MARKET WRAPS
Stocks:
Stocks extended their advance in Europe, led by mining and energy majors, although gains were modest.
Investors' appetite for risk has improved over the past two sessions on growing expectations the Federal Reserve's cycle of interest-rate rises is coming to an end.
"Although it is widely accepted that there will be a further rise in interest rates this month and the possibility of one more to come this year, investors are becoming increasingly hopeful that the Fed is now getting its ducks in a row, with the ongoing resilience of the economy increasingly pointing to the ideal outcome of a soft landing," Interactive Investor said.
Stocks to Watch
ArcelorMittal is expected to report a sequentially better second quarter driven by improving spreads in Europe and the U.S. and by the first-time consolidation of CSP in Brazil, Deutsche Bank said. Read more.
Renault should reconsider its straight initial public offering plans for Ampere and instead fund its battery-electric vehicle business with capital tied up in Nissan shares, Jefferies said. Read more.
Communications and software stocks look like good bets in a tough economic environment, Julius Baer said. It expects the communications sector to deliver solid earnings in 2023, noting that traditional operators tend to be resilient in an economic downturn, offering value and stability. Read more.
U.S. Markets:
Stock futures hovered ahead of June's ISM Manufacturing Index.
A string of strong economic data in recent days have tamped down recession fears, but raised expectations the Fed will need to keep raising interest rates to curb inflation.
Read U.S. Inflation May Average Around 4% in 2023, Julius Baer Says.
U.S. government bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.847%, from 3.818% on Friday.
Stocks to Watch
Electric-vehicle makers jumped premarket. Tesla gained more than 6%, while Rivian added 2.5%. U.S.-traded shares of Chinese electric-vehicle maker NIO rose 6.1%.
Follow WSJ markets coverage here .
Forex:
The dollar recovered some of Friday's post-U.S. data losses and MUFG said investors will need "much weaker" monthly jobs data on Friday and inflation data on July 12 to push the currency lower on a more sustained basis.
MUFG said only this could convince the market that the Fed will again keep interest rates unchanged later this month.
"One weaker reading on its own is unlikely to prevent the Fed from delivering one final rate hike this month. Further weaker U.S. inflation data will be required to trigger a more sustained reversal lower [in the dollar and U.S. yields]."
Natixis said the dollar has been lifted recently by "a series of good macro indicators" and suggestions from Jerome Powell that interest rates could rise further.
This will leave the dollar's movements from here dependent on future U.S. macroeconomic indicators, such as ISM business manufacturing, jobs and wages, Natixis said.
It expects EUR/USD to stay in a range between 1.08 and 1.10 for now.
Bonds:
Eurozone sovereign spreads have taken talk of faster European Central Bank quantitative tightening in their stride, which is one more reason why it might happen, ING said. "Against this, risk sentiment is strong across markets."
ING reckons the transition to a world of lower ECB support will prove tricky "but fiscal transfers across the EU, and more expansive fiscal policy in general should help convince investors to dip their toes back in."
German Bund yields are expected to decline in July driven by worsening eurozone data, the valuation at the short end with an ECB terminal deposit rate at 4% already priced in, and the falling supply path fuelling summer seasonality, Morgan Stanley said.
It sees a potential return close to the lower side of the 2%-2.5% trading range seen in the first half of the year.
Meantime, Natixis said the level of two-year German Schatz yields is a "little high." It sees the fair value around 2.9%, and feels that 3.2% is a good entry point for a long position.
Read Eurozone Bond Supply in 3Q Seen Slowing in Line With Usual Pattern, Says LBBW
Energy:
Crude oil prices eased lower as worries over demand continued to dominate the market.
ING said that despite moving into the third quarter, the market still has the same concern as the last six months: an uncertain demand outlook.
ING pointed to speculators cutting their net long position last week in ICE Brent by 30,586 lots to 159,800 lots and WTI longs by 35,257 lots to 71,543 lots.
"This is the smallest net long speculators have held in WTI since March when we saw prices trading briefly below $65 a barrel."
Metals:
Base metals edged higher, as worries over supply provided some support to prices, while gold dipped with expectations of rate hikes providing pressure in the near term, ANZ said.
