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MARKET WRAPS

Stocks:

Shares in aircraft manufacturers Airbus and Boeing lifted off on Tuesday, ahead of the expected settlement of a long-running trade dispute between the European Union and U.S. over state aid to the two groups.

Airbus stock climbed near 1.5% in European trading, while shares in Boeing rose near 1% in the U.S. premarket.

The 17-year trade spat centres on state subsidies from the U.S. to Boeing and the EU to Airbus. Both companies, rivals, are jewels in the manufacturing crowns of the U.S. and Europe, respectively, with Airbus manufacturing taking place in the U.K., Germany, France, and Spain. The U.S. suspended tariffs on U.K. goods related to the dispute in March.

A formal announcement on the agreement is expected on Tuesday, after an accord was sought among EU member states on Monday, according to Bloomberg. A settlement also paves the way for lifting a cumulative $11.5 billion in tariffs between the U.S. and EU on each other's exports.

The news met an upbeat day for markets in Europe as stocks traded at all-time highs.

The pan-European Stoxx 600 rose 0.3%, hitting a new record, while the FTSE 100 in London ticked up 0.3% after opening at the highest level since February 2020. In Paris, the CAC 40 lifted 0.5% while Frankfurt's DAX climbed 0.6%. Dow industrials futures were up around 40 points, set for a soft but positive open after the index fell 85 points on Monday to close at 34,393.

Analysts noted that stocks were looking for direction ahead of a key announcement on rates and stimulus from the Federal Open Market Committee of the U.S. Federal Reserve on Wednesday.

"Markets appear to be taking the line of least resistance, which is a slow incremental move higher with a 'two steps forward and one step back' approach, over the past week or so," said Michael Hewson, an analyst at CMC Markets.

"Today's European open looks set to play out in a similar fashion with a modestly positive open, with the main focus, apart from the FOMC conclusion tomorrow, on today's U.K. unemployment numbers and U.S. retail sales and PPI [producer price index] for May."

H&M stock fell near 2%, after blowout second-quarter sales at the fashion retail giant fell short of expectations. Sales in local currency jumped 75% from March to the end of May compared with the same period in the year prior, to 46.51 billion Swedish kroner, which fell short of analysts' expectations of SEK 48.09 billion. The company said that by June 13, 180 of its stores remained closed due to COVID-19 restrictions.

After rising as much as 1.5% higher, shares in Lufthansa fell 0.5%, after the German airline announced its targets for 2024 late on Monday, including plans for a possible capital increase. Lufthansa said it would target an adjusted earnings before interest and taxes margin of 8% by 2024, up from 5.6% in 2019 and minus 40% in 2020.

Shares in EDF, the French multinational energy group, fell as much as 2% before settling 1% lower, after reports that one of its nuclear power plants in China could be experiencing a leak. EDF, which jointly owns the plant with the China General Nuclear Power Group, said on Monday that it was dealing with "performance" issue at the facility but that operations remained within safety guidelines.

U.S. Markets:

Stock futures edged higher ahead of fresh data that will indicate how much Americans spent in stores, at restaurants and online last month.

Futures tied to the S&P 500 ticked up 0.1%, indicating that the broad benchmark index is on track to notch its thirtieth record close of the year. Nasdaq-100 futures gained 0.2%, pointing to gains in technology stocks after the opening bell.

Investors expect that stocks will climb through the rest of the year due to easy monetary policies. Many people are also betting that higher inflation, due to the easing of economic restrictions and supply-chain bottlenecks, will be temporary. Signs that inflation will be elevated for a prolonged period or that the Federal Reserve may retrace its support could shake that confidence, money managers said.

"Investors seem a bit more convinced the Fed will do what it says it is going to do and stay put," said Edward Smith, head of asset allocation research at U.K.

investment firm Rathbone Investment Management. "That should mean we have relatively easy financial conditions and that should be good for equity markets."

