UKX FTSE 100 Index

MARKET WRAPS

Stocks:

European stocks rose Tuesday as oil giant BP and Chrysler maker Stellantis advanced after their quarterly results.

In London, the FTSE 100 rose, led by energy giant BP and lender Standard Chartered after well-received earnings. BP shares rose 2.3% after raising its second quarter dividend and launching a $1.4 billion share buyback following stronger-than-expected underlying profit on a replacement cost basis for the period.

Standard Chartered gained 2.0% after the bank reported a bigger-than-forecast rise in first-half profit, resumed interim dividend payments and announced a $250 million share buyback.

In the U.S., a strong spate of corporate results has helped bolster optimism that stocks can continue to grind higher following an already strong rally this year. Investors say continued support from central banks and economic data that still shows growth will further support equities.

"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."

Investors are also monitoring a number of 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.

Technology stocks in China and Hong Kong had another turbulent session after a state-owned newspaper criticized online gaming as "opium for the mind," stoking fears of further tough action from Beijing.

Shares in China's Tencent Holdings, NetEase and Bilibili all plunged, before regaining some ground after the article disappeared from the paper's website.

"Sentiment has been hit by this commentary suggesting that online gaming might be an area China will target in the future," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "It means this risk won't go away. It is hard for investors to trade that risk," he added.

U.S. Markets:

U.S. stock futures edged higher as investors awaited more corporate earnings reports to assess the business climate.

There's plenty of earnings reports still coming in, as chemicals giant DuPont lifted its earnings guidance for the year.

Mall operator Simon Property Group late Monday raised its full-year guidance and lifted its dividend payment after reporting 92% occupancy, while office building owner Vornado Realty Trust VNO, -0.46% met second-quarter estimates and reported a 97% rent collection rate .

Outdoor clothing maker Columbia Sportswear lifted its sales guidance.

Mask mandates have been reintroduced in various U.S. regions including Louisiana and San Francisco to confront the delta strain of coronavirus. The U.S. did achieve the 70% vaccination target set by President Joe Biden. China announced fresh mass testing in Wuhan, the city where the disease was first discovered.

Factory orders data is due at 10 a.m. Eastern.

Forex:

The view that the yield advantage of U.S. assets over euro-area assets should cause the euro to weaken versus the dollar isn't justified, Commerzbank said.

"If it were true, the euro would have to depreciate steadily against the dollar," Commerzbank currency analyst Ulrich Leuchtmann said.

Long-term real inflation-adjusted Treasury and German Bund yields haven't been at comparable levels since 2012, he said.

The risk of significant euro appreciation is higher than the risk of significant depreciation as EUR/USD trades well below long-term equilibrium levels, he said.

The pound should rise in tandem with U.K. bond yields if the Bank of England cements market expectations for an interest rate rise next year in a policy decision Thursday, Bank of America said.

"The rates markets appear well placed in expecting the first hike in May 2022 (+15 basis points), consistent with our own projections," BofA analysts said. "For GBP, this sets the bar for market expectations, and we think the burden of proof is whether the BOE validates market pricing for the removal of policy accommodation in the coming year."

If the BOE can achieve this while sounding "hawkish," the pound should benefit from higher nominal and inflation-adjusted real bond yields, the analysts said.

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked up to 1.189% from 1.173% Monday, its lowest closing level since February.

Euro-denominated investment-grade corporate bond spreads have kept up pace with tightening government bond spreads, said Commerzbank.

"Supported by a lack of issuance, strong quantitative-easing buying and improved fund flow momentum..., euro investment-grade cash [corporate bonds] lately had little trouble keeping pace with govies," said head of corporate credit research Marco Stoeckle.

Since the beginning of June, senior G-spreads--the difference between yield on sovereign bonds and the yield on corporate bonds of same maturity--are flattish and have moved in a 3 basis point range, he said.

Commodities

Oil prices swung higher. "The oil market continues to alternate between concerns about tight supply on the one hand and about looming demand outages on the other," said Commerzbank's Barbara Lambrecht.

Despite swinging over the last week, crude has remained in a relatively tight range in recent sessions, with Brent only 0.2% lower than it was this time a week ago.

While worries over fresh Delta-variant-driven restrictions and the health of the Chinese economic recovery have worried investors in recent days, DNB Markets's Helge Andre Martinsen pointed out that Bloomberg's survey of OPEC production shows compliance with cuts at a record level for July.

LME three-month copper futures edged up 0.2% to $9,638 a metric ton after falling for the third day in a row Monday--despite the fact that labor disputes are still ongoing at one of the world's biggest mines, Chile's Escondida.

Concerns about economic growth and the rise of the Delta variant of the coronavirus in Asia have dragged down copper in recent days, said Marex Spectron's Anna Stablum.

Gold prices in London were down, with price moves having been calm in recent days. While a weaker dollar boosted gold last week, that move seems to have paused for now.

EMEA HEADLINES

Sanofi Snaps Up mRNA Specialist for $3.2 Billion Amid Vaccine Success

Sanofi SA agreed to pay $3.2 billion to acquire mRNA specialist Translate Bio, a big vote of confidence that the new technology underpinning two successful Covid-19 vaccines holds promise beyond the pandemic.

