MARKET WRAPS

Watch For:

EU PPI; updates from Infineon Technologies, BMW, Societe Generale, Generali, Stellantis, BP, Fresnillo, Standard Chartered, Direct Line Insurance, DSM, Hiscox.

Opening Call:

Stocks could open lower. U.S. stock futures point higher. Dollar weakens. Oil gains, gold down.

Equities:

European stocks could open lower as investors remained uncertain about the Delta variant and economic outlook.

The S&P 500 gave up its early gains and slipped to start August as investors weighed a strong earnings season with growing uncertainty about the Delta variant and economic outlook.

Investors have been upbeat that the economic expansion will boost corporate profits and enable stocks to keep rising, albeit at a slower pace. A record number of companies have been beating analysts' estimates for earnings this season, according to Deutsche Bank. This week, traders will be parsing earnings from companies including Uber Technologies and Ford Motor.

"There are a few good reasons why the economy will continue to grow at above-normal rates," said Edward Smith, co-chief investment officer at U.K. investment firm Rathbone Investment Management. Consumers are spending freely, companies plan to invest in their businesses and firms are restocking inventories, he said.

"That should enable earnings momentum to stay strong, carrying through to the end of the year," Mr. Smith said.

Earnings and economic data have led investors to keep piling into stocks, putting major indexes within striking distance of records. Data released Monday also showed that manufacturing activity in the U.S. stayed robust in July.

Still, some are cautious that the highly contagious Delta strain of coronavirus, a prolonged spell of inflation and China's efforts to rein in tech firms could lead to bouts of volatility.

These worries also have stoked swings in the broader market lately, and major indexes whittled their gains in midday trading. Still, dips in the stock market have been short lived in recent weeks.

"There's just so much buying momentum on dips right now. It's hard to bet against the overall market," said David Bahnsen, chief investment officer of Bahnsen Group, a wealth-management firm.

Investors said sentiment in broader markets was given a boost by comments from the Chinese securities regulator. The China Securities Regulatory Commission said it would cooperate with Washington on U.S. listings after the Securities and Exchange Commission said it would increase scrutiny of Chinese companies that aim to sell shares in the U.S.

"Chinese and U.S. regulators shall continue to enhance communication with the principle of mutual respect and cooperation, and properly address the issues related to the supervision of China-based companies listed in the U.S.," a spokesperson for the CSRC told reporters, according to a transcript posted on the regulator's website Sunday.

Chinese stocks were lower in early trade, tracking declines in other Asian equity markets. Pandemic developments are likely to be in focus in China, following news that the highly contagious Covid-19 Delta variant was found in more than 20 cities, IG said.

"Efforts to stem the spread of the virus may hint at a slower economic activity and softer energy demand in the months to come," it says.

Forex:

The U.S. dollar weakens slightly against the euro and softens 0.3% against the yen. The WSJ Dollar Index ticked slightly lower.

"The combination of less-pronounced but nonetheless lingering Delta concerns, China's uncertain regulatory crackdown, and the glide-path towards Fed tapering suggests a summer holding pattern for USD," JPMorgan said.

"Despite the dollar sell-off post-Fed, this combination of factors underscores how the opportunity for broad-based USD weakness remains quite narrow, contained by both sides of the dollar smile (growth risks vs Fed normalization.)

The potential ripple effects of China's regulatory crackdown into CNY's portfolio flow backdrop are concerning, even if there is a better policy regime to prevent any repeat of the 12% CNY slide in 2015-16."

Range-bound trading in the euro versus the dollar is likely to persist this week due to a lack of eurozone economic data and the European Central Bank's looser for longer policy stance, ING said.

"The eurozone's calendar is fairly quiet and indeed the ECB provided enough reasons with its strategy review and at the July meeting that they will remain unreactive to economic developments for longer," ING analysts said.

That means moves in EUR/USD this week will be caused by factors outside the eurozone and driven by the dollar, they said.

If the dollar recovers, EUR/USD could fall below 1.1800 but declines will be limited with the pair remaining in a tight range, they said.

Bonds:

The Treasury rally picked up speed, sending the 10-year yield as low as 1.146%, its lowest level since February, ahead of July employment report coming up Friday and as the Delta variant raises the prospect of new sanitary restrictions for business around the globe.

The yield is now off the day's low, trading at 1.162%. Both the Fed and the ECB have pledged to keep an easy monetary policy for now, busting demand for government debt.

Energy:

Oil gained in morning Asian trade after declining overnight on disappointing U.S. and China economic data.

Rising case numbers of the highly contagious Covid-19 Delta variant globally is likely to remain a major concern for oil demand, CBA said. "Restrictions on mobility, like we're seeing through parts of Asia, are particularly negative for oil demand given that two thirds of global oil consumption is tied to transportation," it added.

