MARKET WRAPS
Stocks:
European equities struggled for traction on Friday, with Adidas a standout gainer, while U.S. stock futures indicated a mostly higher start as investors continued to cheer news that President Joe Biden had reached an infrastructure agreement with bipartisan lawmakers.
In Europe, data showed German consumer sentiment is forecast to rise in July as the Covid-19 pandemic retreats and the economy reopens, according to data from the market-research group GfK released Friday.
A top gainer on the Stoxx 600 was adidas with shares up more than 5% after U.S. rival sportswear maker Nike topped Wall Street revenue estimates by more than $1 billion in its fiscal fourth-quarter, in contrast to deep losses a year ago. Elsewhere, shares of JD Sports Fashion climbed near 4%.
Most airlines and travel stocks were slipping even after the U.K. government added Malta, Madeira, Spain's Balearics and some Caribbean nations to the so-called "green list" of places that won't require travelers to quarantine upon returning home, as long as they test negative before returning and once they arrive.
Ministers also said they may drop quarantine rules for fully vaccinated travelers returning home from countries on an amber list, with details to be announced next month.
But some European leaders reportedly said they planned to follow the advice of German Chancellor Angela Merkel and tighten up borders to keep out the highly contagious delta variant of COVID-19 that has spread across the U.K.
Shares of InterContinental Hotels Group, travel group TUI, cruise company Carnival and International Consolidated Airlines all dropped close to 2% each. Shares of cut-rate airline easyJet fell 1.5%.
Shares of pharmaceuticals were also weighing on the downside, with shares of Novartis, AstraZeneca, and Novo Nordisk all edged lower.
Auto makers were also under pressure, with Renault down 2% and Daimler off more than 1%.
US Markets:
Stock futures edged higher, putting the S&P 500 on track to close out its best week in more than two months amid renewed confidence in the global economic expansion.
Stocks have bounced back, pushing the S&P 500 up 2.4% through Thursday, after stumbling when the Federal Reserve signaled a more hawkish stance on rising inflation last week. Fueling the gains, investors say, are data signaling a fresh acceleration in the world economy coupled with the prospect of additional government spending in the U.S. and Europe.
"We are still in a phase where we're seeing the activity data still accelerate," said Hani Redha, a fund manager at PineBridge Investments, pointing to surveys showing eurozone business activity is growing at the fastest pace in 15 years.
"It is natural that you'll see very mini wobbles [in stocks] from time to time," Mr. Redha added. "But the fundamental support-that things are improving and the numbers are getting better-is going to dominate that."
Adding to investors' optimism about the economy, President Biden and a group of 10 centrist senators agreed to a roughly $1 trillion infrastructure plan Thursday. With a total of $973 billion of investment over five years, the deal will make new investments in the electrical grid, transit, roads and bridges and other forms of infrastructure.
Investors will seek to glean new details on the pace of the economic recovery from data on consumer spending, due to be published at 8:30 a.m. ET.
Economists expect the numbers to show spending rose in May, after a 0.5% increase in April.
Some investors worry that the speedy pace of inflation will prompt the Federal Reserve to withdraw some of the stimulus it has lavished on markets since the spring of 2020. But Fed Chairman Jerome Powell's testimony to Congress this week that he had a level of confidence that inflation will subside allayed some of those concerns.
"That also reassures the market that the Fed will not be overly hawkish in their tightening policy," said Peter van der Welle, a strategist at Robeco. At the same time, "the infrastructure deal also portrays that the fiscal thrust is still very much with us," he added.
Forex:
The dollar could rise if U.S. economic data due later in the day reinforce expectations that inflation will accelerate and the Federal Reserve will respond by tightening its policies, Commerzbank said.
Strong data would point to "continued elevated price pressure and might provide further momentum for dollar appreciation short term," Commerzbank currency analyst Esther Reichelt said.
The Fed made it clear at its last meeting that it will react to upside risks for inflation, she said.
The European Central Bank's ultra-loose policy stance means the euro will suffer the lion's share of any dollar appreciation, ING said."Unlike an increasing number of
emerging market countries who feel the need to respond to the summer inflation spike, it seems the ECB is more than happy to position itself as not being rushed into premature tightening," ING analysts said.
That means the euro, along with the Japanese yen and Swiss franc, will be the preferred funding currencies this summer, they said.
