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EMEA Morning Briefing: Stock Futures Point to Higher Open, Oil Rises

07/07/2021 | 12:16am EDT


Watch For:

Germany Industrial Production Index; EU Summer Interim Economic Forecast; OECD Employment Outlook report launch; updates from Babcock International Group, Bang & Olufsen, Micro Focus International, Provident Financial, Hiscox.

Opening Call:

Europe could open higher Wednesday. Dollar strengthens. Oil, gold, and metals rise.


European stock futures were pointing higher Wednesday as oil prices rose and Wall Street retreated from last week's record highs.

U.S. stock indexes had ground higher in recent weeks, lifted by signs of the economy rebounding and the labor market recovering. Inflation concerns have also eased, and major central banks have signaled that they will leave accommodative monetary policies in place for now. Investors say they are now looking for fresh catalysts, such as strong corporate earnings reports or more fiscal stimulus, to power the next leg of the rally in stocks.

"It just may be time for a little bit of a breather or a pause in the pace of equity market returns," said Chris Dyer, director of global equities at Eaton Vance. "A lot of the good news is priced in and I think that makes it a little bit more tricky for the equity markets to grind higher in the short term."

One possible factor for the market's hesitation is the rise of the Delta variant of Covid-19, said Jason Pride, chief investment officer for private wealth at Glenmede. While the variant is unlikely to provoke full-scale lockdowns, it could lead to renewed mask mandates and slow the recovery, he said.

"It has a dragging economic effect when you put in those kinds of policies," Mr. Pride said.

Investors are also keeping a close eye on the Federal Reserve, which on Wednesday is set to release minutes from last month's rate-setting meeting. The minutes could give insight into how soon the U.S. central bank might begin to taper its asset purchases or raise interest rates.

The European food and home & personal care sector may face margin pressure, said Bernstein, cutting its ratings on Lindt and Reckitt Benckiser.

While the sector has done well so far this year, Bernstein advises caution in 2H due to a margin risk. The brokerage cut its rating on Swiss chocolatier Lindt to market-perform, saying its shares look fully valued.

"Whilst it's a great company we would continue to own for the long term, in the short term we wouldn't add to the position," analyst Ivan Holman says.

Bernstein also cut Reckitt to under-perform, citing potential for weaker flu seasons, cost-price inflation and ongoing market-share losses in core categories where the company isn't launching new brands.


The U.S. dollar strengthened against the euro and weakens against the yen. The WSJ Dollar Index gains 0.3%.

JPMorgan said Friday's strong payrolls report "reinforces our view that the June FOMC was a watershed which will deliver greater and broader dollar support." The firm said "the biggest debates in client discussions about our 2H21 outlook are around the breadth of USD strength and the ability for high-beta FX to perform generally.

For us, the hurdle against such broad-based dollar weakness has only grown, not only because of a more hawkish Fed, but because the dollar has entered a more supportive mid-cycle phase, and also because tail risks have risen from the recent spread of the delta variant."


Treasurys start the week with a rally that sent the 10-year yield down to 1.369%, the third decline in four trading days.

The benchmark has lost 0.38 percentage point since its March peak of 1.749%, but it is still up 0.456 p.p. for this year. Investors seem to be embracing a more benign view of inflation amid mixed economic data.

A PMI index for the services sector comes in below expectations, after Friday's job reports surprised on the upside. More clarity on how the Fed is reading recent indicators should come in the FOMC minutes Wednesday.


Oil rose in Asian trading, amid uncertainty over the outlook for global crude production due to the current OPEC deadlock.

CBA said that while the disagreement between the UAE and Saudi Arabia may be an issue in coming OPEC+ meetings, both parties will likely find a resolution.

"We think OPEC+ will eventually agree to boost oil output for the remainder of the year," the bank said.


Gold inched higher in early Asia trade, following a dip in U.S. treasury yields overnight and amid reports indicating that bullion purchases among central banks were gathering steam. Investor demand for the precious metal may rise, following a risk-off tone for equities, ANZ said.

Base metals were mixed in Asia. Copper rebounded from a decline overnight, as a slower-than-expected expansion in the U.S. services sector signaled a sluggish recovery, ANZ said. A stronger greenback also weighs on the market, it added.

