EUROPEAN MIDDAY BRIEFING: Stocks Struggle With Adidas a Top Gainer

MARKET WRAPS

Stocks:

European equities struggled for traction on Friday, with Adidas a standout gainer, while U.S. stock futures indicated a mostly higher start as investors continued to cheer news that President Joe Biden had reached an infrastructure agreement with bipartisan lawmakers.

In Europe, data showed German consumer sentiment is forecast to rise in July as the Covid-19 pandemic retreats and the economy reopens, according to data from the market-research group GfK released Friday.

A top gainer on the Stoxx 600 was adidas with shares up more than 5% after U.S. rival sportswear maker Nike topped Wall Street revenue estimates by more than $1 billion in its fiscal fourth-quarter, in contrast to deep losses a year ago. Elsewhere, shares of JD Sports Fashion climbed near 4%.

Most airlines and travel stocks were slipping even after the U.K. government added Malta, Madeira, Spain's Balearics and some Caribbean nations to the so-called "green list" of places that won't require travelers to quarantine upon returning home, as long as they test negative before returning and once they arrive.

Ministers also said they may drop quarantine rules for fully vaccinated travelers returning home from countries on an amber list, with details to be announced next month.

But some European leaders reportedly said they planned to follow the advice of German Chancellor Angela Merkel and tighten up borders to keep out the highly contagious delta variant of COVID-19 that has spread across the U.K.

Shares of InterContinental Hotels Group, travel group TUI, cruise company Carnival and International Consolidated Airlines all dropped close to 2% each. Shares of cut-rate airline easyJet fell 1.5%.

Shares of pharmaceuticals were also weighing on the downside, with shares of Novartis, AstraZeneca, and Novo Nordisk all edged lower.

Auto makers were also under pressure, with Renault down 2% and Daimler off more than 1%.

US Markets:

Stock futures edged higher, putting the S&P 500 on track to close out its best week in more than two months amid renewed confidence in the global economic expansion.

Stocks have bounced back, pushing the S&P 500 up 2.4% through Thursday, after stumbling when the Federal Reserve signaled a more hawkish stance on rising inflation last week. Fueling the gains, investors say, are data signaling a fresh acceleration in the world economy coupled with the prospect of additional government spending in the U.S. and Europe.

"We are still in a phase where we're seeing the activity data still accelerate," said Hani Redha, a fund manager at PineBridge Investments, pointing to surveys showing eurozone business activity is growing at the fastest pace in 15 years.

"It is natural that you'll see very mini wobbles [in stocks] from time to time," Mr. Redha added. "But the fundamental support-that things are improving and the numbers are getting better-is going to dominate that."

Adding to investors' optimism about the economy, President Biden and a group of 10 centrist senators agreed to a roughly $1 trillion infrastructure plan Thursday. With a total of $973 billion of investment over five years, the deal will make new investments in the electrical grid, transit, roads and bridges and other forms of infrastructure.

Investors will seek to glean new details on the pace of the economic recovery from data on consumer spending, due to be published at 8:30 a.m. ET.

Economists expect the numbers to show spending rose in May, after a 0.5% increase in April.

Some investors worry that the speedy pace of inflation will prompt the Federal Reserve to withdraw some of the stimulus it has lavished on markets since the spring of 2020. But Fed Chairman Jerome Powell's testimony to Congress this week that he had a level of confidence that inflation will subside allayed some of those concerns.

"That also reassures the market that the Fed will not be overly hawkish in their tightening policy," said Peter van der Welle, a strategist at Robeco. At the same time, "the infrastructure deal also portrays that the fiscal thrust is still very much with us," he added.

Forex:

The dollar could rise if U.S. economic data due later in the day reinforce expectations that inflation will accelerate and the Federal Reserve will respond by tightening its policies, Commerzbank said.

Strong data would point to "continued elevated price pressure and might provide further momentum for dollar appreciation short term," Commerzbank currency analyst Esther Reichelt said.

The Fed made it clear at its last meeting that it will react to upside risks for inflation, she said.

