Germany Industrial Production Index; Bank of England National Agency Briefing with Deputy Governor Ben Broadbent; U.S. Employment Report; updates from Covestro, Allianz, Vonovia, London Stock Exchange, Hikma Pharmaceuticals, ING, A.P. Moller-Maersk.
Stocks could open flat, U.S. stock futures point slightly lower. Dollar unmoved. Oil and gold lower.
European stocks could waver at the open Friday as investors waited for U.S. jobs data for an update on how coronavirus flareups are affecting the biggest global economy.
On Wall Street Thursday, stocks rallied broadly, as shares of banks and technology and travel companies rose.
Major U.S. stock indexes have wobbled in recent days amid concerns that the economic rebound may be slowing. A rapid rise in new Covid-19 cases recently has added to concerns, too. Dr. Anthony Fauci, the Biden administration’s chief medical adviser, said recently that he didn’t believe the U.S. would return to lockdowns but warned that “things are going to get worse” as the more contagious Delta variant of Covid-19 spreads.
Still, both the S&P 500 and the Nasdaq Composite finished at all-time highs, with the broad benchmark index notching its 43rd record close of the year. The Nasdaq Composite has reached 27 records in 2021. The Dow is hovering just 0.2% below its closing high last reached July 26.
Strong earnings results in the second quarter have helped boost share prices recently, even as economic data have been mixed. Fresh data Thursday showed the trade deficit widened to $75.7 billion in June, more than economists had forecast, as Americans bought more goods from overseas.
Meanwhile, jobless claims, seen as a proxy for layoffs, dropped slightly to 385,000 last week. Workers’ filings for new unemployment benefits are still hovering at a level that is nearly double the pre-pandemic average.
“We’re pretty positive, we think that the earnings data is very strong,” said Caroline Simmons, U.K. chief investment officer at UBS Global Wealth Management. Equity markets can continue to climb by 5% to 10% over the next year, she said.
The continued signs of weakness in the labor market also suggests that the Federal Reserve will hold off on scaling back its easy money policies for now, Ms. Simmons added.
“Unemployment is higher than it was pre-pandemic, and central banks feel there is still excess capacity in the labor market,” Ms. Simmons said. “When it comes to it, we believe that monetary tightening will be relatively gradual, well flagged, and actually, equities will probably be able to absorb it.”
In corporate news, BHP’s latest oil investments might be interpreted “as a demonstration of the value-accretive potential of BHP’s petroleum business,” following speculation over whether the miner will seek to offload the division, Morgan Stanley said.
Its $544 million Shenzi North investment would generate an internal rate of return of 35%, and have a pay-back period of two years and break-even price of $25/barrel, MS notes. The $258 million for the Trion project is slated for studies ahead of an expected investment decision mid-2022.
Elsewhere, brutal heat and dry fields have punished farmers in Canada and the U.S. West, raise questions of whether suppliers like Bayer could see a drop in demand–shriveled fields may not need as much herbicide, for example.
Bayer agriculture head Liam Condon said there’s no material effect so far to Bayer’s farm chemical or vegetable seed business, and while Canadian fungicide inventories are building, it isn’t a widespread concern. The drought, Condon said, is one of several “pretty freaky weather incidents” around the world.
The U.S. dollar moved little versus the euro, strengthens 0.3% against the yen and weakens 0.3% against the pound, while the WSJ Dollar Index is unchanged at 86.99.
Labor data confirmed expectations of a decrease in jobless claims last week, but high expectations remain for Friday’s nonfarm payrolls, with consensus forecast of 845K jobs added, while some economists expect more than 1M.
On monetary policy, the Bank of England kept its accommodative stance despite above-target inflation, as the resurgence of Covid-19 looms over the global economy.
The Bank of England is likely to stay put until the U.S. Fed starts removing monetary stimulus, according to Carlo Alberto De Casa, from Kinesis.
The BOE “would probably prefer not to be the first to start reducing liquidity and hike rates in order to see the evolution of the scenario,” he told WSJ after the central bank decided to keep an accommodative stance despite above-target inflation rates in the UK.
“Raising rates too early could in some way suffocate the current recovery,” he said, adding that the British real-estate market “will probably suffer if rates are raising significantly.”
