MARKET WRAPS

Stocks:

European stocks rose Tuesday as oil giant BP and Chrysler maker Stellantis advanced after their quarterly results.

In London, the FTSE 100 rose, led by energy giant BP and lender Standard Chartered after well-received earnings. BP shares rose 2.3% after raising its second quarter dividend and launching a $1.4 billion share buyback following stronger-than-expected underlying profit on a replacement cost basis for the period.

Standard Chartered gained 2.0% after the bank reported a bigger-than-forecast rise in first-half profit, resumed interim dividend payments and announced a $250 million share buyback.

In the U.S., a strong spate of corporate results has helped bolster optimism that stocks can continue to grind higher following an already strong rally this year. Investors say continued support from central banks and economic data that still shows growth will further support equities.

"It has been a pretty strong earnings season and that justifies the medium-term positive view that we have on stocks," said Justin Onuekwusi, head of retail multiasset funds at Legal & General Investment Management. "Earnings typically always beat the average analyst estimate, but for the second quarter in a row, they are coming in above the highest estimates, which is pretty unprecedented."

Investors are also monitoring a number of factors that could add volatility to markets and limit the pace of the rally in broader markets. An increase in Delta-variant Covid-19 cases has raised concerns about the global economic recovery stalling, and a recent regulatory clampdown in China caught some investors by surprise last month.

Technology stocks in China and Hong Kong had another turbulent session after a state-owned newspaper criticized online gaming as "opium for the mind," stoking fears of further tough action from Beijing.

Shares in China's Tencent Holdings, NetEase and Bilibili all plunged, before regaining some ground after the article disappeared from the paper's website.

"Sentiment has been hit by this commentary suggesting that online gaming might be an area China will target in the future," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "It means this risk won't go away. It is hard for investors to trade that risk," he added.

U.S. Markets:

U.S. stock futures edged higher as investors awaited more corporate earnings reports to assess the business climate.

There's plenty of earnings reports still coming in, as chemicals giant DuPont lifted its earnings guidance for the year.

Mall operator Simon Property Group late Monday raised its full-year guidance and lifted its dividend payment after reporting 92% occupancy, while office building owner Vornado Realty Trust VNO, -0.46% met second-quarter estimates and reported a 97% rent collection rate .

Outdoor clothing maker Columbia Sportswear lifted its sales guidance.

Mask mandates have been reintroduced in various U.S. regions including Louisiana and San Francisco to confront the delta strain of coronavirus. The U.S. did achieve the 70% vaccination target set by President Joe Biden. China announced fresh mass testing in Wuhan, the city where the disease was first discovered.

Factory orders data is due at 10 a.m. Eastern.

Forex:

The view that the yield advantage of U.S. assets over euro-area assets should cause the euro to weaken versus the dollar isn't justified, Commerzbank said.

"If it were true, the euro would have to depreciate steadily against the dollar," Commerzbank currency analyst Ulrich Leuchtmann said.

Long-term real inflation-adjusted Treasury and German Bund yields haven't been at comparable levels since 2012, he said.

The risk of significant euro appreciation is higher than the risk of significant depreciation as EUR/USD trades well below long-term equilibrium levels, he said.

The pound should rise in tandem with U.K. bond yields if the Bank of England cements market expectations for an interest rate rise next year in a policy decision Thursday, Bank of America said.

"The rates markets appear well placed in expecting the first hike in May 2022 (+15 basis points), consistent with our own projections," BofA analysts said. "For GBP, this sets the bar for market expectations, and we think the burden of proof is whether the BOE validates market pricing for the removal of policy accommodation in the coming year."

If the BOE can achieve this while sounding "hawkish," the pound should benefit from higher nominal and inflation-adjusted real bond yields, the analysts said.

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked up to 1.189% from 1.173% Monday, its lowest closing level since February.

Euro-denominated investment-grade corporate bond spreads have kept up pace with tightening government bond spreads, said Commerzbank.

"Supported by a lack of issuance, strong quantitative-easing buying and improved fund flow momentum..., euro investment-grade cash [corporate bonds] lately had little trouble keeping pace with govies," said head of corporate credit research Marco Stoeckle.

Since the beginning of June, senior G-spreads--the difference between yield on sovereign bonds and the yield on corporate bonds of same maturity--are flattish and have moved in a 3 basis point range, he said.

