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EUROPEAN MIDDAY BRIEFING: Stocks Rise Ahead of US Economic Data - Morningstar.com

MARKET WRAPS

Stocks:

European stocks rose as investors stayed upbeat ahead of U.S. employment numbers and other economic data.

"A largely quiet calendar in Europe sees traders focus on the U.S. job picture once again, with jobless claims released alongside the latest trade balance and factory orders," IG analysts said.

"Coming off the back of a big miss on the ADP NFP and contraction for the employment element of the ISM manufacturing PMI, there are warning signs that Friday's headline job report may underwhelm."

Shares on the move:

Among European equities, Swedish Orphan Biovitrum surged 24% after private-equity firm Advent International and an affiliate of Singapore's sovereign-wealth fund bid to buy the pharmaceutical company for around $8 billion.

U.S. Markets:

Stock futures edged higher ahead of fresh data on the labor market and the trade balance that could provide insights into the pace of the economic recovery.

Stocks have ground higher this week as investors weighed strong corporate earnings and low interest rates against indicators that growth may be slowing in some parts of the world.

Money managers say they are awaiting the jobs report for August, due Friday, for more cues on when and how the Federal Reserve may taper its bond purchases. The central bank has signaled that the labor market's recovery is a factor in its monetary policy decisions.

"The confluence of a strong recovery at the same time as very low interest rates and maybe the peak of policy accommodation: if you put those all together, it is a very powerful mix for risky assets," said Bill Papadakis, macro economist at Lombard Odier. "If you consider the alternatives in which investors could put their money today-with interest rates where they are-equities are often the one option for somewhat better returns."

The latest data on jobless claims, a proxy for layoffs, is due at 8:30 a.m. ET. Economists estimated first-time filings for unemployment insurance held near pandemic lows in late August. The U.S. trade balance for July will also be released at 8:30 a.m., and likely narrowed as American consumers shifted spending toward in-person services and away from goods.

"We're in an environment where bad news is sort of good news," said Olivier Marciot, investment manager at Unigestion. "Every time the situation deteriorates on the macro front, it is making investors hopeful that central bank accommodation will be here for longer."

Semiconductor and software developer Broadcom and information technology company Hewlett Packard Enterprise are scheduled to post earnings Thursday after markets close.

Forex:

The dollar's drop after ADP's U.S. private payrolls report missed forecasts illustrates the currency's fragility to labor market data and means big moves could happen following Friday's official jobs figures, Commerzbank said.

The dollar is sensitive to jobs data as a significant recovery in the labor market is a necessary condition for raising interest rates, Commerzbank currency analyst Ulrich Leuchtmann said.

"And without that the dollar should struggle to appreciate," he said.

Investors who hold active dollar positions should "fasten their seatbelts" when the Labor Department's U.S. nonfarm payrolls report is released Friday, he said.

The price of bitcoin rose above $50,000, adding 3.5% from its level at 5 p.m. ET Wednesday.

The euro could extend its rise against the dollar, supported by recent remarks from European Central Bank officials about reducing stimulus and the risk of a weak U.S. nonfarm payrolls report on Friday, ING said.

"With USD that may stay broadly offered into tomorrow's NFP, EUR/USD may approach the late July 1.1890 highs today," ING analysts said.

"If payrolls eventually come on the soft side, a break above 1.1900 may well be on the cards."

ECB member Robert Holzmann said it was time to start debating the tapering of pandemic bond purchases and ECB member Klaas Knot said he expects the bank to start reducing purchases at the September 9 meeting.

Bonds:

The yield on the benchmark 10-year Treasury note ticked down to 1.299% from 1.301% on Wednesday.

Comments by ECB officials pointing to a possible reduction in monetary stimulus "could partly trigger unwelcome reactions on the capital market, " said NordLB's analysts Norman Rudschuck and Frederik Kunze.

A bond market selloff in the eurozone earlier this week--also driven by higher-than-expected eurozone inflation--followed comments by ECB Governing Council member Robert Holzmann which contributed to debate around whether to reduce purchases in the Pandemic Emergency Purchase Programme, they said.

"We continue to believe that this discussion is necessary and that a reduction in purchases is likely before the end of 2021," NordLB's analysts said.

However, the likelihood that the ECB Bank will keep its pledge for an--albeit unspecific--increased pace of purchases at next week's meeting "will remain high," they said.

Commodities:

Oil prices wavered around flat after OPEC+ surprised nobody by sticking with its plans to raise production by 400,000 barrels a day in the coming months.