Data on Americans' retail spending last month are due at 8:30 a.m. ET. Economists surveyed by The Wall Street Journal expect retail sales to have fallen as auto sales declined, fiscal support for consumers faded and Americans shifted their spending toward services and away from goods.

The market could see slightly weaker spending data as yet another sign that Americans aren't worried about rising consumer prices, said Sebastien Galy, a macro strategist at Nordea Asset Management. "Households don't need to purchase as quickly because they don't fear inflation," he added.

Forex:

Strong U.S. retail sales, industrial production and producer prices data later Tuesday could lift the dollar ahead of Wednesday's Federal Reserve decision, Commerzbank said.

Signs of rising inflation have been offset by recent weak jobs data, but signs of strong demand in Tuesday's figures could increase speculation that the Fed may scale back monetary easing early, said Esther Reichelt, currency strategist at the bank.

This could mean the Fed might focus more on inflation risks on Wednesday "and might signal an imminent reduction in asset purchases," she said.

However, the Fed's decision remains uncertain and dollar traders won't want to take "too clear a position" before then, she added. The DXY dollar index was down 0.1% at 90.4120.

The EU and U.S. have reportedly agreed to resolve a long-running dispute over aircraft subsidies to Airbus and Boeing but that won't provide a significant boost to the euro, ING said.

"Signs of further unwinding of the Trump-era protectionist agenda by President Biden should be welcomed by European sentiment, although there is likely very little priced in when it comes to EU-U.S. trade-related downside risk to the EUR, so the currency impact should not be material today," ING analysts said.

A formal announcement on the agreement for aircraft subsidies, which would lift the threat of punitive tariffs on the EU and U.S., is expected later Tuesday, according to media reports. EUR/USD was steady at 1.2123.

Bonds:

In bond markets, the yield on the benchmark 10-year Treasury note edged down to 1.487%, from 1.499% on Monday.

Commodities:

Oil prices rose after Brent notched new multiyear highs on Monday. Recent gains have come despite the decreasing likelihood that the U.S. will rejoin the Iranian nuclear deal before the Iranian presidential elections later this week. If talks do drag on into the second half of the year, expected Iranian supply is at risk, ING's Warren Patterson said.

While one might assume this would be bullish for prices, "it would [also] mean that other OPEC+ members would have more room to increase output later this year," he added.

Traders are also observing low investment in production. Angola's output is below its OPEC+ quota and has been declining for years, he said.

Copper prices fell to their lowest level since April amid growing jitters about possible Chinese measures to tamp down rising commodity prices.

Three-month copper on the LME fell 3.3% to $9,624.50 a metric ton, its biggest one-day decline since early March. Chinese markets reopen Tuesday following a holiday, giving traders there the first opportunity of the week to respond to continuing rumors that China was planning to release state reserves of copper, aluminum and zinc as part of a broader push to crackdown on speculation in the metals market and protect domestic consumers of metals from high prices amid inflation concerns.

EMEA HEADLINES

U.S. and EU Near Deal on Boeing-Airbus Trade Fight

The U.S. and the European Union are near to a deal that would suspend their trade dispute over government subsidies to Boeing Co. and Airbus SE, in a sign of easing trade tensions, a top EU official said.

European Commission President Ursula von der Leyen said Tuesday she is "very positive and convinced" a deal would be announced later in the day. "It is in our common interest to solve it," she said of the dispute.

Lufthansa Sets 2024 Targets, Prepares Possible Capital Increase -- Update

Deutsche Lufthansa AG has presented its 2024 targets and revealed plans for a possible capital increase, as it sees growing bookings and prepares for a rebound in passenger demand.

The new targets come as the company and the industry expect a business recovery thanks to a gathering pace of vaccination plans and the progressive lifting of travel restrictions. Lufthansa forecasts a positive operating cash flow in the second quarter.

