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North American Morning Briefing: Stock Futures Point to Dow Extending Rebound


Watch For:

EIA Weekly Petroleum Status Report; Canada New House Prices for June; Coca-Cola Co. 2Q earnings; Johnson & Johnson 2Q earnings; Verizon Communications Inc. 2Q earnings.

Opening Call:

Stock futures edged higher Wednesday, suggesting major indexes will extend their rebound following a volatile stretch of trading sparked by worries about the spread of coronavirus.

Futures for the S&P 500 ticked up a day after the broad market gauge posted its biggest one-day gain since late March. The advance almost unwound the S&P 500's steep drop from Monday and pushed the index to within 1.5% of its record closing high.

Investors are putting concerns about the economic effects of the Delta variant to one side, though markets are expected to remain jittery heading into the peak summer vacation period. A banner start to the corporate earnings season among the biggest U.S. companies is helping buoy sentiment. Many money managers also see few other places to deploy cash with yields on government and corporate bonds trading at depressed levels.

"The market is facing a genuine test: whether the link between case rises and hospitalizations is broken," said Peter van der Welle, a multiasset strategist at Robeco. Nonetheless, Mr. van der Welle expects a second leg of the reopening trade-in which bond yields, economically sensitive stocks and commodities all rose-to get under way once there is more clarity about the Delta variant.

Johnson & Johnson, Harley-Davidson, Coca-Cola and Verizon Communications are among the large companies due to report earnings before the opening bell. Texas Instruments, Whirlpool and Equifax are scheduled to post results after markets close.

Of the 60 S&P 500 constituents that have filed quarterly results, 85% have beaten analysts' expectations, according to FactSet.

"Consumers are going to remain at least moderately cautious because of the spread of Delta everywhere," said Christopher Jeffery, head of inflation and rates strategy at Legal & General Investment Management. "It is really hard to think the U.K. template isn't at least going to be partly followed in the U.S. and Europe," he added, referring to a spike in cases in the U.K.

Still, Mr. Jeffery is upbeat about the outlook for stocks. "It is hard for us to get structurally negative on equities" given the strong start to earnings season, he said.

In overseas markets, the Stoxx Europe 600 jumped, buoyed by shares of travel, leisure and retail companies.


The dollar rose as investors pile into safe-haven assets due to fears the spread of the delta coronavirus variant could derail the global economic recovery.

Safe-haven flows appear to be propping up U.S. bonds and those inflows are seeing international investors buy the dollar, lifting the currency despite the fall in U.S. yields, Oanda analyst Jeffrey Halley said.

"Until nerves calm sufficiently about the impact of the delta variant on the global recovery, that strength should continue, especially if the European Central Bank is dovish at tomorrow's policy meeting."

Uncertainty over the rapidly spreading Delta coronavirus variant and a potential escalation in U.K.-EU tensions are likely to weigh on the pound in the short-term, MUFG Bank said.

U.K. interest rate rise expectations will remain subdued for the remainder of the summer due to concerns about the economic impact of coronavirus and post-Brexit tensions, MUFG analyst Derek Halpenny said. Rising U.K. coronavirus cases will reduce social mobility and hurt economic activity, he said.

Meanwhile, the U.K. is set to present its proposals for overhauling post-Brexit trading arrangements between Britain and Northern Ireland later Wednesday.

"The EU is unlikely to accept these changes reinforcing the prospect of a fresh trade conflict," Halpenny said.


The yield on 10-year Treasury notes ticked up to 1.234% from 1.208% Tuesday. Yields and have skidded in recent weeks in a sign of waning concerns about a prolonged overshoot in inflation.


Oil prices were higher, though both major benchmarks remain down 5% and 6% respectively so far this week after rising Delta variant cases prompted sharp selloffs Monday.

More bad news may be ahead for those watching oil demand as a gauge of economic activity and coronavirus recovery: API data released late Tuesday "were tilted in the bearish direction," DNB Markets' Helge Andre Martinsen said.

Both the API's readings for crude and gasoline inventories rose week-on-week. If EIA data confirm those readings Wednesday, that rise will be the first since May, Martinsen said.

Most metals edged lower Wednesday and remain in the red so far this week despite some rallies Tuesday. LME three-month copper futures were down 0.2% at $9,324 a metric ton, with concerns about rising coronavirus cases spooking investors, according to Marex Spectron's Anna Stablum.

