* A look at the day ahead from EMEA Head of Desk Jon BoyleandEMEA Markets Deputy Editor Sujata Rao. The views expressed aretheir own.
LONDON, July 26 (Reuters) - The ECB is expected to keeppolicy unchanged on the grounds that the growing risk of aglobal trade war is not yet strong enough to scupper its plan togradually exit its easy-money policy of the last few years. ECBPresident Mario Draghi may also firm up the central bank'sguidance for ending a 2.6 trillion bond purchase scheme thisyear and acknowledge a modest improvement in incoming economicdata. In Brexit-bound Britain, the Bank of England is expectednext week to lift rates above their emergency levels of nineyears ago.
Talking of Brexit, negotiations on Britain's EU divorcepackage resume in Brussels later in the day. Markets seemed tolike the idea of Prime Minister Theresa May taking personalcontrol of Britain's negotiations. But with Germany pushing forconcessions from London, including over the delicate issue ofthe land border with EU member Ireland, it may need more thanher personal touch to elicit a change of tone – or substance –from Brussels.
MARKETS
So the author of "The Art of the Deal" has managed to get adeal with the EU on trade, seemingly having wrung someconcessions out of the bloc. The EU has agreed to more importsof US soybeans and lower industrial tariffs among other thingsand Trump has agreed to hold off slapping tariffs on Europeancars. But the devil will be in the detail and the jury is out onwhether a trade war has really been averted. For now, though,markets like it. Wall Street jumped around one percent on thenews while world stocks hit four month highs. This morningEuropean shares are set for an opening bounce; world andemerging stocks have crept higher too. However, there are cloudson the horizon. First, even assuming trade threats to the EU arereceding, issues with China, arguably bigger, have not beenironed out. Note that the deadline passed last night for Chineseregulators to approve US Qualcomm’s $44 billion bid for NXPSemiconductors. Second is growth – three quarters of economistspolled by Reuters see world growth as having peaked and aslowdown next year. Data out of Korea appeared to confirm thatpicture, showing slower growth and exports. US Q2 GDP due Fridayis seen to have accelerated to 4.1 percent but that is again,likely to be the peak. And what about company profits? A Q2earnings miss by Facebook took its shares 24 percent lower lastnight in after-hours trade while carmakers Ford, Fiat Chryslerand GM all lowered outlooks. Today we have earnings from Amazonand Intel which will be closely watched.
On the policy front, we are entering a period when severalbig central banks discuss policy – Bank of Japan, the Fed andthe Bank of England all meet next week and today we have theECB kicking off things. We are unlikely to get the kind ofexcitement we saw last month when the bank set the doves looseby staying interest rates would not rise “through next summer”.Today Draghi may not give away more on the timing but he will beasked about it as well as about the trade war issue, and toconfirm a Reuters story that the ECB plans to buy longer bondsin its own version of the twist. A confirmation will likelyre-ignite the rally in long-end bonds. Greece is the other issueDraghi may be quizzed about – while it grapples with its forestfire tragedy, it’s about to exit its bailout in August and willbe waiting to hear if it will become eligible for the ECB’s bondbuying programme. The euro is flat today after rising in theimmediate aftermath of the Juncker-Trump meeting and euro zonebond yields are up 2-4 bps. The dollar has retreated a quarterpercent to two week lows but expectations of more policy easingare keeping the yuan under the cosh; it’s heading back to recent13 month lows. Data-wise, we'll get the August consumerconfidence print for Germany and July consumer confidence datafor France. Later on, US durable goods orders.
Germany’s exporter-heavy DAX has jumped 1.3 percent and theauto sector is up 1.5 percent with shares in carmakers up acrossthe board including Daimler and Fiat which have shrugged offunderwhelming results. The trade breakthrough comes on a verybusy earnings day for Europe, with big hitters including Shell,Airbus, Diageo, AstraZeneca, Roche, AB InBev and SchneiderElectric all giving updates. Of note are Daimler's results inwhich its Q2 profit dropped 30 percent. This follows theall-too-familiar pattern seen at peers GM, Fiat and Ford wherethe trade tensions between the U.S. and China have resulted inthem cutting forecasts (Daimler did so last month). Facebook'stumble in after-hours trading could put a dampener on techstocks today.
Results and other stock movers: Daimler Q2 profit hit byWLTP emissions, clouding outlook; AB InBev gets World Cup boostto beat expectations; France's Ingenico cuts core profit outlookon Iran exit, currency headwinds; Deutsche Boerse Q2 net profitup 19 pct on higher volatility; Airbus Q2 core profit doublesafter A350 cost improvements; Spain's Bankia posts 36 pct risein Q2 profit on lower provisions; Spain's Telefonica H1 coreprofit down 0.9 percent; Roche raises 2018 outlook as new drugsgain traction; Nokia posts weak profits, sees 5G boost later in2018; Nestle expects better H2 after quarterly growth beatspoll; Telecoms group Orange Q2 core operating profits rise 3percent; Diageo's sales up despite currency headwind; Puma liftssales target after solid second quarter; Shell launches $25 blnbuyback plan, Q2 profits misses; New drugs help as AstraZenecabattles through generic losses; French oil major Total's Q2profits jump on new record output; Schroders posts 8 pct rise inH1 pretax profit, assets up; Britain's Sky reports 9 percentrise in core earnings.(Compiled by Hugh Lawson)
