MARKET WRAPS
Stocks:
European stocks edged higher on Wednesday, shaking off losses on Wall Street triggered in part by softer-than-expected economic data. Resource stocks were leading the gainers, along with sportswear maker Puma.
Shares of Royal Dutch Shell climbed 3%. The energy giant said Wednesday that it will boost total shareholder distributions to 20%-30% of cash flow from operations beginning with the announcement of second-quarter results, due later this month.
Shares of BP and Repsol rose around 2% each. And mining stocks were also higher, with Rio Tinto rising 1.9% and BHP up over 2%.
Sportswear makers got a boost, led by a 1.8% rise for shares of Puma, which makes the kits of the Italian national football team, following Italy's success so far at the UEFA Euro 2020 championship. Shares of rival Adidas rose 1.5%.
Beer makers were also among the rising stocks, with shares of Anheuser-Busch InBev up 1.3% and Heineken rising 1%. The British Beer & Pub Association is predicting England fans will buy 6.8 million pints on Wednesday during the semifinal later.
EDF lifted its earnings target for the year after raising its expectations for nuclear output in France. Shares of the French energy company rose 2%.
Some technology stocks were rising after Nasdaq gains on Tuesday, with software giant SAP up 3%.
U.S. Markets:
Stock futures inched up led by Nasdaq-100 futures. It was a reflection of Tuesday's action, which saw the Dow and S&P 500 step back from record levels, but a new peak for Nasdaq.
Losses came in part after the Institute for Supply Management reported an unexpected fall in its service sector gauge. Job openings and the minutes of the most recent FOMC meeting are in the spotlight for Wednesday.
Forex:
The dollar was largely flat as investors awaited the minutes of the Federal Reserve's latest policy meeting.
Commerzbank said the minutes are unlikely to differ hugely from the information provided at the June 16 meeting when the Fed brought forward its expectations for interest rate rises. "That in turn means that even following careful scrutiny there will not be much reason for any moves in the dollar," said currency analyst Antje Praefcke.
Market uncertainty about the Delta coronavirus variant and its potential impact on economies is likely to set the tone in the short term, she said.
ING said the euro could fall against the safe-haven dollar Wednesday, dragging the sterling-dollar exchange rate lower too, on poor risk appetite and the Fed minutes.
"EUR/USD may gain more downside momentum if the psychological 1.1800 support is broken today," said ING analysts.
Risk appetite could remain weak after correcting lower Tuesday following a fall in oil prices, a weak U.S. ISM non-manufacturing report and China's crackdown on tech companies listed abroad. The dollar could also receive a boost from "hawkishness" in the Fed's minutes.
Bonds:
Eurozone government bond yields are currently in a moderate down trend on worries over the Delta mutation of the coronavirus, said DZ Bank analyst Sophia Oertmann.
The Delta concerns on the one hand are in conflicting tension with inflation worries on the other, she said. Over the past month, however, changes in government bond yield spreads over German Bunds have remained within a narrow range.
Meantime, Natixis said it doesn't rule out a new flare-up in reflation trade in government bonds. The backdrop is a news flow that remains "excellent," as well as a more aggressive tone from the Fed. Natixis added that real rates have significant upside potential that is increasingly asymmetrical following the Fed's June monetary policy meeting.
Euro-denominated, investment-grade nonfinancial corporate bond spreads continue to tighten on the back of weak supply, said UniCredit.
"An absence of new bond issuance is leading to credit spreads of investment-grade non-financials...continuing to drift gradually tighter, " said analysts at the bank. So far this month, companies issued about EUR1.1 billion in new euro-denominated investment-grade bonds, with low issuance contributing to a one-basis point fall in credit spreads Tuesday.
In contrast, continuous new bond supply from high-yield issuers, of about EUR2.3 billion during the same period, is weighing on the performance of this market segment, they said.
UniCredit added that the release of the Fed minutes is unlikely to drive European corporate bond markets. Rather, the market will continue to be driven by technical factors, said analysts at the bank.
Commodities:
Oil prices steadied in Europe after they suffered their worst drop in months on Tuesday as the market continues to assess the fallout of the aborted OPEC+ meeting.
"While on paper no increase in quotas would lead to an extremely tight forward-looking market, it also significantly raises the potential for non-compliance, a major concern with upwards of 5+ [million barrels a day] OPEC+ production still offline," said J.P. Morgan in a note.
