MARKET WRAPS
Stocks:
European stocks were flat Monday, with U.S. markets closed for the July 4 holiday and futures pointing to a tepid drop at the opening on Tuesday.
Investors say stock markets globally could be more choppy in the coming weeks as fresh data offer indications about the pace of economic recovery.
Money managers are also awaiting signals from policy makers world-wide on whether they will weigh tightening easy-money policies that have aided the global recovery.
"For global equities, we're entering a volatile backdrop," said Georgina Taylor, a multiasset fund manager at Invesco. "Any central bank decision is having such an impact globally because it gives a sense of how policy makers are reacting to the data."
Fresh figures released Monday showed that activity in the eurozone's manufacturing and services sectors continued to expand in June. Improving economic data and the expectation of consistent support from the European Central Bank have bolstered Ms. Taylor's expectation that shares in the region could continue to perform well this year.
A private-equity battle for a U.K. supermarket chain highlighted an otherwise quiet day in European stocks on Monday.
Wm Morrison Supermarkets rose 11% to 267 pence after Apollo Global Management said it was considering a counterbid for the U.K. chain, following an agreed GBP6.3 billion ($8.7 billion), or 254 pence per share, bid from a consortium led by Fortress Investment Group.
Clayton, Dubilier & Rice previously made an offer for the country's number-four supermarket chain. Rival U.K. food retailers including Marks & Spencer and J Sainsbury also rose.
Électricité de France shares slumped, after France's finance minister, Bruno Le Maire, said it would be difficult for the country to agree to the European Commission's requests on a reorganization of the power generator.
U.S. Markets:
U.S. markets closed for the July 4 holiday. Key U.S. indexes had closed at record highs Friday, with the latest jobs report adding to economic optimism.
Forex:
EUR/USD last traded flat at 1.1858 but could drop below $1.1800 later this week when U.S. Federal Reserve minutes are released, likely stressing the risk of future monetary tightening, ING said. "It is hard to put the Fed tightening genie back in the bottle now," it said.
Falls in the euro may be limited, however, if official eurozone economic data confirm the improvement suggested by recent surveys.
"The best hope for EUR/USD now is that better activity data does indeed come through, raising expectations that the [European Central Bank] does have to taper in September and securing a floor for EUR/USD at 1.1700," ING said.
Sterling may show little reaction to an expected announcement on the full easing of England's coronavirus measures, ING said.
"There will be much focus this week on what the U.K. government says about fully opening up the economy on July 19--although as the Bank of England admits, this final stage of the re-opening will have little impact on activity," ING analysts said.
The dollar is likely to remain firm until upcoming economic data confirm the Federal Reserve's view that recent inflationary pressures will prove temporary, Commerzbank said.
"Quite some time is likely to pass until it is time to generally question the current moderate USD strength," Commerzbank currency analyst Ulrich Leuchtmann said.
"It will have to become clear that not much will be left of the current surge in inflation so that the Fed will not suddenly have to get active." For now the outlook on inflation remains uncertain, he said.
Cryptocurrencies rose over the weekend, with bitcoin trading at $34,292.65 Monday, up 3.5% from its 5 p.m. ET level Friday. Ether, the second-largest cryptocurrency by market value, added more than 9% over the same period.
Bonds:
Natixis expects the first phase of the European Central Bank's tapering of the Pandemic Emergency Purchase Programme to be a reduction of weekly purchases in the fourth quarter back to the levels seen at the beginning of the year.
This would imply weekly purchases of EUR13.9 billion versus EUR18.1 billion since the March monetary policy meeting at which the ECB decided to carry out PEPP purchases at a significantly higher pace.
Natixis calculates that there will be EUR350 billion left from the PEPP's EUR1.85 trillion envelope going into 2022. "It will be quite a challenge to use all of this by the end of 1Q 2022," said strategist Jean-Christophe Machado.
Commodities:
Crude oil prices were ticking higher as investors await a reconvened OPEC+ meeting later in the day after talks ended in deadlock Friday.
Oil-producing nations failed to reach a deal on lifting output last week after the UAE objected to a proposal from Saudi Arabia and Russia. The spurned deal planned to up output by half a million barrels a day starting next month and then gradually increasing output by a total two million barrels through December.
The UAE wants to change the baseline which is used to calculate its production quota, essentially allowing it to increase output by a greater amount.