Commodities

Oil prices swung higher. "The oil market continues to alternate between concerns about tight supply on the one hand and about looming demand outages on the other," said Commerzbank's Barbara Lambrecht.

Despite swinging over the last week, crude has remained in a relatively tight range in recent sessions, with Brent only 0.2% lower than it was this time a week ago.

While worries over fresh Delta-variant-driven restrictions and the health of the Chinese economic recovery have worried investors in recent days, DNB Markets's Helge Andre Martinsen pointed out that Bloomberg's survey of OPEC production shows compliance with cuts at a record level for July.

LME three-month copper futures edged up 0.2% to $9,638 a metric ton after falling for the third day in a row Monday--despite the fact that labor disputes are still ongoing at one of the world's biggest mines, Chile's Escondida.

Concerns about economic growth and the rise of the Delta variant of the coronavirus in Asia have dragged down copper in recent days, said Marex Spectron's Anna Stablum.

Gold prices in London were down, with price moves having been calm in recent days. While a weaker dollar boosted gold last week, that move seems to have paused for now.

EMEA HEADLINES

Sanofi Snaps Up mRNA Specialist for $3.2 Billion Amid Vaccine Success

Sanofi SA agreed to pay $3.2 billion to acquire mRNA specialist Translate Bio, a big vote of confidence that the new technology underpinning two successful Covid-19 vaccines holds promise beyond the pandemic.

The French healthcare company said the deal would accelerate work already under way with Translate Bio, based in Lexington, Mass., to develop mRNA vaccines for Covid-19, seasonal flu and other infectious diseases. It will also hand Sanofi a platform to pursue further drugs and vaccines using mRNA technology.

BP Raises Dividend, Launches $1.4 Bln Share Buyback

BP PLC said Tuesday that it increased the dividend for its second quarter and launched a $1.4 billion share buyback.

The British oil-and-gas major declared a quarterly dividend of 5.46 cents a share, up from 5.25 cents for the first quarter. The $1.4 billion buyback is planned to be executed before the release of third-quarter results, BP said.

Societe Generale Sees Lower Provisions, Higher Revenue for the Year

Societe Generale SA said it will launch a buyback in the last quarter of the year and improved its guidance for provisions after it swung to a second-quarter profit.

France's third-largest listed bank by assets said Tuesday that it now expects a cost of risk of between 20 and 25 basis points for the year, having previously guided for a range of 30 to 35 basis points. It also anticipates all its business posting higher revenue. The bank confirmed it will launch a 470 million euro ($558.1 million) buyback in the last quarter.

BMW Swung to Profit in 2Q on Higher Revenue

BMW AG on Tuesday reported a swing to second-quarter profit and a rise in revenue as the luxury-car maker continued to benefit from strong demand for premium vehicles and good pricing.

The German auto maker's quarterly aftertax profit was 4.79 billion euros ($5.69 billion) compared with a loss of EUR212 million in the same period a year earlier when it was hit by the effects of the coronavirus pandemic.

Infineon Technologies Returned to 3Q Net Profit Amid 'Unbroken' Chip Demand

Infineon Technologies AG said Tuesday that it swung back to a net profit in the third quarter of fiscal 2021, while revenue continued its ascent as demand for chips shows no signs of abating amid a global supply shortage.

The German chip maker posted a net profit for the three months ended June 30 of 245 million euros ($290.9 million), compared with a net loss of EUR128 million a year earlier.

Maersk Lifts Guidance as Supply Chain Bottlenecks Send Freight Rates Surging

A.P. Moeller-Maersk AS late Monday lifted its full-year guidance and announced strong preliminary second-quarter earnings after seeing a continued rebound in demand and surging freight rates.

The Danish shipping giant has seen supply chain bottlenecks and shortages of equipment as retailers restock inventory that was depleted early last year and as consumer spending recovers, sending freight rates 59% higher in the quarter compared with last year while shipping volumes increased 15%.

Standard Chartered Second-Quarter Profit Jumped 69%

Standard Chartered PLC said Tuesday that its profit jumped 69% in the second quarter, as the Asia-focused bank's recovery picked up on easing credit impairments.

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08-03-21 0641ET