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European Midday Briefing: Gains for Miners Help Lift Broader Stocks



European stocks advanced again on Tuesday for a fifth session of gains, as miners rallied after strong results from BHP Group.

However, the ongoing energy crisis kept gains in check. Germany continues to suffer low water levels on the Rhine and now the country has set a gas levy for consumers, which could keep German inflation higher for longer and cause more headaches for the European Central Bank, ING said.

Stocks to Watch:

The luxury-goods industry looks to be enjoying acceleration across major markets in the current quarter, according to analysts at Bank of America.

In the U.S., the sector looks unaffected by the pressures on wider consumer-goods consumption thanks to its skew to higher-income customers, according to BofA demand data, while normalization in China following Covid-19 pandemic lockdowns has continued into July. In Europe, tourism is driving the recovery.

"The lack of slowdown presents further upside for the sector," BofA said, highlighting heavyweights LVMH, Richemont and Hermes, as well as smaller Italian groups Prada and Moncler and Swatch.

Economic Insight:

The U.K. has recorded two consecutive quarters of a goods trade deficit with the U.S. for first time since 1998, driven by a strong dollar and rising fuel imports, analysis from Ebury showed.

The deficit reached GBP3.1 billion in the first quarter, the largest-ever negative goods gap with the U.S., and GBP700 million in the second quarter.

"Evidently, the devalued pound against the dollar this year has bumped up the value of imports from the U.S.," Ebury said.

"As inflationary pressures continue to build in the U.K. ahead of the October energy price cap hike, the combination of growing imports from the States and a strengthening USD will add further to that volatile cocktail."

U.S. Markets:

Stock futures dipped ahead of results from major retailers that could offer clues about consumer behavior during a period of rampant inflation.

Investors are eyeing a week of key retail earnings with Walmart and Home Depot set to post results later on Tuesday.

On Wednesday, the FOMC will publish the minutes from its policy meeting in July, with the minutes closely read for signals on the Fed's next move.


The euro could fall further in coming days as Europe's energy crisis and a strong dollar weigh, ING said.

"The trade-weighted euro is a whisker away from the lows of the year and a slightly stronger dollar over the next 48 hours could easily see EUR/USD retesting parity."


The dollar could rise further in the near-term, supported by the energy shock, uncertainty over whether the PBOC will engineer another mini-devaluation in the renminbi and improved U.S. economic data, ING said.

The energy independence of the U.S. leaves the dollar relatively insulated to rising energy prices, ING added.

Data on industrial production later Tuesday and retail sales on Wednesday should ease recession fears, ING said. "106.95/107.00 looks like the near-term target for the DXY Dollar Index."


Sterling was little moved after the latest U.K. employment data as investors look ahead to Wednesday's key inflation print.

"The employment reading indicates a robust jobs market and will provide the Bank of England further reason to continue on its current trajectory for a higher interest rate environment," Silicon Valley Bank said.

The U.K. unemployment rate was little changed at 3.8% in the three months to June while the number of people in employment increased 160,000 over the quarter and average earnings excluding bonuses rose 4.7% following 4.4% growth in the previous quarter.


DZ Bank has lowered its forecast for the 10-year German Bund yield as it considers a recession in Europe unavoidable due to the energy crisis.

It now expects the 10-year Bund yield to hover around 0.90% over the next three months, down from a previous forecast of 1.75%. However, uncertainties suggest this is unlikely to be a calm sideways trading.

"Thus the volatility we have witnessed in recent months is likely to continue," DZ Bank said, adding that long-term bond yields remain in the grip of a slowing eurozone economy and stubbornly high inflation.


The prospect of a slowdown of economic activity makes UBS Asset Management "rather cautious" in its positioning in government bonds, considering selloffs as an entry opportunity.

"Risk assets have not yet priced in the extent of this economic slowdown, " UBS AM said, staying underweight stocks and using selloffs in bonds as an opportunity to increase exposure to sovereign fixed income.

It sees balanced risks to developed-market sovereign yields outside the U.S., and sees Treasurys remaining the world's pre-eminent haven and top source of risk-free yield.


Crude futures were more than 1.5% lower, extending Monday's hefty losses, on the prospects of a revival of the Iran nuclear deal and the subsequent resumption of Iranian oil exports.