Gold prices rose after U.S. jobs data and as U.S. markets are closed for the Independence Day holiday.
The employment report on Friday was stronger than economists had expected, showing that employers added 850,000 jobs in June. While such data is typically negative for gold, the unemployment rate also ticked up unexpectedly which would likely allay fears that the strong data might prompt the Federal Reserve to tighten policy, Carsten Fritsch, an analyst at Commerzbank, said.
Gold ETFs tracked by FactSet saw net outflows of $313 million last week. "It is hardly imaginable that the gold price will be able to ignore ETF outflows on that scale for any prolonged period," Fritsch said.
EMEA HEADLINES
Apollo Considers Counterbid for U.K. Grocery Chain Morrisons
LONDON-Apollo Global Management Inc. said Monday it is considering making a bid for U.K. grocery chain WM Morrison Supermarkets PLC, setting up a potential three-way bidding war with SoftBank Group Corp.'s Fortress Investment Group LLC and U.S. private-equity firm Clayton, Dubilier & Rice.
New York-based Apollo said it hasn't yet approached the board of the British grocer and there can be no certainty that any offer will be made.
OPEC-Plus Deadlocked on Oil Production Boost Deal
OPEC and a Russia-led group of producers failed to agree on how to meet fast-rising demand from the industrialized world, as the club of rich nations emerges from pandemic lockdowns.
This week's meeting of the Organization of the Petroleum Exporting Countries, and its Russia-led allies, dubbed OPEC+, has been hampered by conflicting signals about short-term and long-term demand. Some of the historical dynamics of the oil markets have been thrown upside down by the pandemic.
European Business Leaders Want a Stronger Hand With China, Not Decoupling
BRUSSELS-A powerful European business lobby group called on European Union politicians to push back harder against China's state capitalism but not to lock out Chinese businesses, as advocated by some leaders who are following the U.S.'s lead on limiting commercial ties to China.
Members of the European Round Table for Industry, or ERT, a trade group of almost 60 chief executives and chairpersons of major Europe-based multinationals, on Monday called on EU leaders to push for better business terms with China and not to turn away, despite some leaders' growing misgivings about Beijing and amid improving ties with Washington.
SoftBank-Backed Fortress Investment Strikes $8.7 Billion Deal to Buy Morrisons U.K. Grocery Chain
A group of investors led by SoftBank Group Corp.'s Fortress Investment Group LLC agreed Saturday to acquire U.K. grocery chain WM Morrison Supermarkets PLC for more than $8.7 billion, a bet that the retailer can thrive in a hypercompetitive industry grappling with the shift to online commerce.
New York-based Fortress has joined forces with Canadian Pension Plan Investment Board, and the real-estate arm of Koch Industries, a private conglomerate headed by billionaire Charles Koch, to make the offer of GBP6.3 billion, equivalent to $8.71 billion.
Moscow Tightens the Clamp on Russia's Millions of Covid-19 Vaccine Holdouts
MOSCOW-Russia is adopting increasingly coercive measures to convince Russians to be vaccinated, as authorities try to reboot a flailing vaccination campaign and race to beat back a surge in Covid-19 cases caused by the more infectious Delta variant.
Local authorities in some areas of Russia have made vaccination compulsory for service-sector employees, meaning that millions of workers, ranging from hairdressers to bank tellers, face the threat of unpaid leave if they don't get inoculated.
Spain's Targeting of Former Harvard Professor Provokes Trans-Atlantic Outcry
BARCELONA-In just two months, Andreu Mas-Colell, an internationally renowned economist and former Harvard professor, went from enjoying a peaceful retirement in his hometown of Barcelona to facing allegations by the Spanish state that could result in the seizure of his assets.
Mr. Mas-Colell, 77 years old, was the economy minister of Catalonia, a prosperous region in northeast Spain, from 2010 to 2016. He is accused by Spain's Court of Auditors, an administrative body that oversees public accounts, of participating in an alleged misuse of millions of euros by allegedly helping to promote Catalonia's quest for independence from Spain, which culminated in an illegal referendum in 2017.
Taliban Fighters Advance After U.S. Closes Main Afghan Base
KABUL-Taliban fighters have moved to take control of dozens of new districts in Afghanistan in recent days, after the U.S. last week closed its operations at Bagram Air Field, the centerpiece of the American military presence for nearly 20 years.
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07-05-21 0631ET