"Weakening industrial activity in China is a headwind, but we think this has been largely priced in and any upside surprise could see metals prices rebounding," ANZ said, adding that inventories for copper and aluminum have been drawn down, which should protect against downside risks for prices.
DOW JONES NEWSPLUS
EMEA HEADLINES
The European Hot Spots Struggling With the Tourist Masses
MONTEROSSO AL MARE, Italy-A worker shouts in Italian, English and French, directing throngs of tourists through the small train station. Wild gesticulations, a fluorescent yellow vest and a booming voice help her to stand out on the packed platform.
Swarms of people holding backpacks and water bottles squeeze past each other, some heading for a departing train, others for the exit and a stunning view of the sea and cliffs that have made the villages of Italy's Cinque Terre a global tourist draw.
Mineral-Rich Developing Nations Demand Bigger Piece of the EV Pie
Across the developing world, mineral-rich nations say they are moving to end the era of extract and export.
Countries with vast deposits of the ingredients essential to making electric vehicles are digging in and trying to take a bigger share of the expected EV boom.
Tesco Taps Tate & Lyle, Burberry Chairman Gerry Murphy - Update
Tesco said Saturday that Gerry Murphy has been appointed chairman and will join the board on Sept. 1, replacing John Allan who stepped down in June following claims that he acted inappropriately toward several women.
The U.K. number one grocer by market share said that interim chairman Byron Grote will step down and revert back to his previous position as senior independent director.
Behind French Riots Lie Years of Anger Over Police Conduct
NANTERRE, France-When 17-year-old Nahel Merzouk was killed by a police officer last week in this Paris suburb, Mourad Telhaoui thought about the time his own son-a young man of North African origin like the slain teenager-was stopped by police two years ago.
They pulled him over on a secluded stretch of highway at night as he was driving home from work. Three officers spoke abusively to him and handed out tickets for traffic violations that he didn't commit, according to Telhaoui and his son, who declined to be named.
Putin's Corporate Takeover of Wagner Has Begun
In the wake of a mutiny that almost reached Moscow, Vladimir Putin is facing a new test-managing one of the most complex corporate takeovers in history.
Inside the Wagner Group's sealed-off glass tower headquarters in St. Petersburg, agents from the Federal Security Services, or FSB, have been scouring the offices for evidence against Yevgeny Prigozhin, the Wagner chief who led last month's insurrection. New Kremlin-backed military contractors are launching recruiting drives on Russian social-media networks with recruitment ads to poach some of Wagner's 30,000 mercenaries, hackers and moneymen, whom the longtime ally of President Putin deployed to Ukraine, the Middle East and Africa.
GLOBAL NEWS
China Factory Activity Gauge Fell Slightly in June
A private gauge of China's factory activity eased slightly in June but remained in expansionary territory, reflecting the resilience in the manufacturing sector.
The China Caixin manufacturing purchasing managers index was 50.5 for June, slightly lower than the 50.9 reading for May, according to data released Monday by Caixin Media Co. and S&P Global.
U.S., China Start Talking Again, With Global Economic Order at Stake
Washington and Beijing are talking again. The test now is whether they can settle into a new normal that avoids upending the global economy-or fall back into a cycle of acrimony and retaliation.
Treasury Secretary Janet Yellen heads to China on Thursday through Sunday to meet with senior government officials, her department said Sunday. The trip comes as tensions over trade, technology and Taiwan prompt both countries to reconsider the deep commercial and investment ties that have defined the relationship for decades. Yellen is hoping to preserve many of those links, while Chinese officials want to reverse a domestic slowdown by showing they remain open for business from the West.
Investors Spurn Dividend-Paying Stocks as AI Booms
Shares of companies boasting chunky dividends were among the stock market's most popular trades last year. But the strategy of giving them preference has since fizzled out.
During 2022's bear market, dividend-paying stocks were embraced by investors looking for a steady stream of cash. Those investors now see greater promise in growth-focused tech stocks that don't typically pay dividends while betting a boom in artificial intelligence will deliver bigger profits down the road.
Big Banks Stay Cautious as Stress Doesn't End With a Test
Banks endured the stress tests pretty well. But they seem to be anticipating some bigger headaches to come.
(MORE TO FOLLOW) Dow Jones Newswires
07-03-23 0536ET
