EUROPEAN DINNER BRIEF – Shares lift as China eases Covid-19 lockdowns
EUROPEAN DINNER BRIEF – Shares lift as China eases Covid-19 lockdowns

EUROPEAN DINNER BRIEF – Shares lift as China eases Covid-19 lockdowns

MARKEDS WRAPS

Equities:

European equities rose sharply on Tuesday as investors assessed the impact that China’s loosened Covid-19 restrictions would have on global supply chains.

Equities have largely returned in recent sessions as traders reassessed expectations of steep Federal Reserve rate hikes. Weakened economic data has given some investors hope that US central banks may become less hawkish as they try to fight inflation.

Still, there is still doubt about how long-lasting any rally will be, and many note that indices are still very sensitive to news that can quickly swing stocks both ways. The latest example came on Tuesday when China’s National Health Commission on Tuesday said it would loosen its strict quarantine requirements for international travelers.

“Optimistic news is flowing out of China, where the latest is a easing of quarantine rules, facing headwinds from yet another rise in oil prices and the decline higher in US yields,” wrote Stephen Innes, Managing Partner at SPI Asset Management.

“A lot of noise below the surface, but it’s still about energy inflation, where the street also runs with the recession relay.”

Shares to see:

Severn Trent topped the FTSE 100 falls, a 5% drop after JPMorgan downgraded the UK waterworks to underweight from neutral. United Utilities and FTSE 250-listed Pennon fell 1.4% and 6%, respectively.

While the UK water sector has performed well since the most recent regulatory period began in April 2020, when all three UK listed companies achieved strong returns and asset growth and increased dividends at least in line with inflation, returns from April 2025 are likely to fall short of the market expectations, JPM said.

“In our view, the regulator will challenge companies to be more efficient while meeting environmental targets – this may require further reinvestment in the coming years, limiting outperformance,” JPM said.

Financial insight:

High inflation and uncertainty about the war in Ukraine continue to weigh heavily on consumer confidence in Germany, the Pantheon Macroeconomics said.

GfK’s consumer confidence index in Germany fell to minus 27.4 in July from a revised minus 26.2 in June, falling to the lowest level ever. The Pantheon expects little relief for German consumer confidence in the short term, as subdued inflation is a precondition for a recovery.

“Risks to overall headline inflation are tilted upwards as Germany and the rest of Europe struggle with an almost complete halt to Russian gas flows, raising energy prices and inflation further.”

US markets

Stock futures rose after a choppy trading session on Monday sent benchmarks down.

Later Tuesday, investors will analyze data on house prices as well as consumer confidence data from The Conference Board. Economists surveyed by The Wall Street Journal expect consumer optimism to cool further in June, while Americans continue to assess the impact of high inflation and rising interest rates.

In New York pre-market trading, travel and energy companies were bright spots in the market. Occidental Petroleum and Devon Energy each rose more than 2%. Wynn Resorts rose 4.9% and cruise line Carnival rose 1.6%.

In the bond market, the yield on the leading 10-year government bond rose to 3.222% from 3.193% on Monday. In general, government interest rates have fallen in recent weeks as investors have reassessed their expectations of the Fed’s rate hikes.

Forex:

The dollar may weaken further due to weaker prospects for interest rate hikes from the Fed, ActivTrades said.

“With falling commodity prices and rising fears of recession, some now believe that the Fed will not be able to go as far as previously expected in terms of tightening, in a dynamic that shifts expectations towards a slightly lower benchmark rate in the US than before. has been expected, creating the possibility of further dollar weakness. ”

Sterling continued to show little reaction to Brexit headlines, even after the British government’s Northern Ireland law cleared its first hurdle, ING said.

The bill, which unilaterally tears up the post-Brexit trade arrangements for Northern Ireland, passed the second reading phase in the House of Commons on Monday.

“There are certainly many indications that the pound is largely pricing in this scenario, and markets remain largely focused on other reasons for the economic underperformance in the UK, as well as assuming that Brexit is not a significant input in Banking. of England’s political decision-making process at the British bank. moment, “said ING.

The Hungarian forint’s recent weakness has put pressure on the country’s central bank to raise interest rates aggressively at Tuesday’s political meeting, Commerzbank said.

Previously, market observers unanimously expected the central bank to deliver a standard pre-signaled rate hike of 50 basis points, but now a significant minority predicts a 100bp move.

“This means that if [Hungary’s central bank] If one were to simply ignore such expectations and raise by 50bp, there could be immediate further pressure on HUF. “The interest rate decision is at 1200 GMT.

