MARKET WRAPS

Stocks:

European stocks fell Tuesday, with the Stoxx Europe 600 shedding 0.2%, dragged down by declines in the energy and utilities sectors.

Ongoing concerns about turmoil in Afghanistan and unease about China's economic outlook following Monday's weak data, ensured the mood was a cautious one in early trading. Investors looked ahead to a speech by Jerome Powell for an update on the health of the U.S. economy, with traders also waiting for U.S. sales and factory data later in the session.

Shares on the move:

BHP Group said it will combine its oil-and-gas business with Australia's Woodside in an all-stock deal, adding that it would end its dual listing in London. BHP also approved a $5.7 billion project to mine potash in Canada, as it adjusts to the prospect of a lower-carbon world, where old profit drivers such as petroleum and thermal coal are less appealing. BHP stock gained 6% on the news, topping the FTSE 100 risers.

Just Eat reported an interim adjusted loss of EUR190 million, despite a 52% rise in revenue that included Grubhub and reiterated its guidance for the full year. ING said the adjusted Ebitda loss came in better than expected, mainly due to a lower-than-anticipated loss in the U.S. Just Eat's shares in London rose 3.6%.

Swiss Life posted a higher adjusted profit in the first half despite a 7% drop in premiums and confirmed its financial targets for 2021. Citi said the results were reassuring, with strong growth in fee income of 15% year-on-year. The insurer's return on equity was 11%, higher than its target of 8%-10%, and an upwards revision should be expected at the upcoming capital markets day, said Citi.

Data in focus:

Official data showed the U.K. unemployment rate fell to 4.7% in the three months to June from 4.8% previously but ING said it will likely rise to 5.5% later this year after the government's job retention scheme is withdrawn at the end of September.

"In contrast to the headlines about staff shortages, the number of people on the furlough scheme remains fairly high," said ING economist James Smith. "And what's interesting is that this is no longer primarily a consumer services story--a number of sectors have non-negligible levels of staff on furlough."

The rapid recovery from the pandemic shock plus the huge policy tailwind continued to turn up the pressure in the U.K. labor market in June, said Berenberg's senior economist Kallum Pickering. Labor demand surged to a record high, the number of hours worked continued to rebound and wage growth accelerated to a historically elevated rate, U.K. labor-market data show.

"With unemployment falling from an already low level and labor demand surging to well past previous record highs, the risks to the wage-growth outlook look skewed to the upside," Pickering said. Although the end of the furlough program may create some slack in the labor market, that number is unlikely to be large enough to change the wage story, he said.

U.S. Markets:

U.S. stock futures fell Tuesday, suggesting indexes will ease back from all-time highs, as investors awaited the retail sales data and earnings from some of America's biggest retailers, with Home Depot and Walmart due to post results ahead of the opening bell. Lowe's Cos and Target will report on Wednesday.

Forex:

Sterling fell as investors digest the latest U.K. labor market data. The U.K. unemployment rate unexpectedly dropped to 4.7% in the three months to June from 4.8% previously but the more up-to-date claimant count figure, a measure of people claiming unemployment benefits, fell by just 7,800 in July after a 114,800 drop in June.

"September will be a key month for employment data as the government's furlough scheme comes to an end," said Premier Miton's Neil Birrell. "That may give an indication of how the economy will fare through the rest of the year."

Moves in the dollar were limited ahead of U.S. retail sales data due at 1230 GMT, which will be closely watched given last week's weak U.S. consumer confidence data and may prevent the currency from advancing, said ING.

The consumer confidence figures, combined with concerns over growing coronavirus cases in the U.S., dampened confidence that the Federal Reserve will start discussing tapering asset purchases later this month, said ING. It sees downside risks to the retail sales data, which would "keep U.S. money market rates and bond yields subdued, with the dollar trading well inside recent ranges."

It expects the DXY Dollar Index to trade in a tight range between 92.50-93.00. This would keep it well below last week's peak of 93.1920.

Bonds:

Eurozone government bond yields were lower in a generally risk-off mood in Europe. As uncertainty lingers, Germany's EUR6 billion September 2023 Schatz auction Tuesday will "deliver tangible demand pointers regarding the flight-to-Bunds," said Michael Leister, head of interest rates strategy at Commerzbank.

He said that even after the last consolidation, two-year Schatz yields are still trading at levels last seen around the end of January. U.S. retail sales data for July feature are among the data to watch on Tuesday, and are expected to drop amid the spread of the Delta variant.

