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A look at the day ahead from Danilo Masoni.
Equity markets continue to rally as if there were no tomorrow, shrugging off COVID-19 and signs of slowing economic growth. Wall Street notched another record high and so did Europe on Tuesday, while in Asia, even COVID-battered India saw stock markets scale a lifetime peak.
A bounce in Chinese tech stocks was another reason to cheer as the dust settled on the “spiritual opium” attack on the video game industry. Tencent’s which lost $60 billion off its market cap on Tuesday has recovered around 3%.
Bond markets however seem to be telling a radically different story. Treasury yields are struggling below 1.20%, even after some reassuring factory orders data.
Upcoming data could test this diverging trend. In focus now is the U.S. ADP employment survey, which will set the stage for Friday’s payrolls — the last set of labour figures the Fed will see before Jackson Hole, where some expect a tapering signal.
The earnings season meantime continues to deliver. And how! Q2 profits at Europe Inc are now seen growing at 140% year-on-year — the highest rate ever — while corporate America is set for a 90% surge.
In Asia, Toyota posted a record quarterly operating profit, though a cautious outlook weighed on shares.
Stocks futures flag mild gains in Europe, undeterred by the Q2 loss at Germany’s Commerzbank, while Wall Street are flatlining.
M&A newsflow continues apace. Thales is in talks to sell its railway signalling unit to Hitachi in a deal valuing the business at $2 billion. On the other hand, the UK is reportedly considering blocking Nvidia’s $40 billion acquisition of chip designer Arm.
M&A deals worth $3.3 trillion were recorded during the first seven months of 2021 — the highest year-to-date total since Refinitiv records began in 1980.
GRAPHIC: Morning bid – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkqmgkpx/morning%20bid.JPG
Key developments that should provide more direction to markets Wednesday:
– Growth in China’s July services activity speeds up, but risks loom – Caixin PMI
– Japan’s service sector activity shrinks at faster pace in July – PMI
– Euro zone retail sales
– Emerging markets: Thailand, India, Georgia central banks meet
– Fed speakers: Fed Vice Chair Richard Clarida
– U.S. ADP payrolls
– U.S. earnings: Marathon, Kraft Heinz, New York Times, Tupperware, Jones Lang LaSalle, Fox, Western Union, Metlife, MGM, Manulife
– European earnings: Commerzbank, Siemens, Intesa, Tenaris
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(Reporting by Danilo Masoni; editing by Sujata Rao)