H&M 2Q Sales Rise Slightly Less Than Expected

Swedish fashion retailer Hennes & Mauritz AB said Tuesday that sales in its fiscal second quarter rose 62% on the year, a slightly smaller-than-expected rise as the recovery continued but stores in markets such as France and Germany remained closed almost throughout the quarter.

Sales in the quarter ended May 31 rose to 46.51 billion Swedish kronor ($5.59 billion), shy of the SEK48.09 billion expected in a FactSet poll of analysts.

AstraZeneca: AZD7442 Trial for Prevention of Symptomatic Covid-19 Didn't Meet Primary Goal

AstraZeneca PLC said Tuesday that a Phase 3 trial to assess the safety and efficacy of a long-acting antibody combination called AZD7442 for the prevention of symptomatic Covid-19 after exposure didn't meet the primary goal.

The Cambridge, U.K.-based pharmaceutical company said AZD7442 reduced the risk of developing symptomatic Covid-19 in unvaccinated adults with confirmed exposure to a person with a case of the SARS-CoV-2 virus within the past eight days by 33% compared with placebo, which wasn't statistically significant.

Philips Recalls Millions of CPAP, Ventilator Machines Over Potential Health Risks

Royal Philips NV has recalled millions of sleep apnea and ventilator machines over concerns that a type of foam used in the devices could degrade and release harmful, possibly cancer-causing, particles.

The recall affects three million to four million machines, more than half of which are in the U.S., a company spokesman said Monday. About 80% are machines for aiding people with sleep apnea, a condition that causes a person to stop breathing for short periods during sleep. The rest are life-supporting mechanical ventilators.

Chinese Nuclear Plant Flags Performance Issue, French Part Owner Says

French power giant Électricité de France SA said it had requested an extraordinary board meeting with Chinese managers of a nuclear plant it co-owns in Southeast China to get more information on the buildup of gases inside one of the plant's reactors.

EDF said it made the request Saturday after receiving data from the managers of the Taishan nuclear power plant-located in the province of Guangdong 80 miles west of Hong Kong-showing an increase in the concentration of noble gases in one of its reactors' primary circuits, which is part of the reactor's cooling system.

Rapid Spread of Delta Coronavirus Variant Delays U.K.'s Full Reopening

LONDON-U.K. Prime Minister Boris Johnson delayed a long-awaited end to Covid-19 restrictions in England following an upswing in cases of a more contagious variant of coronavirus, highlighting how the virus can spread even within highly vaccinated populations.

The four-week delay offers a cautionary lesson to the U.S. and other countries about the risk of further outbreaks caused by new forms of the virus that are spreading around the world. The variant is primarily spreading among younger, unvaccinated groups in Britain but cases have been detected among older people who have had one and sometimes two doses of vaccine.

Biden, NATO Stress Threats From China and Russia

BRUSSELS-President Biden and NATO allies warned about China's global influence and called Russia a threat to European and Atlantic security, as the U.S. leader sought to marshal democratic nations against autocracies and bolster an alliance jolted by broadsides from his predecessor.

Despite an atmosphere of renewed comity among allies, disputes simmer over how to balance new threats from China against more traditional ones from Russia and how to address threats in new domains including cyber and space. Turkey's increasingly discordant role in the alliance also hung over the gathering.

Biden, Erdogan Meet in Attempt to Reset U.S.-Turkey Ties

ISTANBUL-President Biden met with Turkey's President Recep Tayyip Erdogan for the first time since taking office, as the two NATO allies attempt to repair a frayed relationship by seeking common cause over their security interests across the world, from Libya to Syria and Afghanistan.

"There is no problem with the U.S. that we cannot solve," Mr. Erdogan said following the meeting in Brussels on Monday.

GLOBAL NEWS

Supply Chain Disruptions, Strong Demand Likely Pushed Up Producer Prices in May

The prices that businesses are charging their customers likely rose again last month, adding to inflation pressures bubbling through the economy.