The European Central Bank's ultra-loose policy stance means the euro will suffer the lion's share of any dollar appreciation, ING said."Unlike an increasing number of

emerging market countries who feel the need to respond to the summer inflation spike, it seems the ECB is more than happy to position itself as not being rushed into premature tightening," ING analysts said.

That means the euro, along with the Japanese yen and Swiss franc, will be the preferred funding currencies this summer, they said.

EUR/USD should continue to consolidate, although surprisingly strong eurozone confidence indicators this week suggest the exchange rate could rise to the 1.1980/90 area in coming days, they said.

Sterling's weakness after the Bank of England's policy decision Thursday is likely to remain limited, MUFG Bank said.

The "hawkish" shift some market participants were expecting from the BOE's policy statement failed to materialize but the central bank is certainly moving in that direction, MUFG analyst Derek Halpenny said.

"The upgrades to both real GDP growth in the second quarter and inflation this year could well have implications for inflation over the medium-term that compels the Monetary Policy Committee to alter its monetary stance (taper) or guidance at the next meeting on August 5 when the Monetary Policy Report will be released with updated forecasts."

Bonds:

In bond markets, the yield on 10-year Treasury notes ticked up to 1.488% from 1.486% Thursday.

Eurozone government bond yields were trading slightly higher following better-than-expected economic data from Germany on Friday. The strong reading is reassuring, said Joerg Zeuner chief economist at the German asset manager Union Investment.

Commodities:

Oil prices edged higher as investors look ahead to next week's OPEC+ meeting. Oil producers are set to meet on Thursday next week.

Expectations are that the cartel will agree to add 500,000 barrels a day of their output, said Helge Andre Martinsen, an analyst at DNB.

"However, an increase of 0.5 million barrels a day for August is not enough to flip the oil market balance, and the oil market will stay in undersupply with oil inventories continuing to draw down," he said. Oil prices made modest gains this week amid expectations of continued tight supplies.

Copper prices rose after President Biden and a group of senators agreed to a roughly $1 trillion infrastructure plan. Three-month copper on the LME gains 0.1% to $9,469.50 a metric ton.

The red metal is heavily used in infrastructure projects and some investors are hopeful that the plan would boost demand for copper. However, there are also growing concerns that copper's high price may spur substitution toward cheaper metals such as aluminum, which can also be used in electrical wiring.

"Arguments are starting to become more widespread on the subject of substitution with an eye to the popular world of infrastructure projects, " said Malcolm Freeman, Chief Executive of brokerage Kingdom Futures.

Gold prices ticked higher ahead of U.S. price data which will be eyed by investors for clues on the inflation outlook.

The PCE core price index, the Federal Reserve's preferred gauge of inflation is due at 0830 ET. A stronger reading than expected could heighten fears that Fed officials will move faster to raise interest rates. While gold is typically considered an inflation hedge, higher interest rates would lift bond yield and weigh on gold.

"Fed officials are presenting a mixed view, but inflation worries appear to be on the rise; which is gold negative," said James Steel, chief precious metals analyst at HSBC.

EMEA HEADLINES

Amazon, Google Face UK Probe Over Fake Reviews

The U.K.'s antitrust watchdog said Friday that it has launched an investigation into whether Amazon.com Inc. and Google are doing enough to crack down on fake reviews, adding a new layer to regulatory scrutiny of U.S. tech giants.

German Consumer Confidence Set to Increase Strongly in July

German consumer sentiment is expected to rise in July as the Covid-19 pandemic retreats and the economy reopens, according to data from the market-research group GfK released Friday.

GfK's forward-looking consumer sentiment index is set to increase to minus 0.3 points in July from minus 6.9 points in June, the highest level since August 2020. Economists polled by The Wall Street Journal had expected consumer sentiment to rise to minus four points.

Renault, STMicroelectronics Join Forces on Chip Supplies

Renault SA and STMicroelectronics NV are working together to secure supplies of key semiconductor components for the French car maker's electric and hybrid vehicles, as a shortage of components continues to squeeze the auto industry.

The companies said Friday in a joint statement that their partnership would focus on the supply of electric and hybrid vehicle advanced power semiconductors to be produced from 2026.