German federal elections in September "will push yields higher in the entire eurozone," said Steen Jakobsen, chief investment officer at Saxo Bank. The rise in government bond yields will also affect Italian bonds he said.

"Yet, BTP yields will soar slower than peers, provoking spread compression against the Bund," he said. Jakobsen expects the 10-year BTP-Bund yield spread to tighten to 75 basis points; the spread was recently at 103 basis points, according to Tradeweb.

The balance of global supply-demand dynamics point to higher bond yields, said JPMorgan, expecting this balance to deteriorate this year and next.

The worsening balance implies an approximately 50 basis point upward pressure on bond yields, said JPM. Regarding the effect on equities in cross-asset strategies, JPM is of the view that moderately higher yields shouldn't challenge equity valuations. "Our preference for value stocks would provide a cushion as they would likely outperform in a rising yield environment."

Commodities:

Crude oil futures extended losses in Europe with the threat to demand from the Delta variant combined with seasonally lower demand ahead and increasing production from OPEC+ generally making life harder for prices, said Helge Andre Martinse of DNB Markets.

With broader markets also lower and few oil-specific headlines to move prices, traders may look to the American Petroleum Institute's weekly inventory data for their next moves.

Base metals were mixed as the Delta variant threatens commodities' demand and sparks slowdowns in their supply chain. An outbreak of the virus in China is raising concerns about the nation's economic recovery and with it threatening to undermine demand for base metals. In response, China has implemented new restrictions which have snarled crucial ports that ship base metals providing some support to prices.

"Congestion in two of China's top container ports--Shanghai and Ningbo--is worsening after the container terminal in Ningbo was shut down on account of a Covid case being detected there last week," said Ed Meir, at ED&F Man.

EMEA HEADLINES

BHP to Combine Petroleum Unit With Woodside, End Dual Listing in London

SYDNEY-BHP Group Ltd. said it will combine its oil-and-gas business with Australia's Woodside Petroleum Ltd. in an all-stock deal, adding that it would end its dual listing in London.

BHP on Tuesday also approved a $5.7 billion project to mine potash in Canada, as it adjusts to the prospect of a lower-carbon world, where old profit drivers such as petroleum and thermal coal are less appealing.

Axel Springer in Talks to Buy Ownership Stake in Politico

Axel Springer SE is in talks to purchase an ownership stake in Washington, D.C., publisher Politico, according to people familiar with the matter, a deal that would consummate a yearslong relationship between the two companies.

The deal talks aren't final and could still fall through. The talks also include the possibility of a full buyout, the people said.

Pfizer, BioNTech Seek FDA Clearance for Covid-19 Booster

Pfizer Inc. and partner BioNTech SE have submitted data to U.S. health regulators needed to clear a Covid-19 booster shot among the general public.

The companies said Monday they sent to the U.S. Food and Drug Administration results from a small, early-stage study showing a third dose of their vaccine generated higher levels of neutralizing antibodies against the original virus and against the Beta and Delta variants than the standard two-dose regimen.

Pandora Swung to 2Q Net Profit; To Distribute DKK1 Bln via Dividends, Buybacks

Pandora AS said Tuesday that it will distribute 1 billion Danish kroner ($158.4 million) to shareholders over the next three months as it reported a swing to net profit for the second quarter and backed its recently upgraded forecasts.

The Danish jeweler said that it will pay a DKK500 million extraordinary dividend and buyback up to DKK500 million worth of its shares.

Swiss Life Profit Grew in 1H

Swiss Life Holding AG said Tuesday that net profit, adjusted profit from operations and fee income all grew in the first half, though its premiums declined slightly.

The Swiss financial-services company posted net profit of 618 million Swiss francs ($677.3 million), a 15% rise from a year earlier, when the company reported net profit of CHF533 million.

Just Eat Takeaway.com 1H Net Loss Widened on Investments

Just Eat Takeaway.com NV said Tuesday that net loss for the first half of 2021 widened on the back of investments. The company said its absolute losses peaked in the period.

The Grubhub owner said net loss for the first half was 486 million euros ($572.3 million) compared with EUR59 million for the year-earlier period.

BT Group Names Adam Crozier as Next Chairman, with Effect from December

(MORE TO FOLLOW) Dow Jones Newswires

08-17-21 0607ET