DNB Markets said that could see Iran increase production by 1 million barrels a day within 9 months from current levels of 2.5 million barrels.


Metals prices edged lower, hurt by a strong dollar that spiked on Monday after China had cut rates to add some stimulus to its lockdown-hit economy.

"The macro mood feels heavier this morning," Peak Trading Research said, noting that the Chinese yuan, the number one importer currency, had fallen after the PBOC rate cuts.




UK Unemployment Rate Increased Modestly in Three Months to June

The unemployment rate in the U.K. rose slightly in the three months to June, although the country's labor market remained tight.

The U.K.'s unemployment rate stood at 3.8% in the three months through June, up from 3.7% in the preceding three-month period, according to data from the Office for National Statistics published Tuesday.


Philips Appoints Roy Jakobs as CEO

Royal Philips NV said Tuesday that it has appointed Roy Jakobs as chief executive officer with effect from Oct. 15.

The Dutch health-technology company said current CEO Frans van Houten, who is serving his third term, will act as the company's advisor and support the transition until April 30.


H&M Returns to Alibaba's E-Commerce Platform After 16-Month Absence

H&M is back on sale at an e-commerce platform run by Alibaba Group Holding Ltd., 16 months after the Swedish fashion brand was taken down from the site following its decision to stop sourcing from China's Xinjiang region.

Hennes & Mauritz AB has reopened its official store on Tmall, Alibaba's flagship shopping platform, but continues to be absent from many other websites run by Chinese companies, including Baidu Maps and consumer-review website


Pandora Backs Guidance Despite 2Q Hit From China Lockdowns

Danish jeweler Pandora AS on Tuesday backed its 2022 growth guidance despite recording second-quarter earnings that were weighed by lockdowns in China and a tough comparison in the U.S. due to last year's stimulus cheques.

Covid-19 lockdowns in China dragged down group organic growth by four percentage points versus 2021 while U.S. sales dropped 12% on year, but key European markets delivered double-digit organic growth, it said.


Iran Says Some Issues Still Pending as Deadline for Nuclear Deal Looms

Iran on Monday said there were several issues with the nuclear-deal draft text that the U.S. needs to address before Tehran can agree to it, leaving the fate of the nuclear agreement's revival still uncertain.

The European Union had set Monday as the deadline for Iran, the U.S. and the other countries in the 2015 deal to say whether they would accept the deal or not, according to diplomats. The EU last week circulated what it called a "final text" on reviving the accord and sent the draft following four days of talks in Vienna, saying the 16 months of negotiations were now over.


Aramco's Actions Undercut Its Rosy Predictions

The world's largest energy company says it is bullish on the future of oil-but its actions don't look quite so certain.

Saudi Aramco posted record quarterly results, earning profits of $48 billion in the second quarter because of higher prices and refining margins, low inventories and "geopolitical events." The producer realized an average price of $113.20 a barrel of crude, compared with $67.90 in the same quarter last year.


Explosions Hit Russian Ammunition Depot in Crimea

Russian authorities reported explosions at an ammunition depot in Crimea on Tuesday morning, a week after blasts at a Russian air base on the peninsula appeared to destroy several warplanes.

The new explosions took place at a temporary ammunition dump at a former farm near the village of Maiske in northern Crimea, a local official told Russia state news agency TASS. Local authorities are evacuating Maiske.


William Ruto Declared Winner of Kenyan Presidential Election

NAIROBI, Kenya-William Ruto, who ran on a promise to boost the economic prospects of Kenya's working class, was declared winner of the East African country's presidential race, which descended into chaos moments before the national electoral commission announced the results on Monday.

Mr. Ruto, Kenya's vice president for the past decade, defeated his former ally, longtime opposition leader Raila Odinga, the scion of a Kenyan political dynasty, 50.5% to 48.9%. Two other candidates received the remainder of the votes.


U.K. Approves Covid-19 Booster Shot Aimed at Omicron

The U.K. became the first country to approve Moderna Inc.'s Omicron-targeting Covid-19 vaccine as a booster shot, paving the way for the variant shot to play a role in a planned fall vaccination campaign to shore up immune defenses against the virus.

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August 16, 2022 05:32 ET (09:32 GMT)

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