EMEA Morning Briefing: Stocks to Struggle at Open, Commodities Rise


Watch For:

Monetary developments in the euro area; U.S. Advance Report on Durable Goods; U.S. Federal Open Market Committee meeting; updates from Deutsche Boerse, Dassault Systemes, Kering, Telecom Italia, Ferrovial, ACS, FirstGroup, Croda International, Reckitt Benckiser, Koninklijke KPN, Randstad.

Opening Call:

Europe to open flat after choppy session on Wall Street. Dollar edges lower, Bitcoin jumps. Oil and gold rise.


European stocks could struggle at the open as investors awaiting results from a number of U.S. technology giants later this week and for guidance from the Federal Reserve on Wednesday.

"This week is really where we enter crunchtime for earnings," said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "With tech names reporting, the bar is high."

Rising concerns over the Delta variant of Covid-19 and worries over economic growth are likely to challenge the pace at which the U.S. stock market will rise in the coming weeks, some investors said. Money managers also are awaiting guidance from the Federal Reserve this week, including policy makers' outlook on inflation and any clues on when the central bank may start scaling back its bond purchase program.

"Economic activity in the U.S. does seem to have peaked," said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. "We're still in very benign territory where the economy is still powering ahead, but not at the full elastic bounce back."

The market actually may be reflecting more of that than it seems, said JC Parets, the founder of technical-analysis service AllStarCharts. The records for the big indexes are coming from a small group of stocks, which happen to be the largest. Underneath that, he said, the picture is much choppier.

In corporate news, Rio Tinto is expected to report underlying earnings of US$12.01 billion for the six months through June, according to 14 analysts' forecasts compiled by Vuma.

That would be up from US$4.75 billion in the same period in 2020. A Vuma compilation of 12 forecasts points to an interim dividend of roughly US$4.93 a share, versus US$1.55 a share a year ago.

Forecasts on the miner's payout are wide, however, after a strong first half for iron-ore prices. Analysts are tipping an ordinary dividend anywhere between US$3.57 a share and US$9.16 a share. Rio Tinto is scheduled to report after the Australian market closes Wednesday.


The greenback edged lower against major currencies, with the WSJ Dollar Index falling 0.3%, ahead of big-tech earnings and the Fed's communication later this week. A bullish earnings season and rising economic indicators are offset by concerns about the Delta variant and possible lockdowns around the world. The dollar slid 0.5% against the British pound and the Swiss franc, and 0.3% versus the euro.

The Federal Reserve's bringing forward of interest rate expectations in June likely encouraged more speculators to bet on the dollar strengthening than weakening in the week to July 20, ING said.

The latest CFTC data showed the dollar's positioning moved into net-long territory for the first time since March 2020 in the week to Tuesday. Long positions expect an asset price to rise and short positions expect it to fall.

"This is clearly a signal of how the combination of the Fed's hawkish expectations after the recent shift in tone and the general unwinding of reflation trades has prompted a recovery in USD sentiment," ING forex strategist Francesco Pesole said

On Monday, Bitcoin jumped about 25% from its 5 p.m. ET level Friday. Investors pointed to short positions being liquidated and speculation that Amazon may be venturing into digital currencies. The price of bitcoin rose as high as $ 40,539, its highest level since mid-June, according to CoinDesk.

Worries about post-Brexit trade tensions could have prompted speculators to bet against sterling in the week to July 20, ING said.

Sterling short positions outweighed long positions for the first time this year in the week to last Tuesday, according to the latest CFTC data. Shorts expect an asset price to fall and longs expect it to rise.

The shift in positioning isn't fully aligned with the spot market, where most G-10 currencies have performed worse than sterling in the past month, ING forex strategist Francesco Pesole said.

"At the same time, speculators may start to be pricing in some risk premium related to the post-Brexit EU-U.K. negotiations on the Northern Ireland protocol, which appear to be at a stalemate."


In bond markets, the yield on the 10-year Treasury note ticked lower to 1.276% from 1.286% Friday.

The yield on 10-year Treasury inflation-protected securities, or TIPS, fell to a record low Monday. Viewed as a proxy for the real yield, a measure of what investors earn from bondholdings after compensating for inflation, the TIPS yield reached minus 1.120% in intraday trading, according to Tradeweb.


Oil edged higher in the morning Asian session, but gains could be limited by ongoing concerns over the Covid-19 Delta variant.

This variant continues to spread globally and travel restrictions aren't easing, Oanda said.

The world is determining how it will live with Covid-19, and it still currently appears that worries over crude demand in the short term may prevent the tight market from sending oil prices much higher, Oanda added.


Gold consolidated as traders eye this week's Federal Open Market Committee meeting. Market players are waiting to see whether the Fed will signal the start of tapering, for example, by scaling back bond purchases, which would likely be bad news for gold, Commerzbank said.

The price of gold is unable to detach itself from the psychologically important $1,800/oz level ahead of the meeting, it added.

Copper rose in early Asian trade due to a likely growing bottleneck in primary metal production in China, according to Goldman Sachs. The Covid-19 Delta variant could exacerbate the market tightness, it said.

