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HomeAll NewsMost read newsBusiness Leaders Biography
Birthday : 06/28/1971
Place of birth : Pretoria - South Africa
Biography : Founder of 7 different companies, among them: Tesla, Inc., PayPal, Inc. and The Boring Co. Elon Reev

EMEA Morning Briefing:Stocks Rally to Continue as Virus Fears Ease; ECB Awaited

07/22/2021 | 12:16am EDT

MARKET WRAPS

Watch For:

ECB Interest Rate Decision; France Monthly Business Survey; U.K. CBI Industrial Trends Survey; updates from Givaudan, Valeo, Publicis, Dassault Aviation, ABB, Sika, Roche, Air France-KLM, Remy Cointreau, Vantage Towers, Volkswagen, Sodexo, Unilever, Alliance Trust, G4S, Centrica, EQT, SSE, Impala Platinum, Babcock International, Tate & Lyle, Pennon Group, SSE, Halma, 3i Group, Meggitt, Getlink

Opening Call:

European equities are likely to extend their rebound rally on Thursday but gains could be capped ahead of the ECB policy decision. In Asia, stocks, the dollar and Treasury yields advanced, while oil and metals fell.

Equities:

The rebound in European stocks should continue on Thursday after Wall Street closed higher for a second day, boosted by some healthy corporate earnings.

The Dow closed up almost 300 points as investors stuck by the "buy the dip" mantra after the index on Monday suffered its biggest one-day drop since October.

"Earnings season is off to a solid start, with results beating bumper expectations in the second quarter," Craig Erlam, Senior Market Analyst, at OANDA wrote. "The positivity that's driving the market is clearly offsetting fears about another [virus] wave for now, aided no doubt by belief in the vaccine to stop surges turning into severe lockdowns in most cases."

Forex:

The dollar nudged higher against a basket of currencies and its recent strength despite lower Treasury yields reflects the fact that yields have also fallen elsewhere on concerns about the economic fallout from the Delta coronavirus variant, said Credit Suisse.

"This dynamic would likely need to persist or even accelerate for general USD strength to push on materially from here," said Credit Suisse forex strategists. The dollar's gains in recent days were typical of what is seen when forex volatility jumps, global recovery hopes are challenged and commodity prices drop at the same time, they said.

The euro could fall against the dollar if the European Central Bank signals it plans to keep monetary policy looser for longer at Thursday's policy meeting following its recent strategy review, said ING.

The ECB's decision to raise its inflation target to 2% from below, but close to 2% implies either a continuation of what the ECB has done for the past few years or a step towards more "dovishness," said ING analysts.

"While not a discussion for this week, the ECB dovish bias would suggest that the total reduction of the monthly [asset] purchases in 2022 will be less than previously expected." That would underscore the diverging trend between the ECB and the Federal Reserve, denting EUR/USD, they said.

Bonds:

U.S. Treasury prices extended their retreat in Asia, with the 10-year note yield recovering most of this week's losses.

Analysts said that worries about the delta variant and its effect on the global economy may have been overdone, possibly having caused yields to overshoot to the downside.

Markets have juggled Covid-19 resurgence versus bullish economic indicators, while an uptick in equities may indicate the Delta variant is becoming less of a concern. "The dynamics change very quickly depending on your view and outlook of the global economy," said AmeriVet. "The market will continue to offer volatility until we define the boundaries of a new range."

The ECB is expected to keep its current pace of corporate bond purchases unchanged after Thursday's rate setting meeting, said UniCredit.

"For the moment, we continue to expect net corporate bond purchases of up to EUR8 billion per month within the Corporate Sector Purchase Program and Pandemic Emergency Purchase Program," UniCredit's analysts said. They expect most changes on Thursday to be made on rates guidance, "where adjustments could theoretically have implications for Asset Purchase Program purchases and reinvestment, and thus corporate credit."

Investors will pay attention to how much the ECB plans to take ecological issues into account in its policy framework, as revealed in its recently published strategy review, they said.

