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TRAVEL STOCKS BOOST EUROPE AT OPEN (0723 GMT)
Europe's STOXX 600 rises 0.8% as bond markets calm down and some of the cyclical
names bounce after yesterday's brutal selloff.
Travel stocks were top sectoral gainers (+2%) as the UK further relaxed quarantine rules. In
the coming weeks, it's set to scrap quarantine for fully-vaccinated arrivals from other
countries.
Bond proxy sectors telecom and utilities were among the underperformers after recent rally.
Among single stocks, Vectura jumps 12.5% after cigarette maker Philip Morris outbid PE firm
Carlyle to buy the British pharma company.
(Thyagaraju Adinarayan)
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YOU NEED TO CALM DOWN... (0651 GMT)
In a week that's seen U.S. Treasury yields dive as much as 20 basis points in three sessions
and European stocks suffer one of their worst days in two months, perhaps investors are heeding
the words from Taylor Swift's "You need to calm down."
Stock futures point to a brighter start for Europe, where indices were a sea of red just a
day ago. U.S. 10-year Treasury yields are up 5 bps -- a sign that the relentless push into
safe-haven debt markets of the last few days is abating.
Okay, so Asian shares are languishing at two-month lows on concerns that the spread of Delta
variants will hurt world growth. But compared to the last few sessions, a sense of calm finally
appears to be taking hold as the week draws to an end.
With the idea that reflation is dead or at least taking a break for now and surging variants
of COVID-19 cast a shadow over the global economic recovery, a rethink has clearly taken place
among investors.
Thursday's decision by the European Central Bank to set a new 2% inflation target, versus a
previous below but close to 2%, left markets unfazed but was generally seen as pointing to an
even longer period of central bank stimulus.
For some, the scale of the fast and furious moves in bond markets have gone too far and
reflect a shake-out in positioning rather than a real shift in underlying economic conditions.
Time will tell.
The Biden administration is set as early as Friday to add more than 10 Chinese companies to
its economic blacklist over alleged human rights abuses and high-tech surveillance in Xinjiang,
two sources told Reuters.
Any signs of resurgent tensions between the world's two biggest economies could of course
quickly send investors back into safe-haven assets.
Key developments that should provide more direction to markets on Friday:
- China's factory gate inflation slows
- Morgan Stanley faces data breach, corporate client info stolen in vendor hack
- UK economy grew by slower-than expected 0.8% in May
- UK May industrial output up 0.8% in m/m
- Canada June unemployment rate.
- ECB Andrea Enria participated in panel discussion
- Fitch Ratings review on Russia, Lithuania
- G20 kick off two-day summit in Venice, Italy.
(Dhara Ranasinghe)
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MORNING CALL: IT'S SETTLING DOWN A BIT
European stocks are set to edge higher after one of their worst days in 2021 as the rally in
U.S. Treasuries this week cools. Volatility has also receded with the Wall Street 'fear guage'
VIX closing at 19 points after exceeding 20 on Thursday.
Those moves have killed the momentum in reflation trade and some analysts believe we've
probably alread seen the best of it. The global spread of the Delta virus variant has spooked
investor confidence across the world.
"Yesterday’s continued slide in bond yields, along with a sharp fall in stock markets,
appears to be painting a narrative that the reflation trade is dead or dying," says Michael
Hewson, chief market analyst at CMC Markets UK.
In the corporate world, Airbus said its jet deliveries rose 52% in the first-half.
Another interesting story is how UK supermarkets are super-stretched by soaring demand for
beer, soft drinks, salads and barbecue food as England supporters prepare for Sunday's Euro 2020
final.
(Thyagaraju Adinarayan)
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