The investment bank expects a 430,000 ton refined metal deficit in 2H, and thinks this could continue next year. Maintaining its "bullish conviction," Goldman Sachs has price targets for copper in three, six and 12 months of $10,500, $11,000 and $11,500 a ton, respectively.

The three-month LME copper contract rose 0.9% to $9,890/ton.

Iron ore rose in early Asian trade as the selling that had weighed down the steel-making ingredient in recent sessions has subsided. Investors are finding confidence in the growing steel output of many countries even as Chinese authorities try to rein in steel production, ANZ said.

After a strong start to the year, China's steel output is showing signs of weakness, the bank said.

The most-traded September iron ore contract on the Dalian Commodity Exchange rose 1.2% to CNY1,155.0 a ton.


China Industrial Profit Data for June Signal Relatively Strong, if Uneven, Recovery

China's industrial profit rose 20.0% from a year earlier in June, slowing from May's 36.4% expansion as favorable low- base effects faded.

The profitability of China's industrial companies looks relatively strong as more than 70% of those surveyed reported higher profits than what they earned before the coronavirus pandemic, said the National Bureau of Statistics.

Bitcoin Jumps to a Six-Week High

The price of bitcoin jumped to a six-week high Monday, with some investors attributing the rally to short positions being liquidated and speculation that Amazon.com Inc. may be venturing into digital currencies.

Bitcoin soared as high as $40,501.70, according to Dow Jones Market Data, reaching its highest level since mid-June. It rose 9% from its 5 p.m. EDT level Sunday. Rival currency Ether jumped 4.8%.

Infrastructure-Bill Negotiators Try to Overcome Late Hurdles

WASHINGTON-A push to complete a roughly $1 trillion infrastructure agreement hit a series of hurdles Monday, as aides squabbled over funding for water infrastructure and how to apply a requirement that federal contractors pay their employees a locally prevailing wage, among other issues.

Lawmakers had previously set Monday as a target for closing out their talks and beginning floor consideration of the emerging agreement, though that timeline seemed to slip as the two sides sniped at each other.

Chinese Officials Blame U.S. for Stalemate in High-Level Talks

TAIPEI-Senior U.S. and Chinese officials sparred over Covid-19, human rights and cybersecurity during a tense exchange Monday in the highest-level meetings between the two countries on Chinese soil since Joe Biden became president.

Chinese Vice Foreign Minister Xie Feng, meeting with U.S. Deputy Secretary of State Wendy Sherman in the port city of Tianjin on Monday, said American perceptions of China as an "imagined enemy" were responsible for a stalemate in relations between the two powers.

Foreign Purchases of U.S. Homes Fall to New Low

Foreign purchases of U.S. homes declined for a fourth straight year as the Covid-19 pandemic sharply limited international travel.

Foreigners bought $54.4 billion in U.S. residential real estate in the year ended in March, down 27% from the prior year, according to a report released Monday by the National Association of Realtors. That is the lowest level on record since NAR began collecting the data in 2011.

China's Tech Regulator Orders Companies to Fix Anticompetitive, Security Issues

China's main technology-sector regulator ordered the country's internet giants to fix certain anticompetitive practices and data security threats, building on a regulatory campaign to reform how China's largest tech companies operate.

China's Ministry of Industry and Information Technology, which oversees China's telecommunication and industry policies, said Monday that its new six-month rectification program was aimed at correcting a range of industry issues, including disrupting market order, infringing on users' rights, mishandling user data and violating other regulations.

Investors Aren't Playing Defense, but the Military Splurge Isn't Over

Weapons makers are struggling in the current equity market, but their defensive perimeter may be more secure than it seems.

On Monday, Lockheed Martin reported a $1.8 billion second-quarter profit, narrowly missing Wall Street's expectations because of a $225 million loss on a classified program. The company's shares slipped, despite Chief Executive James Taiclet raising the earnings-per-share forecast for 2021.

Credit Card Spending Bill Will Come Due

Credit-card companies no longer have a spending problem. They've still got a borrowing problem.

In recent months, many U.S. consumers were spending at levels similar to, or better than, what they were doing in the same period in the year before the pandemic began. At Capital One Financial, purchase volume on its domestic cards was up 25% in the second quarter of 2021 from what it was the same period in 2019.

Aon, Willis Towers Scrap $30 Billion Merger Amid Antitrust Impasse

Aon PLC and Willis Towers Watson PLC abandoned a more than $30 billion tie-up to create the world's largest insurance broker, deciding it wasn't worth pursuing in the face of Justice Department opposition to the merger.

The DOJ filed a lawsuit against the deal last month, the first big test of the Biden administration's more muscular antitrust policy. The suit, filed in a federal court in Washington, said that the proposed merger would lead to higher prices and reduced innovation for U.S. businesses, employers and unions that rely on their services.

LVMH Books Higher 1H Revenue, Profit as Fashion Sales Surge

LVMH Moet Hennessy Louis Vuitton SE's earnings rose sharply in the first half as sales jumped by more than half on the year, driven by the core soft-luxury division.