Energy:

Oil futures slipped in Asian trade after they settled more than 4% higher on Wednesday, boosted by inventory data that showed supplies at Cushing, Okla., had fallen to the lowest level since January 2020.

The market is starting to realize that the overall situation is "still very tight," Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.

"We did see a big surprise surge of imports and that kept the market somewhat at bay but if you look at the draw in Cushing, we're getting to a dangerously low level," he said. "We're almost out of oil at the Cushing delivery point if we continue to draw at this rate."

Achieving net-zero carbon emissions by 2050 would require between $92 trillion and $173 trillion in investments in energy supply and infrastructure, according to BloombergNEF. The research provider said the annual investment in these areas would need to more than double, rising from roughly $1.7 trillion a year today to between $3.1 trillion and $5.8 trillion a year on average over the next three decades.

"The capital expenditures needed to achieve net zero will create enormous opportunities for investors, financial institutions and the private sector, while creating many new jobs in the green economy," said Jon Moore, CEO of BNEF.

Metals:

Gold edged below $1,800 in Asia, extending Wednesday's losses, with prices settling at their lowest in nearly two weeks, as Treasury yields continued to bounce off five-month lows.

"Should prices linger below $1,800 for too long, bears may steal back control with the next key level of interest found at $1,760," Lukman Otunuga, manager, market analysis at FXTM, told MarketWatch. But if prices can push back above $1,800, "gold has the potential to retest $1,825, which is just below the 200-day simple moving average."

Aluminum was little changed, held back by signs that supply remains abundant. Commerzbank said the 4.5% on-year rise in the global aluminum supply for June was driven by China's 7.2% growth, with production for the rest of the world rising 1%.

"The Chinese aluminum market at least still appears amply supplied given that China exported large quantities of aluminum and aluminum products in June," it said.

Iron ore prices on the Dalian Commodity Exchange fell 3.9% as China further cut steel production targets. ANZ noted that steel companies in the Chinese province of Jiangsu had received guidance to rein in output for the rest of the year amid rising production in the first half.

Steel mills in the neighboring province of Anhui had earlier in the month also received guidance to reduce its steel output for the rest of the year. This should reduce demand for the steel-making material.

The metals industry is critical to achieving the bulk of the decarbonization required by the Paris agreement by 2050 possible, said Citi in a report. It said that metals will facilitate the shift to renewable energy, the electrification of transport and carbon capture and storage development.

Citi estimates that, in an aggressive electrification scenario, the "incremental ton of metal produced over the next 30 years" will lower greenhouse-gas emissions by more than 170 tons. Citi said each of 16 metals--including dirty steel and aluminum--have the potential to contribute equally to the net reduction in global emissions.

TODAY'S TOP HEADLINES

Delta Variant of Covid-19 Isn't Expected to Dent Robust U.S. Recovery

The highly contagious Delta variant of Covid-19 doesn't pose an immediate risk to the strength of the U.S. economic recovery, with analysts expecting a robust expansion to continue in the second half of the year.

Many economists are maintaining forecasts for solid economic growth due to expectations of steady hiring and continued spending, driven by accumulated savings and Americans' desire to travel and socialize more than a year into the pandemic.

Senate Republicans Block Infrastructure Bill but Talks to Continue

WASHINGTON-Senate Republicans blocked an effort to begin debate on a bipartisan infrastructure deal still under negotiation Wednesday, but lawmakers said they expected to close in on a final agreement by early next week.

The vote failed, with 49 in favor and 51 against, short of the 60 needed to open debate. Senate Majority Leader Chuck Schumer (D., N.Y.) switched his vote to no, which he said gave him the option to bring the bill up again.

Tesla CEO Elon Musk Says He Personally Owns Bitcoin-and So Does SpaceX

Tesla Inc. Chief Executive Elon Musk said Wednesday that he and his rocket company, SpaceX, hold bitcoin, a cryptocurrency he generally supports despite having concerns about its environmental impacts.

Tesla disclosed a $1.5 billion investment in bitcoin in February and soon after began accepting the cryptocurrency as payment for its vehicles. The company quickly reversed course, however, suspending that initiative in May as Mr. Musk expressed worry about the source of the electricity being used to power bitcoin mining.