Oil prices declined in early Asian trade, after rising on U.S. trade data that showed the country’s crude exports improved in June. The demand outlook may be weighed down in the near term due to concerns over the Covid-19 Delta variant that spread has across 15 provinces in China, Oanda said. China is one of the largest oil importers.
“The Chinese vaccines are less effective than the mRNA vaccines and this could mean a slower reopening,” Oanda said. It expects WTI crude to consolidate in a $67/bbl-$71/bbl trading range for now.
Gold declined in early Asian trade after U.S. Treasury yields climbed from lows not seen since February.
The upcoming U.S. nonfarm payroll report will likely be the main driver of gold’s short-term direction, OCBC says. “A stronger than expected jobs report may send gold below the $1,800 support on heightened expectations of an earlier rate hike cycle,” it added.
Copper prices rose slightly in early Asian trade and are likely to remain supported by the U.S.’s roughly $1 trillion infrastructure bill which remains under negotiation, ANZ reckoned.
The infrastructure plan is likely to boost the demand for metals like copper and zinc given their use in construction, it said. Copper would also stand to gain from the U.S.’s plan to invest in electric-vehicle infrastructure, ANZ said. “Overall we see growth in copper demand hitting double digits over the next year or two,” it said. The three-month LME copper contract rose 0.1% to $9,498.50 a ton.
TODAY’S TOP HEADLINES
Business Groups Call on Biden to Restart Trade Talks With China
WASHINGTON-Nearly three dozen of the nation’s most influential business groups-representing retailers, chip makers, farmers and others-are calling on the Biden administration to restart negotiations with China and cut tariffs on imports, saying they are a drag on the U.S. economy.
The tariffs on electronics, apparel and other Chinese goods, which are paid by U.S. importers, were kept in place in part to ensure that China fulfills its obligations under its 2020 Phase One trade pact with the U.S.
CBO Estimates Infrastructure Bill Would Add $256 Billion to Deficits
WASHINGTON-Congress’s nonpartisan scorekeeper found that the roughly $1 trillion infrastructure bill would widen the federal budget deficit by $256 billion over 10 years, countering negotiators’ claims that the price tag would be covered by new revenue and saving measures.
The score was released as the Senate advances amendments for the bill this week and didn’t create any immediate obstacles to final passage of President Biden’s economic agenda.
EU Takes Another Step to Harmonize Anti-Money-Laundering Rules
The European Union’s banking regulator has proposed guidance for financial-sector compliance officers, another step in the bloc’s effort to revamp its anti-money-laundering system.
The proposal from the Paris-based European Banking Authority is the latest move by the EU to harmonize anti-money-laundering rules across member states and shift implementation away from national authorities.
China’s Corporate Crackdown Is Just Getting Started. Signs Point to More Tumult Ahead.
In recent months, China has blown up what would have been the world’s largest initial public offering, launched probes into some of its biggest technology companies, and wiped out more than $1 trillion in market value while investors scramble for cover.
There are many signs it isn’t over yet.
Covid-19 Vaccination Rates Rise Where Delta Variant Is Spreading
Covid-19 vaccination rates are ticking upward across the U.S., federal officials said, particularly in areas where the Delta variant is hitting hardest.
Worries about the virus, growing confidence in the safety of vaccines and the influence of family and friends are all likely contributing to the increase in vaccine uptake, health authorities and residents say. More employers are also starting to institute vaccine mandates. The U.S. has administered more than 864,000 doses of Covid-19 vaccines in the past 24 hours, including 585,000 first shots, White House Covid-19 Response Coordinator Jeff Zients said Thursday during a media briefing.
RBA Debated Suspending QE Taper; Monitoring Covid Crisis
SYDNEY-The Reserve Bank of Australia debated suspending a planned reduction in its weekly government bond buying program at its policy meeting Tuesday, but elected to allow fiscal stimulus to do the heavy lifting of the economy as the country faces a potential plunge back into recession amid a worsening Covid-19 outbreak.
In a testimony before parliament on Friday, RBA Gov. Philip Lowe said the central bank’s board was willing to adjust policy settings, if conditions in the economy continue to deteriorate over the coming months.
WPP Raises Revenue Forecast as Clients Boost Digital Spending
Advertising company WPP PLC said it returned to pre-pandemic growth rates a year earlier than expected as clients boosted spending on digital marketing and e-commerce.
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