Economists surveyed by The Wall Street Journal expect the Labor Department to report Tuesday that its so-called producer-price index rose 0.5% in May from the prior month, down slightly from the 0.6% increase in April from March. The average rise between 2017 and 2019 was 0.2%.

Auto-Supply Pinch Likely Held Back Retail Spending in May

Shoppers likely pulled back on auto purchases last month while boosting spending on other items and at restaurants, as more people got vaccinated against Covid-19 and business restrictions were further eased.

Economists estimate that Tuesday's Commerce Department report will show that overall retail sales declined 0.6% in May. They expect that sales excluding autos rose a solid 0.5% from a month earlier.

RBA Lays Out Key Considerations for Potential Policy Shakeup at July Meeting

Members of the Reserve Bank of Australia's rate-setting board discussed key considerations that could drive significant changes to the central bank's platform of stimulus measures at its next meeting on July 6.

In minutes of the RBA's June 1 policy meeting, the central bank said a return to full employment was a priority for monetary policy as this would assist in achieving its target of bringing inflation to within a 2%-3% range.

Bitcoin Rises Above $40,000 on Elon Musk Tweet, MicroStrategy Plans

Bitcoin reached its highest level in more than two weeks Monday, buoyed by MicroStrategy Inc. completing its $500 million offering of junk bonds to buy bitcoin and by fresh comments from Tesla Inc. Chief Executive Elon Musk.

The world's largest cryptocurrency by market value traded as high as $41,046.77-a nearly 11% rise from its Friday level at 5 p.m. ET.

Back-to-Back Rebukes of China Mark a Turning Point

Major democracies rallied together this week to issue extraordinary back-to-back rebukes of Beijing, marking a shift toward collective action and pushing back against President Xi Jinping's strategies to position China as a global leader.

Over two consecutive days, Group of Seven leaders and North Atlantic Treaty Organization nations jointly criticized core Chinese policy under Mr. Xi as damaging to military stability, human rights, international trade and global health. NATO members vowed Monday to counter "systemic challenges to the rules-based international order" posed by China.

Lumber Prices Are Falling Fast, Turning Hoarders Into Sellers

Lumber prices are falling back to earth.

Futures for July delivery ended Monday at $996.20 per thousand board feet, down 42% from the record of $1,711.20 reached in early May. Futures have declined 14 of the past 15 trading days, the last two by the most allowed by exchange rules.

SEC Considers Changes to Trump-Era Rules

The U.S. Securities and Exchange Commission said it would consider changes to regulations passed under the Trump administration, a move that drew criticism from its Republican commissioners.

Among the regulations that the SEC plans to revisit are amendments to its whistleblower award program and a rule requiring oil, gas and mining companies to disclose payments made to foreign governments. Both rules were passed late last year over opposition by the agency's Democrats.

Biden, NATO Stress Threats From China and Russia

BRUSSELS-President Biden and NATO allies warned about China's global influence and called Russia a threat to European and Atlantic security, as the U.S. leader sought to marshal democratic nations against autocracies and bolster an alliance jolted by broadsides from his predecessor.

Despite an atmosphere of renewed comity among allies, disputes simmer over how to balance new threats from China against more traditional ones from Russia and how to address threats in new domains including cyber and space. Turkey's increasingly discordant role in the alliance also hung over the gathering.

After Apple Subpoenas, Justice Department Rethinks Policies on Getting Lawmakers' Records

WASHINGTON-The Justice Department will bolster its procedures for obtaining records from members of Congress, Attorney General Merrick Garland said Monday, after it emerged that the agency during the Trump administration secretly seized data on the communications of Democrats on the House Intelligence Committee.

Mr. Garland said he directed his deputy, Lisa Monaco, "to evaluate and strengthen the department's existing policies and procedures for obtaining records of the legislative branch."

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

(END) Dow Jones Newswires

June 15, 2021 06:20 ET (10:20 GMT)

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