Bond Rally Undercuts Inflation Fears

The monthslong decline in bond yields exemplifies investors' belief that inflation likely isn't the biggest problem facing the U.S. and global economy.

Monday's sharp selloff in major U.S. stock indexes highlighted investors' mounting concern that the biggest risk to markets right now is underwhelming growth, rather than the runaway price increases feared earlier in the year. At the same time, many investors think inflation readings may run hot for some period, then subside on their own or lead the Federal Reserve to raise interest rates and slow the economy.

U.K. Demands EU Renegotiate Brexit Deal's Northern Ireland Clauses

The U.K. government set the stage for a new clash with the European Union after Prime Minister Boris Johnson said he wants to renegotiate the parts of the Brexit agreement dealing with the politically sensitive question of Northern Ireland.

(MORE TO FOLLOW) Dow Jones Newswires

07-22-21 0016ET

Stocks mentioned in the article
ChangeLast1st jan.
3I GROUP PLC -0.24% 1270.5 Delayed Quote.10.10%
ALLIANCE TRUST PLC -0.59% 1016 Delayed Quote.13.43%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.38% 0.62002 Delayed Quote.-1.62%
BABCOCK INTERNATIONAL GROUP PLC -2.93% 367.1991 Delayed Quote.35.16%
BITCOIN - EURO -0.67% 36013.6 Real-time Quote.53.49%
BITCOIN - UNITED STATES DOLLAR -0.75% 42063.87 Real-time Quote.46.67%
BRITISH POUND / EURO (GBP/EUR) -0.64% 1.16473 Delayed Quote.4.20%
BRITISH POUND / US DOLLAR (GBP/USD) -0.72% 1.36045 Delayed Quote.-0.05%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.05% 0.676613 Delayed Quote.4.78%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.21% 0.79029 Delayed Quote.0.62%
CENTRICA PLC 0.58% 55.82 Delayed Quote.19.31%
DASSAULT AVIATION -1.37% 932.5 Real-time Quote.5.41%
DJ INDUSTRIAL 0.21% 34869.37 Delayed Quote.13.69%
EURO / BRITISH POUND (EUR/GBP) 0.65% 0.85851 Delayed Quote.-4.00%
EURO / US DOLLAR (EUR/USD) -0.11% 1.16808 Delayed Quote.-4.02%
G4S PLC -0.20% 244.8 End-of-day quote.-3.55%
GETLINK SE -2.41% 13.555 Real-time Quote.-2.05%
GIVAUDAN SA -1.68% 4166 Delayed Quote.13.57%
IMPALA PLATINUM HOLDINGS LIMITED -4.60% 170.76 End-of-day quote.-15.42%
INDIAN RUPEE / EURO (INR/EUR) -0.21% 0.011547 Delayed Quote.3.13%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.34% 0.013493 Delayed Quote.-1.05%
LONDON BRENT OIL 0.83% 80.03 Delayed Quote.52.50%
MEGGITT PLC -0.03% 739.8 Delayed Quote.58.63%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.67% 0.69608 Delayed Quote.-2.30%
PUBLICIS GROUPE SA -1.01% 57.12 Real-time Quote.41.56%
S&P 500 -0.28% 4443.11 Delayed Quote.18.62%
S&P GSCI ALUMINUM INDEX 0.40% 184.7151 Delayed Quote.47.62%
SIKA AG -2.41% 299.2 Delayed Quote.26.92%
SODEXO -1.14% 76.3 Real-time Quote.11.47%
TESLA, INC. 2.19% 791.36 Delayed Quote.12.14%
UNILEVER PLC 1.13% 4006.3123 Delayed Quote.-9.72%
US DOLLAR / EURO (USD/EUR) 0.13% 0.856238 Delayed Quote.4.19%
VALEO 3.20% 24.83 Real-time Quote.-25.40%
VOLKSWAGEN AG 0.78% 192.88 Delayed Quote.25.53%
WTI 0.98% 76.14 Delayed Quote.55.27%