Bonds:

JPMorgan expects volatile interval trading in German bonds during the summer months with a continuously lower drift and the 10-year Bund interest rate ending the year around 1%.

JPMorgan prefers to express overweight in the medium term via longs in mid-sectors both in direct terms and relative to US government bonds. The Bank remains “largely constructive” in the medium term around the eurozone, but expects government bond yield spreads to continue testing the European Central Bank in the short term until the ECB delivers its planned anti-fragmentation tool.

High-yield corporate bonds bore the bulk of the spread with credit in the second quarter, with only a short respite during a short-term relief rally in late May, HSBC said.

The US dollar-denominated high interest rate had the worst performance and saw the most aggressive spread widen. USD investment-grade credit, which experienced the smallest widening of the spread, outperformed euro-denominated investment-grade credit, HSBC said.

Energy:

Oil prices rose by around 1% due to a lack of additional supplies from the world’s leading producers.

The United Arab Emirates’ energy minister said on Monday that the major oil producer was close to producing at its maximum capacity. The United Arab Emirates along with Saudi Arabia has been seen as one of the few major OPEC members capable of compensating for lost Russian supply to help balance the market.

“A nail of tight supply news has strengthened the market,” the CBA said.

Metals:

Base metals and gold shot higher, boosted by improved demand sentiment on signals that parts of China will loosen lockdown restrictions in the short term.

Beijing and Shanghai have slowly lifted some Covid-19 lockdown restrictions this week, which should help boost metal purchases. Data from Bloomberg on Monday showed that economic activity in Shanghai had increased after lifting some restrictions.

Investors will keep a close eye on Thursday’s release of PMI results for the region, looking for further signs of improvement.

DOW JONES NEWSPLUS

   
 
 

EMEA HEADINGS

The German consumer sentiment is expected to fall to a new record low in July

Consumer confidence in Germany is set to fall to an all-time low in July, as inflation and Russia’s war in Ukraine weigh on household sentiment.

The market analysis group GfK’s forward-looking consumer sentiment index predicts that confidence will fall to minus 27.4 in July from a revised figure of minus 26.2 in June. July’s figures are below the forecast for economists polled by The Wall Street Journal at minus 27.0.

   
 
 

Volkswagen is approaching an agreement to sell a stake in Electrify America to Siemens

Volkswagen AG is close to selling a minority stake in its US electric vehicle charging company to part of Siemens AG, a deal that will value the network at more than $ 2 billion, according to people familiar with the matter.

A sale of a stake in Volkswagen’s Electrify America LLC would generate additional financing as part of a plan to more than double the number of electric charging stations that Electrify America operates in the United States and parts of Canada to 1,800 by 2026. Reston, Va. – based Electrify America also offers EV charging stations for home use.

   
 
 

Grain must flow from Ukrainian ports to facilitate global food stocks, says US Secretary of Agriculture Vilsack

CHICAGO – US Secretary of Agriculture Tom Vilsack called for the opening of Ukrainian ports in the Black Sea to send grain out of the contested country to help alleviate a global food crisis.

Trade must resume from the ports of the Black Sea, which have been damaged or disrupted by Russia’s invasion, said Mr. Vilsack, freeing up storage space for the coming harvest in Ukraine. The United States also needs to look for ways it can increase its own crop production to help close the gap in global grain supplies, he said.

   
 
 

Steel producers avoid Russian components, but bargain hunters strike

Many European steelmakers have said they would avoid Russian raw materials after the country invaded Ukraine in late February, but the volume of imports of some Russian steelmaking ingredients into Europe is rising nonetheless.

Russian exporters increased shipments of ferrotitanium from Russia, a metallic alloy used to strengthen steel, by 30% in March from the previous month, according to import and export documents. The alloy is the key to manufacturing finished steel that goes into cars, stainless steel and shipbuilding.

   
 
 

Akzo Nobel appoints Gregoire Poux-Guillaume CEO; Thierry Vanlancker resigns

Akzo Nobel NV said on Tuesday that Gregoire Poux-Guillaume has been appointed CEO with effect from 1 November.

The Dutch painting company – which houses the brands Dulux, Polycell and Cuprinol – said that Mr Poux-Guillaume’s previous roles include CEO of Sulzer AG, CEO of CVC Capital Partners and senior CEO of GE Grid Solutions.

   
 
 

Ericsson is working with the US Foreign Investment Committee to review the Vonage agreement

(MORE TO FOLLOW) Dow Jones Newswires

June 28, 2022 05:36 ET (09:36 GMT)

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