Monetary developments in the euro area; U.S. Advance Report on Durable Goods; U.S. Federal Open Market Committee meeting; updates from Deutsche Boerse, Dassault Systemes, Kering, Telecom Italia, Ferrovial, ACS, FirstGroup, Croda International, Reckitt Benckiser, Koninklijke KPN, Randstad.
Europe to open flat after choppy session on Wall Street. Dollar edges lower, Bitcoin jumps. Oil and gold rise.
European stocks could struggle at the open as investors awaiting results from a number of U.S. technology giants later this week and for guidance from the Federal Reserve on Wednesday.
"This week is really where we enter crunchtime for earnings," said Hugh Gimber, a strategist at J.P. Morgan Asset Management. "With tech names reporting, the bar is high."
Rising concerns over the Delta variant of Covid-19 and worries over economic growth are likely to challenge the pace at which the U.S. stock market will rise in the coming weeks, some investors said. Money managers also are awaiting guidance from the Federal Reserve this week, including policy makers' outlook on inflation and any clues on when the central bank may start scaling back its bond purchase program.
"Economic activity in the U.S. does seem to have peaked," said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. "We're still in very benign territory where the economy is still powering ahead, but not at the full elastic bounce back."
The market actually may be reflecting more of that than it seems, said JC Parets, the founder of technical-analysis service AllStarCharts. The records for the big indexes are coming from a small group of stocks, which happen to be the largest. Underneath that, he said, the picture is much choppier.
In corporate news, Rio Tinto is expected to report underlying earnings of US$12.01 billion for the six months through June, according to 14 analysts' forecasts compiled by Vuma.
That would be up from US$4.75 billion in the same period in 2020. A Vuma compilation of 12 forecasts points to an interim dividend of roughly US$4.93 a share, versus US$1.55 a share a year ago.
Forecasts on the miner's payout are wide, however, after a strong first half for iron-ore prices. Analysts are tipping an ordinary dividend anywhere between US$3.57 a share and US$9.16 a share. Rio Tinto is scheduled to report after the Australian market closes Wednesday.
The greenback edged lower against major currencies, with the WSJ Dollar Index falling 0.3%, ahead of big-tech earnings and the Fed's communication later this week. A bullish earnings season and rising economic indicators are offset by concerns about the Delta variant and possible lockdowns around the world. The dollar slid 0.5% against the British pound and the Swiss franc, and 0.3% versus the euro.
The Federal Reserve's bringing forward of interest rate expectations in June likely encouraged more speculators to bet on the dollar strengthening than weakening in the week to July 20, ING said.
The latest CFTC data showed the dollar's positioning moved into net-long territory for the first time since March 2020 in the week to Tuesday. Long positions expect an asset price to rise and short positions expect it to fall.
"This is clearly a signal of how the combination of the Fed's hawkish expectations after the recent shift in tone and the general unwinding of reflation trades has prompted a recovery in USD sentiment," ING forex strategist Francesco Pesole said
On Monday, Bitcoin jumped about 25% from its 5 p.m. ET level Friday. Investors pointed to short positions being liquidated and speculation that Amazon may be venturing into digital currencies. The price of bitcoin rose as high as $40,539, its highest level since mid-June, according to CoinDesk.
Worries about post-Brexit trade tensions could have prompted speculators to bet against sterling in the week to July 20, ING said.
Sterling short positions outweighed long positions for the first time this year in the week to last Tuesday, according to the latest CFTC data. Shorts expect an asset price to fall and longs expect it to rise.
The shift in positioning isn't fully aligned with the spot market, where most G-10 currencies have performed worse than sterling in the past month, ING forex strategist Francesco Pesole said.
"At the same time, speculators may start to be pricing in some risk premium related to the post-Brexit EU-U.K. negotiations on the Northern Ireland protocol, which appear to be at a stalemate."
In bond markets, the yield on the 10-year Treasury note ticked lower to 1.276% from 1.286% Friday.
The yield on 10-year Treasury inflation-protected securities, or TIPS, fell to a record low Monday. Viewed as a proxy for the real yield, a measure of what investors earn from bondholdings after compensating for inflation, the TIPS yield reached minus 1.120% in intraday trading, according to Tradeweb.
Oil edged higher in the morning Asian session, but gains could be limited by ongoing concerns over the Covid-19 Delta variant.
This variant continues to spread globally and travel restrictions aren't easing, Oanda said.
The world is determining how it will live with Covid-19, and it still currently appears that worries over crude demand in the short term may prevent the tight market from sending oil prices much higher, Oanda added.
Gold consolidated as traders eye this week's Federal Open Market Committee meeting. Market players are waiting to see whether the Fed will signal the start of tapering, for example, by scaling back bond purchases, which would likely be bad news for gold, Commerzbank said.
The price of gold is unable to detach itself from the psychologically important $1,800/oz level ahead of the meeting, it added.
Copper rose in early Asian trade due to a likely growing bottleneck in primary metal production in China, according to Goldman Sachs. The Covid-19 Delta variant could exacerbate the market tightness, it said.
The investment bank expects a 430,000 ton refined metal deficit in 2H, and thinks this could continue next year. Maintaining its "bullish conviction," Goldman Sachs has price targets for copper in three, six and 12 months of $10,500, $11,000 and $11,500 a ton, respectively.
The three-month LME copper contract rose 0.9% to $9,890/ton.
Iron ore rose in early Asian trade as the selling that had weighed down the steel-making ingredient in recent sessions has subsided. Investors are finding confidence in the growing steel output of many countries even as Chinese authorities try to rein in steel production, ANZ said.
After a strong start to the year, China's steel output is showing signs of weakness, the bank said.
The most-traded September iron ore contract on the Dalian Commodity Exchange rose 1.2% to CNY1,155.0 a ton.
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