Huatai Futures said the U.S.'s and Europe's June manufacturing PMIs show the economies continue to improve, while U.S. Treasury yields remain at a relatively low level, which should be beneficial to commodities.

The three-month LME copper contract rose 0.4% to $9,350.00 a ton, while the aluminum contract fell 0.8% to $2,509.00 a ton.


China's Regulatory Moves Knock Chinese Tech Stocks

Chinese technology stocks fell Tuesday after China's cybersecurity regulator widened its review of several of the country's newest public companies.

Ride-hailing giant Didi Global Inc. shed nearly a third of its value since shares spiked as high as $18 apiece on June 30, the day of the company's public debut. Last week Chinese officials banned the company from adding new users and launched a probe of the company's data practices.

Bitcoin Fraud Concerns Draw Scrutiny From Regulators

Regulators are signaling they want more control over an expanded cryptocurrency universe that has pushed further into Wall Street activities without the investor and consumer protections that apply to traditional securities and financial services.

The catch: no single regulator inspects crypto exchanges or brokers, unlike in the securities and derivatives markets. Regulators step in only when they believe U.S. law applies to a particular cryptocurrency or transaction, based on the way the asset was sold or traded.

China Targets Firms Listed Overseas After Launching Didi Probe

China said it would tighten rules for companies listed overseas or seeking to sell shares abroad, moves that could hinder attempts by homegrown firms to raise money in the U.S.

The shift comes as Chinese regulators intensify scrutiny into technology companies, including Didi Global Inc., that recently listed in the U.S.

Market for Bonds Meant to Keep World Cool Heats Up

Sales of bonds with borrowing costs linked to climate change have accelerated dramatically this year, led by companies with high carbon emissions, such as Canadian pipeline operator Enbridge Inc., Italian energy giant Enel SpA and Spanish energy firm Repsol SA.

More than $31 billion worth of sustainability-linked bonds have been sold in the past three months, according to Dealogic. That is more than the $23 billion sold between the first deal being done in 2019 and the start of the second quarter this year.

U.S. Services Sector Slows in June Amid Cooling Demand and Labor Shortages -- ISM

Activity in the U.S. service sector continued to grow at a high pace in June, but the growth rate eased compared with the previous month as demand slowed and firms struggled to find candidates to fill open positions.

The ISM Services Report on Business PMI decreased to 60.1 in June from the 64.0 record-high registered in May, according to data from a survey compiled by the Institute for Supply Management released Tuesday.

Hong Kong Moves to Speed Up IPOs

Hong Kong's stock exchange is moving to speed up initial public offerings, overhauling a system where investors must wait at least a week for a newly priced stock to start trading.

The long time lag relative to the U.S. markets-where stocks typically begin changing hands a day after an IPO is priced-increases the risk of market sentiment souring due to external events.

More Credit Suisse Senior Bankers Depart in Wake of Archegos Loss

Credit Suisse Group AG is continuing to lose senior bankers to competitors in the wake of missteps including a $5.5 billion loss tied to the meltdown of Archegos Capital Management.

Several investment bankers in the U.S. gave their notice in the past week, while others are considering leaving, people familiar with the matter said.

WHO Urges Covid-19 Treatment With Roche and Sanofi Anti-Inflammatory Drugs

The World Health Organization recommended that certain hospitalized Covid-19 patients be given a type of anti-inflammatory drug found to reduce the risk of death by 13% in the sickest patients when taken in combination with steroids.

The global public-health agency updated its Covid-19 treatment guidelines on Tuesday to strongly recommend that people with severe or critical disease be given drugs tocilizumab and sarilumab to combat the haywire inflammatory immune reaction of some patients.

Pfizer Vaccine Less Effective Against Delta Infections but Prevents Severe Illness, Israeli Data Show

TEL AVIV-Data from Israel suggest Pfizer Inc.'s vaccine is less effective at protecting against infections caused by the Delta variant of Covid-19 but retains its potency to prevent severe illness from the highly contagious strain.