Gold futures rose ahead of the Fed meeting minutes. While they will be keenly eyed for further clues on plans for the Fed's bond-buying program and interest rate hikes, the minutes are unlikely to yield many surprises, said Commerzbank analyst, Carsten Fritsch.
Three-month copper prices rose 2% on the LME to $9,499 a metric ton, as the dollar's rally stalled and China completed the first round of sales from its metal reserves.
While the planned sales initially sparked concern and hit prices, the quantities thus far earmarked for sale have been smaller than expected, said Saxo Bank. "It was not a quantity that shook the market," said Ole Hansen, head of commodity strategy.
Jefferies said even if commodity prices have hit their peak, the valuations of major diversified miners remain compelling on the long run outlook.
"While valuations may not be relevant during short-term periods, especially when commodity prices are falling, we would argue that valuations should matter most in the long term."
The risk to mining stocks might be if commodity prices crash from today's levels to lower, long-run pricing very quickly, rather than over several years, or if companies make large, value-destructive investments, Jefferies said.
EMEA HEADLINES
Eurozone Economy Set to Rebound Faster Than Previously Expected
The European economy is forecast to rebound faster than previously expected, the European Union said Wednesday, revising growth expectations for 2021 and 2022 upward.
The two main reasons for the revision are that activity in the first quarter of the year exceeded expectations and the improved health situation prompted a swifter easing of pandemic restrictions in the second quarter.
German Industrial Production Unexpectedly Fell in May
German industrial production declined in May, missing expectations for an increase, statistics office Destatis said Wednesday.
Total industrial output--comprising production in manufacturing, energy and construction--decreased 0.3% in May from April in calendar-adjusted terms. Economists had forecast a 0.5% increase, according to a poll by The Wall Street Journal.
Bank Stocks in Europe Zoom Higher, Rewarding Bargain Hunters
European banks are among the stock market's top performers, making winners out of the investors who backed them when many wouldn't touch them during the pandemic.
This year, the Euro Stoxx Banks index is up 26%-compared with a 14% rise for the broader benchmark-and has recently regained all the ground it lost during the pandemic. Some individual stocks have done even better. Spain's Banco de Sabadell SA, which was hammered during the pandemic's shutdowns, is up 60% in 2021, while French banking giant Société Générale SA is up nearly 50%.
Shell to Increase Shareholder Distributions
Royal Dutch Shell PLC said Wednesday that it will increase total shareholder distributions to 20%-30% of cash flow from operations starting from the second-quarter results announcement on July 29.
Bang & Olufsen Swung to 4Q Net Profit, Sees Double-Digit Revenue Growth This Year
Bang & Olufsen AS said Wednesday that it swung to a small fiscal fourth-quarter net profit amid higher demand for home entertainment products and said it expects to deliver double-digit revenue growth this year with improved profitability.
The Danish consumer electronics company posted a net profit of 1 million Danish kroner ($159,008) for the three months to May 31 compared with a loss of DKK135 million a year earlier.
EDF Raises Earnings Target on Higher Nuclear Output
Electricite de France SA has improved its earnings target for the year after raising its expectations for nuclear output in France.
The French energy company said Wednesday that it now targets earnings before interest, taxes, depreciation and amortization of more than 17.7 billion euros ($20.93 billion) for this year, having previously guided for an Ebitda of more than EUR17 billion.
Ferrexpo Reports Higher 2Q Production, Appoints New CFO
Ferrexpo PLC on Wednesday reported that its iron ore pellet production increased in the second quarter, and appointed Nikolay Kladiev as chief financial officer.
The Swiss-headquartered, Ukraine-focused iron ore company said pellet production was 2.8 million metric tons in the three months to June, up 5% compared with the first quarter, reflecting the completion of pelletizer upgrade work.
Covid-19 Vaccine-Related Blood Clots Linked to Amino Acids in New Study
Canadian researchers say they have pinpointed a handful of amino acids targeted by key antibodies in the blood of some people who received AstraZeneca PLC's Covid-19 vaccine, offering fresh clues to what causes rare blood clots associated with the shot.
(MORE TO FOLLOW) Dow Jones Newswires
07-07-21 0600ET