Adidas Shares Get a Boost From Nike's Upbeat Sales

Shares in sneaker maker Adidas AG rose Friday after its peer Nike Inc. posted record sales fueled by solid U.S. consumer demand for sportswear--an indicative sign of the sector's bright prospects.

Nike's sales nearly doubled in the quarter ended May 31, beating consensus estimates and raising investors' expectations for sneaker makers and sporting brands as economies in key regions reopen.

Roche: Actemra/RoActemra Gets FDA Emergency-Use Authorization for Covid-19 Treatment

Roche Holding AG said Friday that it has received an emergency-use authorization from the U.S. Food and Drug Administration for its Actemra/RoActemra drug to treat certain patients with Covid-19.

The Swiss pharmaceutical major said the authorization allows for emergency use of Actemra/RoActemra for the treatment of Covid-19 in hospitalized adults and children who are at least 2 years old.

Steinhoff International 1H Pretax Loss Narrowed, Revenue Rose

Steinhoff International Holdings NV said Friday that its pretax loss narrowed in the first half of fiscal 2021, while revenue rose.

The South African conglomerate reported a narrowed pretax loss of 219 million euros ($261.3 million) for the six months ended March 31, from a restated pretax loss of EUR1.24 billion.

U.K. Car Manufacturing Suffers from Global Supply Shortages

U.K. car manufacturing rose in May compared with the same month last year when the country was in its first coronavirus lockdown, but is still 53% below the May 2019 figure, an industry body said Friday.

The Society of Motor Manufacturers and Traders said that production is being hurt by global supply shortages, notably of semiconductors.

U.K. Consumer Confidence Stabilizes in June

Consumer sentiment in the U.K. leveled off in June following four months of gains amid the gradual reopening of the economy.

Market-research firm GfK's consumer-confidence barometer stood at minus nine in May, unchanged from April. The reading is below the minus eight consensus forecast from economists polled by The Wall Street Journal.

Food Companies Say Combating Climate Change Comes With Costs

Food companies are investing billions of dollars into sustainability efforts, betting that costs will fall and consumers will remain interested in more environmentally friendly diets, executives said.

Nestlé SA, the world's biggest food and beverage company, has committed to paying premium prices over the next five years for recycled materials in its packaging, as it works toward achieving net-zero greenhouse-gas emissions by 2050. Agricultural giant Archer Daniels Midland Co. is offering incentives for farmers to adopt more climate-friendly practices, part of industry efforts to meet corporate and government carbon-reduction goals.

Europeans Split Over Russia After Biden's Summit With Putin

European leaders rebuffed a proposal from Germany and France to hold formal talks with Russian President Vladimir Putin, following President Biden's summit with him last week.

After a meeting in Brussels that stretched into early Friday morning, European Union leaders released a statement calling for "selective engagement" with Russia but without explicit reference to a summit, a rare defeat for German Chancellor Angela Merkel.

U.S. Considers a Plan to Relocate Afghans Who Aided U.S. During War

The White House is assembling a plan to rescue Afghan interpreters and others who have helped the U.S. over the past 20 years by helping them to get out of Afghanistan and, ultimately, to the U.S., officials said.

The effort would involve quickly moving Afghan interpreters and drivers who worked with the U.S. military out of Afghanistan-where they have become targets of possible retaliation for the Taliban-to another country or U.S. territory where they would be safe while the U.S. State Department processes their visas to come to the U.S., which typically takes several years.

GLOBAL NEWS

Consumers Are Back Out Spending, Driving the Recovery

Consumers likely increased spending last month on services that they shunned earlier in the Covid-19 pandemic, helping fuel the broader economic recovery.

Economists surveyed by The Wall Street Journal expect Friday's Commerce Department report to show consumer spending rose 0.4% in May. They expect incomes fell 2.7% last month from April, as the boost faded from government stimulus checks sent out earlier in the year.

Fed Gives Big Banks Clean Bill of Health in Latest Stress Test

WASHINGTON-The Federal Reserve gave large U.S. banks a clean bill of health as they emerge from the coronavirus crisis, paving the way for the lenders to boost their payouts to investors after June 30.