The French healthcare company said the deal would accelerate work already under way with Translate Bio, based in Lexington, Mass., to develop mRNA vaccines for Covid-19, seasonal flu and other infectious diseases. It will also hand Sanofi a platform to pursue further drugs and vaccines using mRNA technology.

BP Raises Dividend, Launches $1.4 Bln Share Buyback

BP PLC said Tuesday that it increased the dividend for its second quarter and launched a $1.4 billion share buyback.

The British oil-and-gas major declared a quarterly dividend of 5.46 cents a share, up from 5.25 cents for the first quarter. The $1.4 billion buyback is planned to be executed before the release of third-quarter results, BP said.

Societe Generale Sees Lower Provisions, Higher Revenue for the Year

Societe Generale SA said it will launch a buyback in the last quarter of the year and improved its guidance for provisions after it swung to a second-quarter profit.

France's third-largest listed bank by assets said Tuesday that it now expects a cost of risk of between 20 and 25 basis points for the year, having previously guided for a range of 30 to 35 basis points. It also anticipates all its business posting higher revenue. The bank confirmed it will launch a 470 million euro ($558.1 million) buyback in the last quarter.

BMW Swung to Profit in 2Q on Higher Revenue

BMW AG on Tuesday reported a swing to second-quarter profit and a rise in revenue as the luxury-car maker continued to benefit from strong demand for premium vehicles and good pricing.

The German auto maker's quarterly aftertax profit was 4.79 billion euros ($5.69 billion) compared with a loss of EUR212 million in the same period a year earlier when it was hit by the effects of the coronavirus pandemic.

Infineon Technologies Returned to 3Q Net Profit Amid 'Unbroken' Chip Demand

Infineon Technologies AG said Tuesday that it swung back to a net profit in the third quarter of fiscal 2021, while revenue continued its ascent as demand for chips shows no signs of abating amid a global supply shortage.

The German chip maker posted a net profit for the three months ended June 30 of 245 million euros ($290.9 million), compared with a net loss of EUR128 million a year earlier.

Maersk Lifts Guidance as Supply Chain Bottlenecks Send Freight Rates Surging

A.P. Moeller-Maersk AS late Monday lifted its full-year guidance and announced strong preliminary second-quarter earnings after seeing a continued rebound in demand and surging freight rates.

The Danish shipping giant has seen supply chain bottlenecks and shortages of equipment as retailers restock inventory that was depleted early last year and as consumer spending recovers, sending freight rates 59% higher in the quarter compared with last year while shipping volumes increased 15%.

Standard Chartered Second-Quarter Profit Jumped 69%

Standard Chartered PLC said Tuesday that its profit jumped 69% in the second quarter, as the Asia-focused bank's recovery picked up on easing credit impairments.

The upbeat earnings from Standard Chartered followed results from peer HSBC Holdings PLC, which earlier this week said its second-quarter profit soared more than 10-fold, in a sign of the strength of Asia's economic rebound from the peak of the pandemic's impact last year.

Ernst & Young to Pay $10 Million to Settle SEC Probe of Bid Violations

Ernst & Young LLP will pay $10 million to settle a regulatory investigation into allegations that it improperly obtained confidential information in pursuit of a contract to audit a public company's books.

The Securities and Exchange Commission also fined four accountants allegedly involved in the misconduct: an Ernst & Young partner, two retired partners and a former chief accounting officer of the unnamed client company who shared the competitive information with them, according to the agency. The four accountants were all suspended from reviewing the financial statements of public companies for periods ranging from one to three years.

Ferrari Is Stuck in Neutral

Ferrari likes to take its time to get things right. That is a strength in creating cars that justify astronomical prices, but it also means investors can't expect the stock to suddenly pick up speed.

Like the luxury industry it sometimes seems part of, the Italian sports car maker is accelerating smoothly out of the pandemic. Second-quarter operating profits reported Monday were about 15% higher than in the same period of 2019, before Covid-19 struck. It sold a similar number of vehicles, but those cars it did sell-such as the SF90 Stradale, a plug-in hybrid with a base price north of $500,000-were more expensive and profitable than those of two years ago. June was the best month ever for orders.

Device Maker Linked to Alleged Ponzi-Like Scheme Loses Bankruptcy Funding

Insightra Medical Inc., a device maker which filed for bankruptcy after its investment firm owner became the target of civil and criminal complaints by the U.S. government, lost access to financing and is teetering on the edge of liquidation.

Insightra lawyer Anthony Saccullo said at a court hearing Monday that its direct shareholder Odyssey Life Science Holdings LLC was cutting off the financing, including $500,000 the company needed in the short term.

GLOBAL NEWS

Cable, Internet Companies Stand to Gain From Broadband Funding in Infrastructure Bill

WASHINGTON-The $1 trillion infrastructure bill moving through the Senate this week stands to be a windfall for cable and fiber-optic internet companies, with $65 billion allocated to improve internet access for poor and isolated communities.

The plan, which must still be reconciled with a House version, would help home internet providers such as AT&T Inc. and Charter Communications Inc. by providing $40 billion in grants that states can dole out to operators that expand their networks to households that lack high-speed service.

