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EMEA Morning Briefing : Stocks to Rise as Investors Digest Earnings, Pandemic Developments

08/04/2021 | 12:19am EDT


Watch For:

EuroCOIN indicator of euro area economic activity; Eurozone Services PMI; CIPS/Markit Services PMI; EU Retail trade; updates from Hugo Boss, Schaeffler, Commerzbank, Siemens Energy, Intesa Sanpaolo, Babcock, Taylor Wimpey, Legal & General Group, Wolters Kluwer, Next.


European stocks are set to open higher Wednesday as investors continue to digest earnings and the increase in Delta-variant Covid-19 cases.

U.S. stocks advanced broadly Tuesday, bouncing back from earlier losses to bring the S&P 500 to a closing high.

A solid earnings season has helped bolster investors' optimism that stocks can continue to grind higher following an already strong 2021 rally. Money managers are counting on continued support from central banks and economic data that still shows growth to further support markets.

"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."

Besides earnings, investors also are monitoring a number of other 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.

In corporate news, Taylor Wimpey investors are likely to focus on latest trading in the U.K. house-builder's half-year results.

Taylor last updated the market in late April, when the group highlighted robust market conditions and in-line trading, Numis Securities said.

"We think the market will focus on the group's trading trends over the last few months, progress with land buying--and how this will translate into rising outlets, a key issue for the group in recent years--and also progress against the group's target of generating a 21-22% EBIT margin," Numis analyst Chris Millington said.


The U.S. dollar moved little, with the WSJ Dollar Index slightly down. The dollar weakens 0.3% versus the yen and 0.2% against the pound, and is a little stronger versus the euro.

Markets juggle opposing expectations about Friday's nonfarm payrolls. A positive surprise could boost the currency by fanning forecasts of speedy monetary tightening, while too few new openings would hint to a slower recovery, delayed Fed action and less of a support for the dollar.

The sharp deterioration in Romania's current account deficit to 6.3% of gross domestic product in the year to May looks concerning and could lead to a weaker leu, Capital Economics said.

"Current account deficits this large have often been associated with vulnerability to a decrease in global risk appetite, which can put large downwards pressure on currencies," Capital Economics economist Nicholas Farr said.

Romania's central bank is likely to limit the rise in EUR/RON to 5.10 by the end of 2023, versus the current level of 4.9185, but there is a risk of sharper falls in the leu that could prompt a faster-than-expected rise in interest rates, he said.


The steep decline in Treasury yields is "surreal," asset manager Louis Navellier said. The 10-year yield was at 1.172%, well below the 1.749% reached in March. The fall is widely attributed to prospects of a slower global recovery.

"The bond market looks like it is afraid of the delta mutation of the novel coronavirus, and it also is probably benefiting from Japanese and European QE money, which can find no yields in their home bond markets to chase, so they are looking at positive yields in the US bond market," he said, adding the yield may go down to 1%.


Oil declined in morning Asian trading amid demand concerns due to the spread of the Covid-19 Delta variant globally. Developments on the seizure of a tanker ship in the Gulf of Oman by suspected Iranian gunmen will be closely watched, Oanda said.

Investors will also keep an eye on this week's upcoming EIA report on U.S. oil inventories. "If U.S. stockpiles unexpectedly increase this week, WTI crude could be vulnerable to a drop towards the $67.00 region, " Oanda added.


Gold was little changed in Asian trading after declining overnight as U.S. Treasury yields and the dollar edged up. Chinese demand may provide some support for the precious metal.

A report by the China Gold Association showed the country's demand for gold recovered significantly in the first half of the year after slumping last year due to the pandemic, Commerzbank said.

Copper rose in early Asian trade, but prices could soon lose support as current levels now seem too pricey for some Chinese buyers, Commerzbank said.

The German bank noted that China's copper imports fell for the third month in a row in June. At just under 430,000 tons, the June figure is also the second lowest in the last one-and-a-half years, Commerzbank said.

"If China continues to hold back on metals imports in the coming months, the situation on the world market will probably ease," it said. The three-month LME copper contract rose 0.3% to $9,569.50 a ton.