In the months ahead, the market will be watching Covid infection rates and U.S.-Iran negotiations in the event that a nuclear deal leads to sanctions being lifted on Iranian oil, ING's Warren Patterson said.

"Overall, the outcome of the meeting was neutral for the market," he said.

Elsewhere, EIA data revealed a larger-than-expected drop in U.S. crude inventories.

 

EMEA HEADLINES

OPEC Alliance Keeps Gradual Production Increases, Despite U.S. Request

The Organization of the Petroleum Exporting Countries and a group of Russia-led producers said they agreed to continue increasing oil production in measured steps, resisting for now recent U.S. pressure to open the group's spigots wider.

In July, the OPEC-Russian alliance agreed to gradually bring back millions of barrels a day of production that they had bottled up at the start of the Covid-19 pandemic.

 

Richard Branson's Virgin Galactic Flight Path Examined by FAA

Aviation regulators are investigating how Virgin Galactic Holdings Inc.'s spacecraft returned to the ground after taking billionaire entrepreneur Richard Branson to the edge of space, a spokesman for the Federal Aviation Administration said.

Virgin Galactic's Unity space vessel deviated from the flight path it agreed to follow as it came back to the Spaceport America facility in New Mexico on July 11, according to the FAA spokesman. Five other crew members were on board with Mr. Branson, Virgin Galactic's founder. The mission, called Unity 22, drew widespread attention.

 

Taliban Face Threat of European Sanctions Over Rights Abuses and Terror Links

BERLIN-European leaders, grappling with the question of how to interact with Afghanistan's new hard-line Taliban leadership, are considering threatening sanctions to win commitments to safeguard human rights, cut terrorist ties and permit at-risk Afghans to leave.

Measures under consideration include freezing Afghan money overseas and ending existing sanctions-waivers for certain Taliban leaders.

 

Taliban Battle Opposition Militias, Wield New Power in Kabul

Clashes flared in northern and central Afghanistan between the Taliban and local militias on Wednesday, as the Islamist movement continued to consolidate its grip on power in the Afghan capital two days after the U.S. ended its 20-year presence in the country.

The U.S. now estimates it left behind the majority of the Afghan interpreters and others who had applied for visas to flee Afghanistan, a senior State Department official said, despite frantic efforts to evacuate those at risk of Taliban retribution in the final days of the airlift.

 

Biden, Zelensky Discuss Energy, Russia, Ukraine's Future With the West

President Biden and Ukrainian President Volodymyr Zelensky met on Wednesday to discuss the countries' bilateral relations and Ukraine's tensions with Russia and aspirations to join the West, addressing a simmering foreign policy challenge for Mr. Biden in the wake of the U.S. withdrawal from Afghanistan.

Earlier in the day, Mr. Biden said on Twitter that the meeting would serve "to reaffirm America's commitment to Ukraine's sovereignty, territorial integrity, and Euro-Atlantic aspirations."

 

Energy Traders See Big Money in Carbon-Emissions Markets

LONDON-Big energy trading houses, long focused on deep, volatile markets such as oil and natural gas, are now bulking up their carbon-trading operations as governments around the world push to expand the market for trading carbon emissions.

Two of the world's biggest oil companies, Royal Dutch Shell PLC and BP PLC, already have significant carbon-emissions trading arms, thanks to a relatively well-developed carbon market in Europe. Big carbon emitters such as steel producers receive emission allowances, and can buy more to stay under European emissions guidelines. Companies that fall below those limits can sell their excess carbon-emissions allowances.

 

GLOBAL NEWS

Unemployment Claims Trending at Pandemic Lows

New applications for unemployment benefits are likely to hold near pandemic lows, showing the labor market is progressing despite uncertainty caused by the Delta variant of Covid-19.

Economists surveyed by The Wall Street Journal estimate that initial jobless claims, a proxy for layoffs, declined by 8,000 to a seasonally adjusted 345,000 in the week ended Aug. 28. That number would be the lowest level since the pandemic took hold in the U.S. in March 2020.

 

Why Bitcoin's Price Got Stuck at $50,000

The late summer lull that overtakes Wall Street is even making bitcoin drowsy.

 

Singapore to Host SPAC Listings With New Framework

Singapore will become the first major financial hub in Asia to allow blank-check companies to list.

(MORE TO FOLLOW) Dow Jones Newswires

September 02, 2021 05:55 ET (09:55 GMT)

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