Bundled Commercial Real-Estate Loans Climb to Sales Record

Sales of securities backed by riskier commercial real-estate loans have surged to a record, highlighting investors' demand for higher-yielding debt and expectations for a recovery in business properties.

Commercial real-estate collateralized loan obligations are created by private real-estate investors. In these deals, lenders sell debt and equity to make short-term loans to borrowers that renovate business properties, particularly multifamily housing. Money from interest payments and principal from the pool of bridge loans goes to bondholders, while any residual cash goes to equity holders.

Tencent Plummets as China Calls Online Gaming 'Opium for the Mind'

Shares of Tencent Holdings Ltd. and rivals plummeted Tuesday after a state-owned Chinese newspaper criticized online gaming as "opium for the mind," fueling investor concerns that the companies' popular games could be swept up into a broader regulatory crackdown.

Hours later, however, the story was no longer accessible on the paper's website, and the stocks recovered some lost ground. Meanwhile, Tencent said it would introduce stricter curbs on younger users.

Pensions Post Best One-Year Returns in Over Three Decades

Investments held by public pension systems, bolstered by private-equity and publicly traded stocks, posted their best returns since 1986 for the one-year period that ended in June.

The returns surged to a median of nearly 27% during the 12 months through June from about 3.4% in the year-earlier period, according to Wilshire Trust Universe Comparison Service. Pension fund executives credit private equity for some of the substantial gains.

Janet Yellen to Enact Steps to Avoid Breaching Debt Ceiling

WASHINGTON-Treasury Secretary Janet Yellen on Monday revealed further measures to avoid breaching the federal government's borrowing limit and urged Congress to increase or suspend the ceiling, which went back into effect on Sunday.

Starting Monday, the Treasury Department will suspend reinvestments by a number of retirement funds for civil servants and postal workers, Ms. Yellen said in a letter to congressional leaders. The funds will be made whole once the debt limit is either suspended or increased, she said.

Delta Variant Stalls Asia's Economic Recovery After Early Rebound

Asia is emerging as a weak link in an otherwise strong global economic recovery, as new pandemic restrictions restrain manufacturing in some countries and the exports that have powered the recovery in China show signs of slowing.

With progress on vaccinations slower than in the West, Asia is hitting new pandemic highs driven by the Delta variant of the coronavirus. The spread of the virus is threatening to hurt consumer confidence and erode the advantage of many Asian economies as manufacturing powerhouses.

RBA Presses on With QE Taper Even as Lockdowns Cripple Economic Outlook

SYDNEY-The Reserve Bank of Australia will press ahead with plans to reduce its government bond buying in September, even as the economic outlook deteriorates sharply amid pandemic-related lockdowns in several cities.

The RBA's decision means it will cut its government bond buying to 4 billion Australian dollars (US$2.95 billion) per week in September from A$5 billion as planned, with a further review of its buying scheduled for November.

U.S. Says It Has Shared 110 Million Covid-19 Vaccine Doses Overseas

WASHINGTON-President Biden's administration has shipped more than 110 million Covid-19 vaccine doses to 65 countries, the White House said, as it works to share supply with the rest of the world following regulatory and logistical setbacks.

The figures come about a month behind the White House's June goal of delivering 80 million doses overseas, part of a greater vaccine-donation drive by the U.S. in the coming months.

CDC's Covid-19 Mask Mandate Clouded by Flawed Data

The Centers for Disease Control and Prevention is fighting Covid-19 without a full arsenal of data that some public-health experts said it would need to persuade more people to take steps to contain the pandemic.

When CDC Director Rochelle Walensky said last week that people should wear masks again indoors in areas with "substantial" levels of Covid-19 transmission, for instance, she said evidence shows the Delta variant might be spread as easily by vaccinated people who become infected as by the unvaccinated. The CDC pointed to Provincetown, Mass., where it said large gatherings in July at bars, nightclubs and house parties led to hundreds of Covid-19 infections. More studies released over the weekend backed the CDC's conclusion, Dr. Walensky said.

Beijing Wants More Control of Arts Opinions Via Algorithms, Big Data

China's ideology watchdogs want stronger management of public opinions and commentaries on literary and artistic works with the use of big data and recommendation algorithms.

The Communist Party's Propaganda Department and four agencies pressed for the improvement of recommendation algorithms to better guide opinions on arts, according to the guidelines published by the state-run Xinhua News Agency late Monday. Such algorithms are widely used by social media and video streaming platforms to promote content.

Belarusian Olympic Athlete Who Refused to Go Home Says She Will Never Return

TOKYO-The Belarusian sprinter who refused her team's orders to fly home after a public dispute said she would never return home for fear for her life and is looking to continue her sporting career-and perhaps reach another Olympics-in another country.

In her first full press interview since the incident, Krystsina Tsimanouskaya, who received a Polish humanitarian visa on Monday, said her husband fled Belarus for neighboring Ukraine and they plan to meet up in Poland. Ms. Tsimanouskaya plans to fly to Warsaw as soon as Wednesday.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

August 03, 2021 06:41 ET (10:41 GMT)

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