EUR/USD should continue to consolidate, although surprisingly strong eurozone confidence indicators this week suggest the exchange rate could rise to the 1.1980/90 area in coming days, they said.
Sterling's weakness after the Bank of England's policy decision Thursday is likely to remain limited, MUFG Bank said.
The "hawkish" shift some market participants were expecting from the BOE's policy statement failed to materialize but the central bank is certainly moving in that direction, MUFG analyst Derek Halpenny said.
"The upgrades to both real GDP growth in the second quarter and inflation this year could well have implications for inflation over the medium-term that compels the Monetary Policy Committee to alter its monetary stance (taper) or guidance at the next meeting on August 5 when the Monetary Policy Report will be released with updated forecasts."
Bonds:
In bond markets, the yield on 10-year Treasury notes ticked up to 1.488% from 1.486% Thursday.
Eurozone government bond yields were trading slightly higher following better-than-expected economic data from Germany on Friday. The strong reading is reassuring, said Joerg Zeuner chief economist at the German asset manager Union Investment.
Commodities:
Oil prices edged higher as investors look ahead to next week's OPEC+ meeting. Oil producers are set to meet on Thursday next week.
Expectations are that the cartel will agree to add 500,000 barrels a day of their output, said Helge Andre Martinsen, an analyst at DNB.
"However, an increase of 0.5 million barrels a day for August is not enough to flip the oil market balance, and the oil market will stay in undersupply with oil inventories continuing to draw down," he said. Oil prices made modest gains this week amid expectations of continued tight supplies.
Copper prices rose after President Biden and a group of senators agreed to a roughly $1 trillion infrastructure plan. Three-month copper on the LME gains 0.1% to $9,469.50 a metric ton.
The red metal is heavily used in infrastructure projects and some investors are hopeful that the plan would boost demand for copper. However, there are also growing concerns that copper's high price may spur substitution toward cheaper metals such as aluminum, which can also be used in electrical wiring.
"Arguments are starting to become more widespread on the subject of substitution with an eye to the popular world of infrastructure projects, " said Malcolm Freeman, Chief Executive of brokerage Kingdom Futures.
Gold prices ticked higher ahead of U.S. price data which will be eyed by investors for clues on the inflation outlook.
The PCE core price index, the Federal Reserve's preferred gauge of inflation is due at 0830 ET. A stronger reading than expected could heighten fears that Fed officials will move faster to raise interest rates. While gold is typically considered an inflation hedge, higher interest rates would lift bond yield and weigh on gold.
"Fed officials are presenting a mixed view, but inflation worries appear to be on the rise; which is gold negative," said James Steel, chief precious metals analyst at HSBC.
EMEA HEADLINES
Amazon, Google Face UK Probe Over Fake Reviews
The U.K.'s antitrust watchdog said Friday that it has launched an investigation into whether Amazon.com Inc. and Google are doing enough to crack down on fake reviews, adding a new layer to regulatory scrutiny of U.S. tech giants.
German Consumer Confidence Set to Increase Strongly in July
German consumer sentiment is expected to rise in July as the Covid-19 pandemic retreats and the economy reopens, according to data from the market-research group GfK released Friday.
GfK's forward-looking consumer sentiment index is set to increase to minus 0.3 points in July from minus 6.9 points in June, the highest level since August 2020. Economists polled by The Wall Street Journal had expected consumer sentiment to rise to minus four points.
Renault, STMicroelectronics Join Forces on Chip Supplies
Renault SA and STMicroelectronics NV are working together to secure supplies of key semiconductor components for the French car maker's electric and hybrid vehicles, as a shortage of components continues to squeeze the auto industry.
The companies said Friday in a joint statement that their partnership would focus on the supply of electric and hybrid vehicle advanced power semiconductors to be produced from 2026.
Adidas Shares Get a Boost From Nike's Upbeat Sales
Shares in sneaker maker Adidas AG rose Friday after its peer Nike Inc. posted record sales fueled by solid U.S. consumer demand for sportswear--an indicative sign of the sector's bright prospects.
Nike's sales nearly doubled in the quarter ended May 31, beating consensus estimates and raising investors' expectations for sneaker makers and sporting brands as economies in key regions reopen.
(MORE TO FOLLOW) Dow Jones Newswires
06-25-21 0623ET