The French luxury-goods giant said Monday that it made an operating profit of 7.63 billion euros ($8.98 billion) in the six months to end-June, nearly fives times as much as the previous-year period, and some 44% higher than in the same period of 2019. Sales increased to EUR28.67 billion from EUR18.39 billion previously.

Covid-19 Vaccine Pioneer BioNTech Plans to Make New Malaria and Tuberculosis Shots in Africa

BioNTech SE said it would invest some of the profits from the Covid-19 vaccine it markets with Pfizer Inc. into developing shots for malaria and tuberculosis in Africa, part of the German company's plan to establish a large production hub for innovative medicines on the continent.

The biotech firm plans to build a factory in Africa and develop a manufacturing network with local partners to transfer its technology based on messenger RNA, a genetic molecule, to a continent that has suffered from a lack of access to vaccines and other lifesaving treatment, BioNTech Chief Executive Ugur Sahin said.

U.S. Combat Role in Iraq to End This Year, Biden Says

WASHINGTON-President Biden said the U.S. combat mission in Iraq would conclude by the end of 2021, but the U.S. military would continue to work with Iraqi forces in their fight against the Islamic State militant group.

"We are not going to be, by the end of the year, in a combat mission," Mr. Biden said Monday at the start of a White House meeting with Iraqi Prime Minister Mustafa al-Kadhimi. The president said U.S. military forces would "be available to continue to train, to assist, to help and to deal with ISIS."

Lebanon Nominates Former Prime Minister Najib Mikati to Form Government

BEIRUT-Lebanon's political factions nominated billionaire businessman and former Prime Minister Najib Mikati to form the country's next government, in an attempt to break a monthslong deadlock after two previous attempts were abandoned.

President Michel Aoun on Monday tapped Mr. Mikati with forming a new government after a majority of lawmakers backed him. His designation comes after Saad Hariri, the last prime minister-designate, gave up his nine-month effort to form a government in mid-July.

Barclays Overtakes Credit Suisse in Investment Banking

Barclays PLC recently overtook Credit Suisse Group AG in investment banking revenue, a sign that the U.K. bank's long, frustrated push to be a major player is making progress thanks in part to the troubles of its Swiss rival.

The London-based bank vaulted past its Zurich-based counterpart to be the largest investment bank outside the U.S. in the second quarter of this year with $1.26 billion of investment banking revenue, representing a 4.1% market share, according to Dealogic. JPMorgan Chase & Co. was the top investment bank during the quarter with $3.15 billion of revenue, a 10.1% market share.

Intel Sets Plan to Again Become World's Premier Chip Company

The race is on at Intel Corp. as the semiconductor giant pledges to return to the top of its game, committing to produce the world's best chips within four years.

To get there, Chief Executive Pat Gelsinger laid out a plan Monday for the company to introduce at least a new central processing unit-the brains of the modern computer-every year between 2021 and 2025. Each is expected to be based on transistor technology more advanced than the last.

Ad-Tech Company AdTheorent Nears $1 Billion SPAC Deal to Go Public

Advertising-technology company AdTheorent Inc. is nearing a combination with a special-purpose acquisition company to go public in a deal that would value the firm at about $1 billion, people familiar with the matter said.

AdTheorent uses machine learning and data science to optimize advertising and marketing campaigns for its customers. It says it can efficiently target consumers without using sensitive personal data.

Judge Extends Deadline for FTC to Refile Facebook Antitrust Suit

WASHINGTON-The Federal Trade Commission has until Aug. 19 to file an amended version of its antitrust lawsuit against Facebook Inc. after a judge granted the agency an extension.

Judge James E. Boasberg of the U.S. District Court for the District of Columbia had previously set a July 29 deadline after saying the agency hadn't supported its claims that Facebook has monopoly power in personal social-networking services. His dismissal of the suit cited in part how the FTC calculated the company's market share.

Tesla's Quarterly Profit Soars to Record $1.1 Billion

Tesla Inc.'s generated a record quarterly profit as the car maker largely sidestepped the effects of a global chip shortage that has constricted production for many global auto makers.

The Silicon Valley electric-car maker, as it posted second-quarter earnings on Monday, said its ability to navigate ongoing supply-chain challenges would help dictate its pace of growth in the second half of the year as it races to satisfy growing demand for battery-powered vehicles.

Write to sarka.halas@wsj.com

Expected Major Events for Tuesday

05:00/FIN: Jun Labour force survey, incl unemployment

06:00/DEN: Jun Retail Sales Index

07:30/SWE: Jun Foreign trade

08:00/ITA: Jun Foreign Trade non-EU

08:00/EU: Jun Monetary developments in the euro area (M3)

08:30/UK: Jun Capital issuance

10:00/FRA: 2Q Claimant count and job advertisements collected by Pole emploi

10:00/UK: Jul CBI Distributive Trades Survey

12:00/HUN: Jul Hungarian interest rate decision

15:59/UKR: Jun Industrial Production

23:01/UK: Jul REC JobsOutlook survey

23:01/UK: Jul Shop Price Index

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

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  07-27-21 0019ET
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