China Services-Sector Gauge Rebounded in July

A private gauge of China's services sector unexpectedly rebounded in July after slipping to a 14-month low in June, as new orders picked up.

However, China's recent resurgence of Covid-19 cases since late July is set to overshadow its services sector and weaken the economic outlook, as local governments have imposed stringent lockdown and quarantine measures to stop the spread of the virus.

Crypto 'Wild West' Needs Stronger Investor Protection, SEC Chief Says

WASHINGTON-The Securities and Exchange Commission will regulate cryptocurrency markets to the maximum extent possible using its existing authority, Chairman Gary Gensler said Tuesday, while also calling on Congress to grant the agency more scope and resources to oversee the sector.

Calling the asset class rife with "fraud, scams and abuse," Mr. Gensler signaled the SEC is likely to become more active in policing crypto trading and lending platforms, as well as so-called stablecoins.

Ship Seized in Gulf of Oman Amid Rising Tensions With Iran

A tanker ship in the Gulf of Oman was seized Tuesday by suspected Iranian gunmen, Western officials said, amid rising regional tensions following a fatal drone attack on another vessel that the U.S. and its allies have blamed on the Islamic Republic.

The tanker was boarded near the port of Fujairah in the United Arab Emirates, according to the United Kingdom Maritime Trade Operations, which is affiliated with the British Defense Ministry.

Robinhood's Stock Jumps, Reversing Faltering IPO Debut

Shares of Robinhood Markets Inc. jumped Tuesday, surging past the company's initial-public offering price in a reversal from last week's underwhelming trading debut.

The company's stock, which trades under the ticker symbol HOOD, rose 24% to $46.80 after surging as high as $48.59 earlier in the day. Robinhood, the maker of the popular zero-commission trading platform, made its debut on Nasdaq last week, opening at $38 a share. Its stock tumbled shortly after trading kicked off, falling more than 10% intraday, before settling below $35.

Biden Administration Issues New Eviction Moratorium

WASHINGTON-The Biden administration Tuesday announced a new federal moratorium on evictions, bowing to pressure from progressive Democrats to revive lapsed tenant protections despite White House officials saying they lacked the legal authority to do so.

The Centers for Disease Control and Prevention's ban targets areas that have experienced "substantial or high" levels of Covid-19 transmission and is expected to cover more than 80% of U.S. counties.

Natural Gas Is Looking Like This Summer's Hottest Commodity

The heat wave that scorched the West has dissipated, but natural-gas prices have yet to cool off.

The power-generation fuel has been in high demand to run air conditioners and make up for parched hydropower markets, and forecasters expect booming exports and more steamy weather to keep supplies down and prices up.

As SPAC Creators Get Rich, How Incentives Are Shared Remains Murky

Many investment executives who back special-purpose acquisition companies are scoring big paydays as more deals get completed. Some of their clients are missing out.

The divergence results from the varying methods SPAC creators use to share the lucrative incentives known as the "sponsor promote." It typically consists of deeply discounted shares and other securities executives receive for risking capital to set up the SPAC and vet a company to take public. The promote typically allows creators to make tens of millions of dollars on paper on average-sometimes several times their initial investment-even if that company's shares fall.

Ship Seized in Gulf of Oman Amid Rising Tensions With Iran

A tanker ship in the Gulf of Oman was seized Tuesday by suspected Iranian gunmen, Western officials said, amid rising regional tensions following a fatal drone attack on another vessel that the U.S. and its allies have blamed on the Islamic Republic.

The tanker was boarded near the port of Fujairah in the United Arab Emirates, according to the United Kingdom Maritime Trade Operations, which is affiliated with the British Defense Ministry.

Facebook Acquisition Review Shows EU's New Antitrust Power

BRUSSELS-Facebook Inc. has hit a new obstacle in Europe in its planned takeover of a small New York-based startup, showing how antitrust muscle-flexing is increasingly affecting deals an ocean away.

(MORE TO FOLLOW) Dow Jones Newswires

08-04-21 0018ET

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