In a vote of confidence for the banks, including Goldman Sachs Group Inc. and Wells Fargo & Co., the Fed on Thursday said it would end temporary limits on dividend payments and share buybacks after all 23 firms performed well in annual stress tests.

Saving for Retirement? Now You Can Bet on Bitcoin.

Cryptocurrencies, among the world's most volatile assets, are searching for mainstream acceptance in the investment world. Their next target: your retirement portfolio.

Financial services companies are rolling out new products and services that allow more everyday investors to add bitcoin and other virtual currencies to their nest eggs as a way of reaching for higher returns. Some are marketed under names such as "CryptoIRA" and "BitcoinIRA."

Fed's Williams Says More Progress Needed Before Rate-Hike Shift

Federal Reserve Bank of New York President John Williams reiterated Thursday he doesn't see a case to raise rates any time soon given that the job market remains far short of the strength the central bank wants to see.

When it comes to lifting rates, "it is not the time now because the economy still is far from maximum employment," Mr. Williams said in a virtual appearance. As for when the Fed may raise rates, "the answer, which you might not like, is that it depends" on how the economy performs, he said.

Numbers Ain't What They Used to Be in Turbulent U.S. Economy

There is a rule of thumb in data watching that, if you want to understand which way things are trending, you need to watch the revisions. What is happening with capital spending might be a case in point.

The Commerce Department on Thursday reported that U.S. manufacturers' new orders for durable goods rose 2.3% in May from April, lower than the 2.6% gain economists expected. Much of that increase was due to a jump in aircraft orders, which are often lumpy.

Environmental Investing Frenzy Stretches Meaning of 'Green'

The first time Gerard Barron tried to mine the sea floor, the company he backed lost a half-billion dollars of investor money, got crosswise with a South Pacific government, destroyed sensitive seabed habitat and ultimately went broke. Now he's trying again, but with a twist: Mr. Barron is positioning his new seabed mining venture, The Metals Company, as green, to capitalize on a surge of environmentally minded investment.

TMC is set to receive nearly $600 million in investor cash in a deal slated to take the company public in July. If successful, that would value TMC at $2.9 billion-more than any mining company ever to go public in the U.S. with no revenue.

Sydney Locks Down as Delta Covid-19 Variant Spreads

SYDNEY-Parts of Australia's largest city will go into a rare lockdown for at least a week as officials seek to stamp out an outbreak of the highly infectious Delta variant of the coronavirus.

People who live or work in four areas in and near downtown Sydney and the iconic Bondi Beach have been ordered to stay home from Friday night to stem the spread of the virus first detected in the city last week.

Derek Chauvin Faces Sentencing for Murder of George Floyd

MINNEAPOLIS-Former Minneapolis police officer Derek Chauvin is expected to be sentenced Friday afternoon for the murder of George Floyd, closing out a chapter in a case that redefined the conversation over race and policing in the U.S.

Mr. Chauvin, 45 years old, was convicted in April of all counts: second-degree murder, third-degree murder and manslaughter in the killing of Mr. Floyd. The 46-year-old Black man died after the white officer knelt on his neck and back for more than nine minutes. Mr. Chauvin was fired from the Minneapolis police force.

Biden, Senators Agree to Roughly $1 Trillion Infrastructure Plan

WASHINGTON-President Biden and a group of 10 centrist senators agreed to a roughly $1 trillion infrastructure plan Thursday, securing a long-sought bipartisan deal that lawmakers and the White House will now attempt to shepherd through Congress alongside a broader package sought by Democrats.

Mr. Biden and Democratic leaders said that advancing the deal on transportation, water and broadband infrastructure will hinge on the passage of more elements of Mr. Biden's $4 trillion economic agenda. The two-track process sets up weeks of delicate negotiations to gather support for both the bipartisan plan and a separate Democratic proposal, a challenging task in the 50-50 Senate and the narrowly Democratic-controlled House.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

June 25, 2021 06:23 ET (10:23 GMT)

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