The vaccine protected 64% of inoculated people from infection during an outbreak of the Delta variant, down from 94% before, according to Israel's Health Ministry. It was 94% effective at preventing severe illness in the same period, compared with 97% before, the ministry said.

In Afghan Peace Talks, the Taliban Gain Legitimacy While Pursuing War

(MORE TO FOLLOW) Dow Jones Newswires

07-07-21 0016ET

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.35% 0.6192 Delayed Quote.-1.34%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) -0.13% 80.374 Delayed Quote.1.38%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.51% 0.7258 Delayed Quote.-5.16%
BABCOCK INTERNATIONAL GROUP PLC 0.37% 380.2 Delayed Quote.35.83%
BITCOIN - EURO -0.06% 36367.66 Real-time Quote.54.35%
BITCOIN - UNITED STATES DOLLAR -0.13% 42617.62 Real-time Quote.47.86%
BRITISH POUND / EURO (GBP/EUR) -0.22% 1.1661 Delayed Quote.4.45%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.02% 151.399 Delayed Quote.7.29%
BRITISH POUND / US DOLLAR (GBP/USD) -0.37% 1.36698 Delayed Quote.0.34%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.25% 0.674459 Delayed Quote.4.53%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) 0.40% 87.477 Delayed Quote.7.41%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.01% 0.7897 Delayed Quote.0.57%
CREDIT SUISSE GROUP AG 0.92% 9.194 Delayed Quote.-19.35%
DIDI GLOBAL INC. -2.69% 7.96 Delayed Quote.0.00%
DJ INDUSTRIAL 0.10% 34798 Delayed Quote.13.59%
DOW JONES FXCM DOLLAR INDEX 0.22% 12007.68 Delayed Quote.2.85%
ENBRIDGE INC. 0.02% 50.72 Delayed Quote.24.59%
ENEL S.P.A. -0.86% 7.018 Delayed Quote.-15.20%
EURO / DIRHAM (EUR/AED) -0.17% 4.3037 Delayed Quote.-3.90%
EURO / JAPANESE YEN (EUR/JPY) 0.20% 129.779 Delayed Quote.2.81%
EURO / US DOLLAR (EUR/USD) -0.18% 1.1718 Delayed Quote.-3.88%
INDIAN RUPEE / EURO (INR/EUR) 0.18% 0.011559 Delayed Quote.2.98%
INDIAN RUPEE / JAPANESE YEN (INR/JPY) 0.40% 1.500848 Delayed Quote.5.79%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.01% 0.013548 Delayed Quote.-1.04%
JAPANESE YEN / SWISS FRANC (JPY/CHF) -0.42% 0.8346 Delayed Quote.-2.24%
JPMORGAN CHASE & CO. 1.15% 163.04 Delayed Quote.26.84%
LONDON BRENT OIL 0.94% 78.01 Delayed Quote.49.38%
MICRO FOCUS INTERNATIONAL PLC 1.87% 398 Delayed Quote.-6.15%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) -0.36% 77.661 Delayed Quote.5.16%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.73% 0.7012 Delayed Quote.-1.60%
PFIZER, INC. -0.57% 43.94 Delayed Quote.20.05%
PROVIDENT FINANCIAL HOLDINGS, INC. -0.03% 16.9944 Delayed Quote.8.18%
PROVIDENT FINANCIAL PLC 0.29% 350.8 Delayed Quote.14.27%
RECKITT BENCKISER GROUP PLC 0.39% 5853 Delayed Quote.-10.53%
REPSOL S.A. 0.30% 10.72 Delayed Quote.29.94%
S&P 500 0.15% 4455.48 Delayed Quote.18.45%
S&P GSCI ALUMINUM INDEX -0.52% 185.37 Delayed Quote.48.39%
SANOFI -1.01% 82.02 Real-time Quote.4.22%
US DOLLAR / DIRHAM (USD/AED) -0.01% 3.6726 Delayed Quote.0.00%
US DOLLAR / EURO (USD/EUR) 0.18% 0.853388 Delayed Quote.4.04%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.33% 110.685 Delayed Quote.6.92%
WTI 0.93% 73.961 Delayed Quote.52.07%
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