Metals:

Gold inched lower in Asian trading after rising overnight on a further pullback in U.S. 10-year Treasury yields. The precious metal could continue to trade above $1,800 an ounce, due to concerns over the rising number of Covid-19 Delta variant cases, which is likely to continue weighing on global economic growth, OCBC said.

Copper fell in Asian trading amid continued concerns over possible supply disruptions arising from the threat of strike action at some Chilean mines. Workers at the Escondida mine in Chile, the world's largest, are threatening to go on strike after rejecting the latest wage offer from operator BHP, ANZ said.

The bank also noted similar situations at Chile's Andina and Caserones mines, which, together with Escondida, represent some 7% of the world's copper supply. The three-month LME copper contract was 0.5% lower at $9,650.5 a ton.

TODAY'S TOP HEADLINES

Tencent Plummets as China Takes Aim at Online Videogames

Shares of Tencent Holdings Ltd. and rivals plummeted Tuesday after Chinese state media criticized online gaming as "opium for the mind," fueling investor concerns that the companies' popular games could be swept up into a broader regulatory crackdown.

In morning trading in Hong Kong Tuesday, Tencent's stock fell more than 10%. The Hong Kong shares of smaller peer NetEase Inc. dropped 15%, while those of video and gaming group Bilibili Inc. declined 14%.

Janet Yellen to Enact Steps to Avoid Breaching Debt Ceiling

WASHINGTON-Treasury Secretary Janet Yellen on Monday revealed further measures to avoid breaching the federal government's borrowing limit and urged Congress to increase or suspend the ceiling, which went back into effect on Sunday.

Starting Monday, the Treasury Department will suspend reinvestments by a number of retirement funds for civil servants and postal workers, Ms. Yellen said in a letter to congressional leaders. The funds will be made whole once the debt limit is either suspended or increased, she said.

Delta Variant Stalls Asia's Economic Recovery After Early Rebound

Asia is emerging as a weak link in an otherwise strong global economic recovery, as new pandemic restrictions restrain manufacturing in some countries and the exports that have powered the recovery in China show signs of slowing.

With progress on vaccinations slower than in the West, Asia is hitting new pandemic highs driven by the Delta variant of the coronavirus. The spread of the virus is threatening to hurt consumer confidence and erode the advantage of many Asian economies as manufacturing powerhouses.

RBNZ to Further Tighten Mortgage Lending

WELLINGTON, New Zealand--New Zealand's central bank said it plans to further tighten home mortgage lending as earlier curbs haven't produced a sufficient reduction in what it considers risky loans.

Owner-occupier mortgages deemed riskiest would be limited to 10% of new loans, down from 20%, the Reserve Bank of New Zealand said Tuesday. The changes would be implemented from Oct. 1 after consultations, it said.

U.S. Factory Growth Held Solid Momentum in July, But Shortages Persist -- ISM

Manufacturing activity in the U.S. remained robust in July, but slowed somewhat compared with previous months as supply-chain strains continued to act as a meaningful drag on growth.

The ISM Manufacturing Report on Business PMI fell to 59.5 in July from 60.6 in June, according to data from a survey compiled by the Institute for Supply Management released Monday. Economists polled by The Wall Street Journal expected the index to come in at 60.8.

Fintechs Need to Be Regulated More Like Banks, Says Report From Global Regulator Group

Calls are growing louder to impose more stringent regulation on technology giants that spill over into financial services.

A paper published by the Bank for International Settlements, a consortium of central banks and financial regulators, said tech companies that play a critical role in payments and other areas should be subject to stricter regulatory scrutiny that considers issues beyond traditional market risks.

Fed Chairman Powell's Approach to Regulation Has Drawn Criticism From Some Democrats

As President Biden nears a decision about who should be the next Federal Reserve chairman, the current chief is getting criticized by progressives for his record on bank regulation and the postcrisis rulebook for Wall Street.

During Chairman Jerome Powell's nearly four years as head of the Fed, the central bank has revamped big-bank stress tests, tailored its rules for U.S. lenders based on their size and simplified key postcrisis regulations such as the Volcker rule prohibition on proprietary trading.

Ernst & Young to Pay $10 Million to Settle SEC Probe of Bid Violations

Ernst & Young LLP will pay $10 million to settle a regulatory investigation into allegations that it improperly obtained confidential information in pursuit of a contract to audit a public company's books.

The Securities and Exchange Commission also fined four accountants allegedly involved in the misconduct: an Ernst & Young partner, two retired partners and a former chief accounting officer of the unnamed client company who shared the competitive information with them, according to the agency. The four accountants were all suspended from reviewing the financial statements of public companies for periods ranging from one to three years.

