MARKET WRAPS

Watch For:

EU, Italy Balance of Payments; UK CBI Industrial Trends Survey; updates from Coca-Cola HBC, DS Smith

Opening Call:

Shares in Europe should extend gains early Tuesday, although caution will remain ahead of the U.S. reopen. In Asia, major benchmarks were broadly higher, along with Treasury yields, oil and gold; and the dollar weakened as a risk-on mood boosted regional markets.

Equities:

European stocks are likely to continue their winning streak on Tuesday, having advanced for a second straight session on Monday in the absence of U.S. trading.

U.S. futures were also higher as Wall Street reopens later and as investors look ahead to comments from Jerome Powell to Congress on Wednesday and Thursday for clues about the chances of a second consecutive three-quarter-point interest rate rise in July.

On Monday, Federal Reserve Bank of St. Louis President James Bullard said the economy appears on track for more expansion this year, and that the central bank must meet market expectations for rate rises as part of its effort to rein in inflation.

"U.S. labor markets remain robust, and output is expected to continue to expand through 2022," Bullard said. But he added, "Risks remain substantial and stem from uncertainty around the Russia-Ukraine war and the possibility of a sharp slowdown in China."

Read: Fed's Bullard Says He Expects Economic Expansion to Continue This Year

Forex:

The dollar weakened on improved risk sentiment in Asian markets. MUFG Bank currency analyst Sophia Ng said this is unlikely to last, however, as investors remain wary of global growth risks and China's latest move to impose limited mobility restrictions in Shenzhen to contain a Covid-19 outbreak.

---

The Bank of England should raise interest rates more aggressively to prevent the pound from weakening as that could exacerbate inflation pressures, according to Catherine Mann, member of the BOE's monetary policy committee.

A robust rate rise "reduces the risk that domestic inflation already embedding is further boosted by inflation imported via a sterling depreciation," Mann said.

The trade-off between inflation and economic activity may become more challenging due to the U.K.'s sensitivity to global financial spillovers resulting from robust policy tightening by other major central banks, she added.

The BOE raised its key rate by 25 basis points to 1.25% last Thursday, but Mann and two of the nine-member monetary policy committee voted for a 50 basis-point rise.

Bonds:

Treasury yields were unchanged early Monday after investors seeking cover from inflation sent 10- and 30-year yields lower for a third straight session on Friday.

Despite three straight sessions of declines, the 10- and 30-year rates remained up for the week just ended. Meanwhile, the spread between 2- and 10-year yields shrank back toward the brink of inversion and hovered below 6 basis points in a worrisome sign about the outlook. The 5s30s spread remained inverted, at minus 5.6 basis points.

After Monday's U.S. holiday, housing data is likely to be closely watched for indications on the impact monetary tightening is having on the economy. "The next issue is how sensitive inflation will be to a significant growth slowdown," said BMO's Douglas Porter.

Energy:

Oil futures made further gains early Tuesday, advancing on some tightness in the market.

Recent Chinese data showing record oil imports for May suggests that demand is still strong, said OANDA's Jeffrey Halley. "That remains so around the world, and the squeeze on refined products like diesel and gasoline remain as tight as ever."

Other News:

The loss of Emmanuel Macron's parliamentary majority is an early sign of how Russia's squeeze on European energy prices is raising the economic and political stakes for European leaders as the invasion of Ukraine becomes a war of attrition.

Russia began throttling the flow of natural gas to Europe last week, sending energy prices even higher and raising the specter that the continent won't have ample supplies of gas to heat homes and power factories through the winter.

Read: Macron Lost Grip on Parliament Amid Russian Squeeze on Energy Prices

Metals:

Gold futures edged up in early Asian trade, supported by some safe-haven demand on current macroeconomic uncertainties. Investors will likely keep a close watch on Jerome Powell's testimony before lawmakers later this week, where he will outline his views on inflation.

---

Copper prices were little changed as demand weakens on a worsening macroeconomic outlook and as supply slowly returns to the market. Fitch said expectations of weaker economic growth in China were also weighing on demand for the metal.

---

Chinese iron-ore futures dipped with sentiment still weak. ANZ said steel mills conducting maintenance has curbed the demand for iron ore.

"Expectations of a rebound in the real estate sector have slowly fallen as renewed outbreaks of Covid-19 lead to further lockdowns. The promise of more economic support in China failed to boost sentiment in the iron ore market."

