U.S. ADP National Employment Report for July; U.S. ISM Report on Business Services for July; EIA Weekly Petroleum Status Report; CVS Health 2Q earnings; General Motors 2Q earnings; Kraft Heinz 2Q earnings; Uber Technologies 2Q earnings.
Stock futures wobbled Wednesday ahead of more earnings reports and data on the services sector that would provide fresh insights into the pace of the economic recovery.
Stocks have ground higher this week amid strong earnings reports and signs that the economic rebound remains under way, albeit at a slower pace than in recent months. But the spread of the Delta variant of Covid-19 and a slowdown in the rate of vaccinations is prompting some concern that authorities may reimpose or tighten restrictions on social activity and travel.
"We're entering a stage where growth is still strong, but not as strong as the initial stage of the recovery," said Sebastian Mackay, multiasset fund manager at Invesco. "The implications for markets would be if earnings fail to sustain the very strong performance they have been reporting. Are we entering a stage of the cycle where earnings are still reasonably robust, but the recovery is difficult to sustain?"
A purchasing managers' survey for the U.S. services sector in July is set to be released at 10 a.m. ET. Economists are expecting the data will show an increase as Americans shifted from spending on goods to in-person activities amid vaccinations and relaxed Covid-19 restrictions.
A report from ADP on employment levels in the private sector is also scheduled for 8:15 a.m., acting as a precursor to Friday's highly-anticipated jobs report from the government. Federal Reserve policy makers have said the recovery of the labor market is a key factor in monetary policy decisions.
Drugstore chain CVS Health, food and beverage giant Kraft Heinz, private-equity firm Apollo Global Management and auto maker General Motors are slated to report earnings ahead of the opening bell. Ride hailing giant Uber Technologies and Costco Wholesale are scheduled to report after markets close.
Overseas, the pan-continental Stoxx Europe 600 advanced 0.5%, extending gains after notching record closing levels for two days in a row. Purchasing managers' surveys showed an expansion in activity in the eurozone's manufacturing and services industries in July, albeit at a slower pace than the previous month.
Among European equities, Commerzbank declined 5% after it swung to a loss in the second quarter. Dutch coffee company JDE Peet's jumped over 5% after its profit more than tripled.
In Asia, most major benchmarks rose by the close of trading. The Shanghai Composite Index and Hong Kong's Hang Seng Index both rose 0.9%. China's Caixin purchasing managers' survey gauge of the services industry for July rose from the previous month.
New Zealand's dollar appreciated 0.7% against the greenback after a strong jobs report lifted expectations that the country's central bank may raise interest rates sooner than previously thought.
Strong ADP private payrolls data due at 1215 GMT could raise prospects of strong nonfarm payrolls data Friday. If combined with some indication on "the start and end" of tapering of asset purchases in a speech by Federal Reserve Vice Chairman Richard Clarida, this could lift U.S. short rates and the dollar, ING said.
Dollar strength would be mainly against the low-yielding euro and Japanese yen, however, ING said.
ADP private payrolls are forecast to rise by 653,000 in July, according to a WSJ poll of economists.
The European Central Bank's looser-for-longer policy stance has driven the Swiss franc's recent gains against the euro, Commerzbank said.
"After the last ECB meeting, the market is additionally tending towards the assumption that monetary policy in the euro-area will remain expansionary for a long time even after the pandemic, which in turn is weighing on the EUR/CHF rate," Commerzbank's Thu Lan Nguyen said.
That may not be reflected in EUR/USD as the Federal Reserve's strategy also allows for prolonged expansionary policy, she said.
Once the pandemic eases, the safe haven franc's declines versus the euro might be limited, she says. EUR/CHF rose 0.1% to 1.0736, having reached its lowest level since November at 1.0719 overnight, according to FactSet.
In bond markets, the yield on the benchmark 10-year Treasury note edged up to 1.177% from 1.174% on Tuesday.
Ten-year U.S. Treasury yields might have more room to fall than their German peers, said ING's rates strategists. The bottom could be 1% for 10-year U.S. Treasury yields, while German Bund yields are probably closer to the bottom, they think.
Rates are on autopilot, trying to find the bottom of this year's trading range, while the main catalyst for a change in the current market dynamics would be bumper U.S. nonfarm payroll data on Friday, said ING's rates strategists.
Danske Bank lowers its forecasts for five-year eurozone government bond yields for the next 12 months because it no longer expects markets to price early interest rate rises by the ECB, said Danske's chief analyst Arne Lohmann Rasmussen.
The lower forecasts for five-year bond yields also feed into Danske's 10-year yield outlook for the eurozone, he said.
Accordingly, Danske expects the 10-year German Bund yields to rise to -0.25% by the end of the year and to 0.1% on a 12-month horizon, compared with the bank's previous forecasts of 0% and 0.3%, respectively.
Oil prices rose after both benchmarks ended Tuesday less than 1% down after at one point losing 3% each. This week's volatility has come as "worries continue to grow over the spread of the delta variant in China, " said ING's Warren Patterson.
With a number of cities now in lockdown and travel restrictions newly imposed, demand worries have weighed on oil prices.
Prices rebounded after suspected Iranian gunmen hijacked a tanker off the coast of the UAE. That follows an attack on an Israeli-operated tanker that the U.S. and U.K. blamed on Iran.
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