) for the
quarter, compared with EUR289 million in the same period a year
earlier, on sales which grew to EUR4.87 billion from EUR4.12
billion in the same quarter of 2020.
Credit Agricole 2Q Net Profit Doubled
Credit Agricole SA's net profit more than doubled in the second
quarter supported by lower provisions and positive one-offs.
France's second-largest listed bank by assets said Thursday that
net profit for the period was 1.97 billion euros ($2.33 billion)
compared with EUR954 million a year earlier.
Iran to Swear In New President as Unease Grows Over Nuclear
Deal
For the first time in years, all branches of power in Iran are
set to fall under the control of hard-liners when a protégé of the
supreme leader is sworn in as president, bolstering their power and
adding to growing unease that the Islamic Republic's relations with
the West could worsen.
President-elect Ebrahim Raisi, 60 years old, studied as a young
man at one of Supreme Leader Ali Khamenei's Islamic seminaries. He
also served on a panel that ordered the execution of thousands of
political prisoners. Later, he moved up through the ranks to lead
Iran's judiciary.
U.S. Faces Growing Pressure to Allow European Travelers
BRUSSELS-The European Union's top official called on the U.S. to
reverse its ban on travelers from the bloc, urging the Biden
administration to act within weeks to match Europe's opening to
Americans.
The comments by European Commission President Ursula von der
Leyen, which were published in German media on Wednesday, signal a
growing risk that U.S. travelers could again be banned from
visiting Europe because of the Covid-19 pandemic.
GLOBAL NEWS
Jobless Claims Have Settled at Elevated Levels After Steady
Declines
After a steady decline this spring, worker filings for new
unemployment benefits have settled this summer at a level that is
nearly double the pre-pandemic average.
The trend, some economists say, could be happening while the
labor market continues to recover from the pandemic and be part of
a development where claims remain higher because of greater
awareness of unemployment insurance programs.
U.S. Trade Deficit Likely Widened in June as Economic Growth
Boosted Imports
WASHINGTON-The U.S. trade deficit likely widened to near a
record in June as the resurgent American economy drove strong
demand for foreign-made goods.
Economists surveyed by The Wall Street Journal expect a Commerce
Department report Thursday to show that the deficit in goods and
services widened to $74.2 billion in June from $71.2 billion in
May. That would put the trade gap just shy of the record $75
billion in March.
Senate Infrastructure Final Vote Expected as Soon as This
Weekend
WASHINGTON-The Senate moved through a series of amendments to
the roughly $1 trillion infrastructure package on Wednesday, with
lawmakers anticipating a vote on final passage of the bill this
weekend or early next week.
Since negotiators finished the 2,702-page bill last weekend,
lawmakers have considered amendments offered by a mix of
Republicans and Democrats to fine-tune elements of the bill.
Republicans have pushed for an open-ended amendment process, while
Senate Majority Leader Chuck Schumer (D., N.Y.) has called for the
chamber to move quickly. Democrats are seeking to approve a budget
outline for a $3.5 trillion climate and antipoverty package before
the chamber departs for its August recess.
Interest-Rate Increases Could Come as Soon as Early 2023, Fed's
Clarida Says
Significant fiscal stimulus this year is speeding the economy's
recovery so that the Federal Reserve is able to consider lifting
interest rates from near zero by early 2023, said a top central
bank official in a speech Wednesday.
Fed Vice Chairman Richard Clarida said he expects that, under
his current projections for inflation and employment, "commencing
policy normalization in 2023 would...be entirely consistent with
our new flexible average inflation targeting framework."
China State Media Outlet Urges Higher Taxes for Gaming Firms
Amid Gaming Addiction Concerns
China's gaming companies should step up their social
responsibility by paying more taxes, a state-owned media outlet
said Thursday, stoking concerns that a regulatory crackdown may be
looming.
Securities Times, a newspaper affiliated with Communist Party
mouthpiece People's Daily, said that, after years of enjoying
government subsidies and tax cuts, the gaming sector should brace
for taxation that aligns with that of other industries.
U.S. to Set Electric-Vehicle Sales Target of 50% by 2030
WASHINGTON-Roughly half of all cars and light trucks sold in the
U.S. by 2030 would be electric, hydrogen-fuel cell and plug-in
hybrid vehicles under voluntary targets set to be announced
Thursday by the Biden administration and backed by auto makers,
contingent on government support.
In a joint statement, General Motors Co., Ford Motor Co., and
Chrysler maker Stellantis NV said their commitment hinges on
federal funding for manufacturing and supply-chain research and
development, purchase incentives and an EV-charging network.
FDA Weighs Faster Timeline for Approving Pfizer Vaccine
WASHINGTON-U.S. Food and Drug Administration officials, under
pressure to swiftly grant full approval to the Pfizer Covid-19
vaccine, are in an intense debate over whether the agency will make
the decision this month or stretch the timetable into early or
mid-September, according to people familiar with the
discussions.
There has been a flurry of internal discussions about that
timeline within the agency over the past two days, according to
three people familiar with or involved in the talks.
Contractor Says Fired Supreme Court Justice Behind Killing of
Haitian President
A Miami-based security contractor who hired Colombian
mercenaries accused of killing Haitian President Jovenel Moïse last
month said he was working with a former Haitian Supreme Court judge
to help arrest Mr. Moïse and not assassinate him.
Antonio Intriago, owner of a South Florida-based firm called CTU
Security, said the mercenaries went to the president's private
villa to accompany Haitian police executing an arrest warrant for
the president, according to a statement released Wednesday by three
lawyers representing Mr. Intriago. They said the president was dead
when the Colombians arrived, echoing testimony from some of the
soldiers.
WHO Calls for Halt to Covid-19 Booster Shots to Tackle Shortfall
in Developing World
The World Health Organization called Wednesday for a moratorium
on Covid-19 booster shots until at least the end of September to
address a shortfall in vaccine supplies to poor countries.
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(END) Dow Jones Newswires
August 05, 2021 06:01 ET (10:01 GMT)
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