   
 
 

TODAY'S TOP HEADLINES

Fed's Bullard Says He Expects Economic Expansion to Continue This Year

Federal Reserve Bank of St. Louis President James Bullard said the economy appears on track for more expansion this year, and that the central bank must meet market expectations for rate rises as part of its effort to rein in inflation.

"U.S. labor markets remain robust, and output is expected to continue to expand through 2022," Mr. Bullard said in materials for a presentation in Spain. But he added, "Risks remain substantial and stem from uncertainty around the Russia-Ukraine war and the possibility of a sharp slowdown in China."

   
 
 

Hong Kong Continues Selling U.S. Dollars to Defend Currency Peg

Hong Kong has sold more foreign-exchange reserves to maintain its longstanding peg to the U.S. dollar, bringing its total outlay this year to US$9.54 billion.

The Hong Kong Monetary Authority, the city's de facto central bank, said it sold US$665 million of U.S. currency in New York hours Monday. That followed the US$6.63 billion it sold last week.

   
 
 

Activists Target Nelson Peltz's Trian Over U.K. Fund

A group of investors is agitating for change at a London-listed investment vehicle managed by shareholder activist Trian Fund Management LP, arguing that the company has deviated from its original purpose when it went public nearly four years ago.

The group, made up of Invesco Ltd., Janus Henderson Investors UK Ltd., Pelham Capital Ltd. and Global Value Fund, said Monday it is calling on the company's board to convene an extraordinary general meeting of its shareholders and swap out current directors.

   
 
 

Israel Heads for New Elections as Coalition Moves to Dissolve Parliament

TEL AVIV-Israel's prime minister, Naftali Bennett, said Monday he would move to dissolve Parliament and call for the country's fifth election in three years, marking the end of the most diverse ruling coalition in Israel's history.

Mr. Bennett said Foreign Minister Yair Lapid, a former news anchor turned centrist politician, would lead the country in the interim period, which could last several months. The two leaders, from opposite sides of the Israeli political spectrum, joined forces last year to oust then-Prime Minister Benjamin Netanyahu. The prospect of new elections gives Mr. Netanyahu, the country's longest-serving prime minister, a fresh shot at regaining power.

   
 
 

France's Macron Lost Grip on Parliament Amid Russian Squeeze on Energy Prices

PARIS-The loss of French President Emmanuel Macron's parliamentary majority is an early sign of how Russia's squeeze on European energy prices is raising the economic and political stakes for European leaders as the invasion of Ukraine becomes a war of attrition.

Mr. Macron's party lost dozens of seats in the National Assembly to candidates backed by far-left firebrand Jean-Luc Melenchon and far-right leader Marine Le Pen. Both politicians seized on record-level inflation to portray Mr. Macron as a leader who paid more attention to his role on the diplomatic stage, dealing with the war in Ukraine, than to voters struggling to make ends meet.

   
 
 

Israel Expands Operations Against Iranian Nuclear, Military Assets

Israel is intensifying its campaign to thwart Iran's nuclear, missile and drone programs with a series of covert operations targeting a broader range of key targets, said people familiar with the effort.

The new moves are the latest evolution of a strategy that has been dubbed the Octopus Doctrine by Israeli Prime Minister Naftali Bennett, who aims to bring Israel's battle against Iran onto Iranian territory after years of targeting Iranian agents and Tehran's proxies outside the country in places such as Syria.

   
 
 

Write to paul.larkins@dowjones.com

   
 
 

Expected Major Events for Tuesday

05:00/FIN: May Labour force survey, incl unemployment

06:00/SWI: May Trade Balance

08:00/POL: May Average gross wages

08:00/EU: Apr Euro area balance of payments

08:00/POL: May PPI

08:00/POL: May Industrial Production Index

08:00/POL: May Agricultural prices

08:00/ICE: May Harmonized CPI

09:00/ITA: Apr Balance of Payments

09:00/MLT: May RPI

10:00/UK: Jun CBI Industrial Trends Survey

17:59/POR: Apr Balance of Payments

22:00/NED: May House Price Index

All times in GMT. Powered by Kantar Media and Dow Jones.

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

 

(END) Dow Jones Newswires

June 21, 2022 00:18 ET (04:18 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Jul 2022 to Aug 2022 Click Here for more FTSE 100 Charts.
FTSE 100
Index Chart
From Aug 2021 to Aug 2022 Click Here for more FTSE 100 Charts.