Wednesday's slip comes despite Chile's huge mine at Escondida posting a 10% drop in production for the year ending June, ING's Warren Patterson said.

London gold prices were down 0.2%, with the WSJ dollar index edging up 0.2%. The two assets tend to move in opposite directions.



MGM Resorts Reveals Plans for $9 Billion Casino in Japan

MGM Resorts International formally proposed building a $9 billion casino resort in Osaka, reinvigorating its push to open Japan's first casino gambling facility after pandemic-related delays.

Global casino operators have been looking for opportunities since Japan legalized casinos in 2018, but the process has moved slowly and some companies have dropped their bids.


New York Inches Forward on Mobile Sports Betting

New York is opening its lucrative market to mobile sports betting, but gambling companies vying to operate in the state may have to pay a steep premium for the privilege.

State officials issued a request for applications from sports-betting companies earlier this month, with proposals due Aug. 9. DraftKings Inc. and FanDuel Group, the most dominant companies in the online betting industry, are expected to submit applications to the New York State Gaming Commission in the coming weeks.


Netflix May Find No Business Like Show Business

It is as good a time as any for Netflix to test a new story line. Even a lucky turn in videogames won't free the streaming giant from the need to keep playing Hollywood's game, though.

Netflix used its second-quarter report Tuesday afternoon to confirm previously reported plans to enter the videogame business. No timing was given, though the company said the offerings would be included in its current subscription plans at no additional cost. The company isn't backing away from its work on movies and TV shows, but said in its letter to shareholders "since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games."


Autodesk Ends Acquisition Talks with Altium

Autodesk Inc. on Tuesday ended its talks to potentially acquire Australian software firm Altium Ltd.

Altium in June rejected Autodesk's unsolicited takeover proposal on valuation grounds. The initial offer valued Altium's equity at about $3.91 billion and was described by analysts as opportunistic.


Carlyle Launches Renewable-Energy Infrastructure Unit

Private-equity giant Carlyle Group Inc. is launching a company to develop renewable-power-generation and storage projects in a push to reorient its energy business toward sustainable investments.

Funds Carlyle operates will inject as much as $700 million in the new venture, Copia Power, enabling it to arrange projects worth over $6 billion, according to Pooja Goyal, Carlyle's co-head of infrastructure and head of renewable and sustainable energy. Copia will focus on developing large-scale solar generation projects and battery facilities to store power and distribute it after sunset.


Bond Rally Undercuts Inflation Fears

The monthslong decline in bond yields exemplifies investors' belief that inflation likely isn't the biggest problem facing the U.S. and global economy.

Monday's sharp selloff in major U.S. stock indexes highlighted investors' mounting concern that the biggest risk to markets right now is underwhelming growth, rather than the runaway price increases feared earlier in the year. At the same time, many investors think inflation readings may run hot for some period, then subside on their own or lead the Federal Reserve to raise interest rates and slow the recovery.


Fed Chair Powell Enjoys Support For Reappointment, but He's Not a Lock

President Biden's selection of the next Federal Reserve chair is likely to be a choice between keeping the current chief, who enjoys broad support in markets and among lawmakers from both parties, or replacing him with one of his well-regarded colleagues.

Chairman Jerome Powell, whose term expires in February, is viewed by some inside and many outside the administration as the front-runner for the job. But if Mr. Biden decides he would prefer his own pick, rather than the Republican chosen by President Trump, Fed governor Lael Brainard is the most likely candidate to succeed him.


Infrastructure Vote Approaches Without Final Agreement in Place

WASHINGTON-The Senate barreled toward a pair of Wednesday deadlines for advancing much of President Biden's multitrillion-dollar economic agenda, with lawmakers bracing for a procedural vote on a still-forming $1 trillion infrastructure plan to fail as bipartisan negotiations dragged on.

Senate Majority Leader Chuck Schumer (D., N.Y.) has set a vote for Wednesday to begin consideration of infrastructure legislation, a step that Republicans have said they would oppose absent more details on its contents and how it would be paid for.


EU-U.S. Data Privacy Talks Enter Second Year With No Timeline for Resolution

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July 21, 2021 06:08 ET (10:08 GMT)

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