Hackers Take Down Italian Vaccine-Booking Site

A cyberattack brought down the Covid-19 vaccine-scheduling website for the Italian region of Lazio, underscoring the vulnerability of healthcare data and vaccine technology during the pandemic.

On Sunday hackers attacked technology systems run by the government of Lazio, the region that encompasses Rome, Italian authorities said in a Facebook post.

Heineken's Usual Advantage Will Slow Its Recovery

A big business in developing countries is normally a reason to buy Heineken's shares. For now, though, slow vaccination rollouts have taken the fizz out of some of the world's most promising beer markets.

The second-largest brewer globally after Anheuser-Busch InBev said Monday that sales increased 14% in the six months through June, compared with the same period of last year. Revenue is still more than one-tenth below where it was in the first half of 2019.

Ferrari Is Stuck in Neutral

Ferrari likes to take its time to get things right. That is a strength in creating cars that justify astronomical prices, but it also means investors can't expect the stock to suddenly pick up speed.

Like the luxury industry it sometimes seems part of, the Italian sports car maker is accelerating smoothly out of the pandemic. Second-quarter operating profits reported Monday were about 15% higher than in the same period of 2019, before Covid-19 struck. It sold a similar number of vehicles, but those cars it did sell-such as the SF90 Stradale, a plug-in hybrid with a base price north of $500,000-were more expensive and profitable than those of two years ago. June was the best month ever for orders.

Device Maker Linked to Alleged Ponzi-Like Scheme Loses Bankruptcy Funding

Insightra Medical Inc., a device maker which filed for bankruptcy after its investment firm owner became the target of civil and criminal complaints by the U.S. government, lost access to financing and is teetering on the edge of liquidation.

Insightra lawyer Anthony Saccullo said at a court hearing Monday that its direct shareholder Odyssey Life Science Holdings LLC was cutting off the financing, including $500,000 the company needed in the short term.

Former Nazi Guard, Age 100, to Stand Trial in Germany

BERLIN-A 100-year old man will be tried in Germany on charges of aiding and abetting mass murder while working as a concentration-camp guard, making him one of the oldest defendants in a case brought against alleged Nazi-era perpetrators.

The centenarian was charged with complicity in the murder of more than 3,500 inmates at the Sachsenhausen camp on the outskirts of Berlin. He is alleged to have worked there between 1942 and 1945 as a member of the SS Nazi militia.

U.S. and Turkey Caught in Extradition Fight for Businessman With Ties to Turkish Elite

A well-connected Turkish businessman currently sits in a Vienna jail, awaiting his fate in an extradition contest between the U.S. and Turkey. Both want him on charges of laundering proceeds from a U.S. renewable-energy tax credit fraud, and where he winds up could affect already strained relations between the U.S. and a NATO ally.

Sezgin Baran Korkmaz was arrested in Austria in June at the request of the U.S. Department of Justice, which accuses him of laundering more than $133 million in tax fraud proceeds through a network of businesses he controls in Turkey. Prosecutors in Turkey want him in connection with the same alleged scheme, and have launched extradition proceedings against him in an Austrian court, which ordered him to be held until Sept. 22.

Goldman Sachs Is Giving Entry-Level Bankers a Nearly 30% Raise

Junior bankers at Goldman Sachs Group Inc. are getting a big raise.

The Wall Street firm is increasing base pay for its entry-level employees-first-year analysts-to $110,000, a nearly 30% increase from the previous starting salary of $85,000, according to a person familiar with the matter. Second-year analysts are set to make $125,000, up from $95,000. Salaries for first-year associates will jump to $150,000 from $125,000.

Li Auto Seeks to Raise Around $1.9 Billion in Hong Kong Offering

Chinese electric vehicle maker Li Auto Inc. plans to raise as much as 15 billion Hong Kong dollars (US$1.93 billion) through a share offering in Hong Kong.

The company plans to sell 100 million shares and has set a maximum price of HK$150 each for the stock that is expected to start trading on the Hong Kong exchange from Aug.12, Li Auto said Tuesday.

Write to sarka.halas@wsj.com

Expected Major Events for Tuesday

00:01/IRL: Jul Ireland Manufacturing PMI

06:00/ROM: Jun PPI

07:00/CZE: 2Q LFSS Employment & Unemployment

07:00/SPN: Jul Unemployment

07:00/SWI: Jul Quarterly Consumer Sentiment Index

07:00/TUR: Jul PPI

07:00/TUR: Jul CPI

09:00/EU: Jun PPI

14:00/DEN: Jul Foreign Exchange & Liquidity

23:01/UK: 3Q CBI SME Trends Survey

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

(END) Dow Jones Newswires

August 03, 2021 00:19 ET (04:19 GMT)