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* STOXX 600 ticks down
* Wall Street futures mixed
* UK inflation surges to highest since 2018
* AstraZeneca-Alexion deal to close next week
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INFLATION AND RECOVERY TO DRIVE SWISS EQUITIES (1037 GMT)
Traders on the Swiss Stock Exchange expect inflation and a
post-COVID recovery to drive trading volumes in the second half
of the year, a survey from SIX reveals.
Switzerland's blue-chip stock market index has
touched a record high this month with volumes expected to get a
further boost as the global economy recovers.
The survey among 1,900 traders across Europe express
optimism on the positive market momentum, as the global economy
seems to pick up faster and stronger than expected.
Some 40% of the traders also expect growth and hiring to
surge, while only about a quarter of them anticipates a full
return to the office.
(Joice Alves)
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UK BANKS SAY HIGH TO INFLATION (0957 GMT)
With British inflation jumping to its highest since 2018,
FTSE banks are today's top performers in London.
Shares in Natwest, Lloyds and Barclays
are all rising around 1%, while the broader index
is down 0.4%.
Inflation surged further above the Bank of England's target
in June to strike 2.5%. The jump exceeded all forecasts from
economists polled by Reuters.
The big question of course is what the central bank will do
next.
Inflation figures, "considerably higher than expected",
stokes the fire for interest rates hike, which benefits banks,
says AJ Bell financial analyst Danni Hewson.
Savvas Savouri, chief economist of Toscafund Asset
Management, says things look promising for UK banks.
"The problem is at the moment in all geographies, you've got
interest rates, which are too close to zero for banks to be
happy. I am hugely enthusiastic (about UK banks) because I think
the UK will be the first central bank to begin raising interest
rates in response to strong recovery".
(Joice Alves)
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EARNINGS: ROOM FOR POSITIVE SURPRISES (0937 GMT)
While everyone seems to worry about the Fed’s tapering
timing, expectations for a strong earnings season has been
propping up stocks that remain close to their all-time highs.
But current expectations might not be enough as analysts say
that there is room for positive surprises.
“Even though the breadth of positive earnings estimate
revisions is at the highest rate in 35 years, we believe EPS
estimates are still too low,” Mark Haefele, Chief Investment
Officer, UBS Global Wealth Management, says.
He continues to advise clients to position for reopening and
recovery and he adds that “the next leg of the rally will be led
by cyclical and value parts of the market, including energy and
financials.”
“Consensus expects EPS growth of 72% in the U.S. and 120% in
Europe (60% and 70% ex-Energy),” Barclays analysts say.
“Depressed base effects mean high year on year growth should
not be a surprise,” they add. “The bar is not as high as it
seems, given estimates for a flat quarter on quarter growth in
Europe and a small fall in the U.S.”
But “Q2 could turn out to be the last ‘beat and raise’
earnings season, given peaking activity data and harder
comparisons ahead,” they argue.
(Stefano Rebaudo)
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EUROPEAN BOURSES DOWN AS BANKS REBOUND, TRAVEL STOCKS FALL
European stocks opened slightly lower, with investors
unwilling to take position with conviction ahead of a two-day
testimonial of the Federal Reserve chairman Jerome Powell.
Yesterday's U.S. core inflation data triggered worries about
an earlier than expected tapering of monetary stimulus.
The pan-European Stoxx 600 index falls 0.3%, with
the travel and leisure index falling 0.8%, as concerns
about the impact of the Delta variant continue to weigh.
Bank stocks are in positive territory with the index
up 0.6% after yesterday’s loss.
According to Deutsche Bank analysts, shares in U.S. lenders
were under pressure yesterday after JP Morgan and Goldman Sachs
posted a strong investment banking quarter by revenues, along
with worse-than-expected fixed income trading revenues and
higher than expected costs.
Tele2B < TEL2b.ST> is the best performer in Europe, rising
3.7%, after an earnings beat and an outlook upgrade. Avanza Bank
is down 7.4% after its second-quarter report.
(Stefano Rebaudo)
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IT'S JAY TIME! (0700 GMT)
After data showing the biggest rise in U.S. consumer prices
in 13 years, we get to hear what Fed chief Jay Powell says on
the matter when he kicks off his two-day testimony on Capitol
Hill later on Wednesday.
Inflation in the world's top economy barrelling ahead for a
third straight month has doused the equity rally, just as stocks
were staging a come-back after navigating last week's bond
market volatility.
Powell will face questions on how transitory price pressures
might be and how fast the Fed might need on withdrawing the
monetary support which has been critical for markets.
Wednesday's figures prompted markets to bring forward the
timing of the Fed's first rate hike, bets that lifted the
dollar to a three-month high versus the euro and a one-week high
versus the yen.
An added complication was weak demand at Wednesday's auction
of 30-year Treasury bonds, which pushed 10-year yields above
1.4%. And after a softer Wall Street close, Asian stocks fell
while European and U.S. markets are tipped to open lower.
Price pressures are a hot topic elsewhere too, with data
showing British inflation rising further above the Bank of
England's target, hitting 2.5%.
Some central banks, meanwhile, are going full steam ahead
with stimulus withdrawal plans -- New Zealand announced a halt
to its pandemic-linkd QE programme. Bets on a rate hike this
year have sent the Kiwi dollar surging 1%.
Later in the day, the Bank of Canada is also expected to
announce plans to taper asset purchases.
Key developments that should provide more direction to
markets on Wednesday:
-UK inflation jumps to 2.5% in June
-Bank of Canada expected to taper
-New Zealand c.bank ends bond purchases, paves way for possible
rate hikes
-Turkey, Chile and Croatia central bank meetings
-India WPI inflation
-Swedish CPI
-Euro Area Industrial Production
-ECB Board Member Isabel Schnabel speaks
-Bank of England Deputy Governor Dave Ramsden speaks
-Auctions: German 10-year Bund
-Earnings: Citi, BofA, BlackRock, Wells Fargo, Delta Airlines
(Karin Strohecker)
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EUROPE IN THE RED AFTER U.S. DATA (0619 GMT)
European stock futures are lower amid worries that the
Federal Reserve could take steps to halt rising inflation
earlier than expected, after yesterday’s U.S. CPI data.
Investors seem willing to take some profit off the table
ahead of a two-day congressional testimony by the Fed chairman
Jerome Powell starting today, which would give markets some
insight into the central bank thinking.
The European reporting season, which is kicking into gear,
might provide some support European stocks, while concerns about
the Delta variant continue to weigh on risk sentiment.
(Stefano Rebaudo)
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