Last checked at 
* STOXX 600 up 0.4%, close to record high
* New UK rules lift travel stocks
* Big earnings day: Cap Gemini shines
* Adecco, Moncler, Rexel fall
* Wall Street futures flat to higher
July 28 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
'PEAK GROWTH' VERSUS 'ROARING 20S' (0911 GMT)
There's been a lot of comments saying the Q2 earnings season
is as good as it gets for equity markets and that it's unclear
what could lift them further from their current record high
levels.
The 'peak growth' narrative is indeed quite compelling when
looking at the short term but for Berenberg economist Holger
Schmieding, this is not how the big picture looks like.
"That concept of 'peak growth' makes little sense",
Schmieding argued in a note today, pointing out that economic
growth is likely to outpace the sluggish trend of the last
decade.
"We believe that an unprecedented monetary stimulus,
continuing fiscal support, pent-up consumer demand, a drawdown
of excess savings and a need for companies to raise investment
in response to rising demand and to offset the investment pause
of early 2020 will underpin solid growth for years to come", he
writes.
Other factors are encouraging. "Helped by a faster diffusion
of cutting-edge technologies in the wake of the pandemic shock
and more private and public investment, we project a long period
of rapid gains in productivity and per-capita GDP", he adds.
In a nutshell the 'peak growth narrative' shouldn't deter
the bulls to buy the dips.
"For the time being, we would continue to treat market
corrections as buying opportunities rather than the start of a
persistent downtrend", the economist adds.
There's indeed plenty of upbeat strategists moving forward.
"In our base case, we expect the global economy to continue
to reopen in the second half of the year amid the ongoing
vaccine rollout, and think a continued risk-on stance in
equities is warranted", Mark Haefele, CIO at UBS Global Wealth
Management wrote this morning.
(Julien Ponthus)
*****
TRAVEL STOCKS PULL EUROPE HIGHER (0745 GMT)
News that double-vaccinated tourists from both the EU and
the U.S. might be able to visit the UK without the need for
quarantine has lifted the travel and leisure sector 1%, which
is itself helping keep the STOXX Europe 600 afloat.
The pan-European index is up 0.15% at 459.3 points, just two
points away from another record high.
France's Cap Gemini, up 3%, is also giving a boost to the
tech sector after publishing its results.
The contrast with the gloom in the Chinese sector is quite
striking. European tech is up 0.8% at the moment and the only
big stock in the red is ASMI after disappointing results.
Among the key movers this morning is a trio of British
financial shares: Barclays, St James Place and Virgin Money, up
5%, 4.2% and 3.8%, respectively.
In what is bound to lift the spirits of shareholders in the
banking sector, Barclays said it would resume payouts after
beating first-half profit expectations on bumper investment
banking fees.
One big loser today is Switzerland's Adecco which is having
its worst day since October, down 5.4% after announcing its
results and the acquisition of Paris-listed Akka Technologies.
The latter is on a roll to say the least with a 85% jump.
Another underperformer of the session is Italy's Moncler,
down 4% after the release of its Q3 sales.
(Julien Ponthus)
*****
INFLATION: A WHIFF OF 'MARLBORO FRIDAY' IN THE AIR (0709
GMT)
One thing markets are good at is swiftly changing price
tags.
Beijing's broad regulatory clampdown on tech has forced
investors to quickly reassess the risk premium they are willing
to pay for both the sector and the country and the answer is
quite unambiguous: much less!
The embattled Hang Seng Tech Index sank to its
lowest level since the index's creation in July 2020 and is down
about 40% from its February high.
At the same time on Wall Street, Google parent Alphabet
Microsoft, and Apple all reported
record quarterly earnings and while their respective share
prices wobbled slightly, they stand close to record highs.
Investors did have a moment of doubt on big U.S. tech
between February and March when the reflation trade pushed the
yield on 10-year Treasuries close to 1.8%, denting the premium
they were ready to pay for growth stocks.
But at this morning's 1.24%, the reflation trade seems
pretty much on hold and the U.S. 10-year yield isn't much of a
threat to the appeal of the stock market.
European bourses look to open higher though that cautious
optimism doesn't translate to the other side of the Atlantic
where stocks futures are red.
Investors will pay close attention later today when Jerome
Powell tells them just how united the Federal Open Market
Committee is about the transitory nature of inflation and when a
good time to start tapering bond buying might be.
How much this will move markets and how prescient this will
look when the U.S. PCE core price index is published on Friday
is anyone's guess but in the meantime, there's plenty of
inflation gauges to look at starting with the second-quarter
earnings season.
Britain's Reckitt, owner of big brands such as Durex, lost
over 8% on Tuesday, its worst session since 2003 with investors
wondering whether it will be able to maintain margins if
inflation keeps on rising.
One thing investors love about consumer staples is their
ability to raise prices on consumers' favourite brands, protect
their margins and continue to deliver stable sweet bond proxy
dividend. Not much so when they can't.
For similar reasons, consumer group Unilever got hit when it
published its results on July 22.
On a lot of fund managers' mind is a repetition of 1993's
"Marlboro Friday", when Philip Morris' decision to cut prices to
defend its market share triggered a sell-off across consumer
staples.
No doubt will investors closely watch how other big consumer
groups like Nestle on Thursday are dealing with labour,
transportation and raw material costs.
Key developments that should provide more direction to
markets on Wednesday:
-- German consumer morale steady heading into August
-- Deutsche Bank's second-quarter net profit tops estimates
-- Wizz Air sees summer capacity close to pre-pandemic
levels
-- Capgemini raises 2021 targets on booming tech demand
-- Adecco Group to buy AKKA Technologies in $2.4 bln deal
-- U.S. Fed meeting and presser
-- U.S. inventories
-- U.S. earnings: Pfizer, Bristol Mayers-squibb, CME,
McDonalds, Boeing, Ford, Qualcomm. Raymond James, Facebook
(Julien Ponthus)
*****
