MARKET WRAPS
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.
Equities:
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.
Forex:
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."
Bonds:
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.
Energy:
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.
Metals:
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.
TODAY'S TOP HEADLINES
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.
(MORE TO FOLLOW) Dow Jones Newswires
07-27-21 0019ET
