EMEA Morning Briefing: Nord Stream Hopes to Push Shares Higher Again


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EU Flash Consumer Confidence Indicator, Balance of Payments, New Car Registrations; Germany PPI: UK Producer Prices, Monthly Inflation, House Price Index; Italy Balance of Payments; updates from ASML, SKF, Telia, Harbour Energy, Royal Mail, Antofagasta, Experian, Orsted

Opening Call:

Renewed risk appetite on hopes of the Nord Stream 1 reopening, should continue to support European shares on Wednesday. In Asia, the major benchmarks posted broad gains; Treasury yields extended their advance; the dollar and oil dipped; and gold was flat.


The rally in European stocks should continue early Wednesday after the major U.S. indexes posted their largest daily gains in weeks, with small caps seeing their biggest advance in 18 months.

U.S. stocks rose as investors reacted enthusiastically to a new round of corporate earnings results. Netflix gained 7% in after-hours trading as its second-quarter results showed it lost fewer subscribers than it initially expected.

Kristina Hooper, chief global market strategist at Invesco, said stocks were well-positioned for a rebound as corporate earnings reports haven’t been as gloomy as many had feared, while the easing of the dollar has added to tailwinds for U.S. stocks.

“We haven’t heard doom-and-gloom prognostications just yet,” Hooper said, describing the general tone of corporate earnings reports as the second quarter reporting season moves past the big banks.

Reports that the shuttered Nord Stream 1 gas pipeline could re-open on Thursday as planned, easing energy-supply fears, lifted European markets on Tuesday.

“…the latest rumor that the gas will indeed flow once again has provided a welcome boost for European indices, despite uncertainty over quantity,” said IG analyst Joshua Mahony.

Read: Europe Fears a Long, Cold Winter if Russia Ends Supply of Natural Gas


The dollar continued to lose ground in a mainly risk-on Asian session.

Silicon Valley Bank said the dollar has benefited recently from differences in global monetary policy as well as risk aversion, but over the past 48 hours the narrative has changed to what’s going on in Europe.

The ECB has been very slow to jump on the inflation fight but now there are rumblings of a possible 50 basis-point increase from the expected 25 bp one.

Silicon said the ECB is starting from a very low place, but the euro has staged a “notable pullback” after hitting parity with the dollar last week and could receive a further boost.

Read: China’s Central Bank Keeps Benchmark Rates Despite Rising Risks


Treasury yields added to Tuesday’s gains, as investors turn their attention to rising rates in Europe ahead of the ECB’s interest-rate decision on Thursday.

The short-term 3-month T-bill rate led Treasury yields higher on Tuesday, with the rise in 10- and 30-year yields the biggest one-day gain in more than a week.

Tradeweb noted that another section of the yield curve often associated with economic recession, the 3-month-10-year spread, was the flattest it has been since August 2020. Disappointing housing starts data stoked fears of a recession and existing home sales due later Wednesday are expected to show a monthly decline.

The recession fears have been mitigated by bank earnings, but investors keep looking for signs of investment cutbacks as corporations report quarterly results.

Other News:

Barclays has warned of troubled conditions in the Treasury market in a report Tuesday.

When looking at trading volumes across different government bond types, transaction costs and the liquidity risk premium, “we find that there has been a worsening across all three.” It noted this is happening amid high volatility and declining liquidity in the market.

Meanwhile, the Fed is allowing its footprint in the Treasury market to shrink as it ramps up the pace of its balance sheet winddown effort.


Oil was lower in Asian trade, after prices shook off early losses on Tuesday to finish higher, as tight supply concerns resurfaced following Joe Biden’s vow to take action on climate change.

Investors’ focus is on the next OPEC+ meeting, scheduled for August 3 and on China demand.

“Energy investors are warming up to the prospect of the [Chinese] government to further strengthen policy support in the second half, likely bringing forward future infrastructure projects and funding,” said SPI Asset Management.

While China’s month-over-month demand is slightly better, it is still not consuming as much as it was, SPI noted.

Other News:

The API reported inventories of crude in the U.S. rose by 1.9 million barrels in the latest week, while gasoline supplies climbed by 1.3 million.

The rather bearish results were released ahead of official inventory data from the EIA originally set for release Wednesday. Average forecasts in a WSJ survey indicate the EIA report will show crude inventories rose by 600,000 barrels from the previous week and that gasoline supplies edged higher by 200,000 barrels.


Gold futures were little changed but holding ground above $1,700 as the dollar continued to weaken.

OANDA said gold’s “inability to hold onto even modest rallies in prices, even as the dollar falls and U.S. bonds trade sideways, is a major concern. It suggests that risks remain heavily skewed towards the downside.”

OANDA has put support for the precious metal at $1,700/oz and resistance at $1,725/oz.

Copper and aluminum with notable short-covering by the top 10 participants in China, said TD Securities, based on its tracking of these participants.

This seems to add evidence to signs of a local peak in commodity liquidations, TD said.

Chinese iron ore futures extended Tuesday’s gains, with near-term sentiment likely supported by China’s plan to centralize the purchase of iron ore imports.

This is in line with the government’s other initiatives, which include boosting iron ore supply domestically and abroad as well as increasing the use of scrap steel, CBA said.

“Chinese policy has proven to be the more dominant driver of iron ore prices over the last 18 months.”



China’s Central Bank Keeps Benchmark Rates Despite Rising Risks

China’s central bank Wednesday kept its benchmark lending rates unchanged, in line with market expectations, despite rising financial risks amid slowing economic growth.

The People’s Bank of China said it held the one-year loan prime rate steady at 3.7% and the five-year rate at 4.45%, according to a statement published on its website.


Senate Votes 64-34 to Advance Chips Bill

WASHINGTON-A bipartisan bill subsidizing domestic semiconductor production cleared its first procedural hurdle on Tuesday in a 64-34 vote, even as the details of the legislation were still being worked out.

The legislation would provide roughly $52 billion in subsidies to encourage chip companies to boost production in the U.S., seen by the White House and leaders of both parties as a critical national-security need. Lawmakers worked until late Tuesday to negotiate other elements in the competitiveness package, dubbed USICA.


Europe Fears a Long, Cold Winter if Russia Ends Supply of Natural Gas

The Nord Stream pipeline that channels Russian natural gas to Europe shut down for scheduled maintenance last week, stoking fears across the continent that the Kremlin could cut off supplies in retaliation for sanctions against its invasion of Ukraine.

The reduction of gas flows to Europe is endangering the continent’s race to sock away enough fuel to ride out next winter.


India’s Rupee Touches Record Low Against Dollar

India’s rupee hit a record low on Tuesday, against the backdrop of a stronger dollar and rising aversion by global investors to owning risky, emerging market assets.

The currency crossed 80 during trading in India but closed at around 79.95, according to the Reserve Bank of India.


Truck Protests Bring Port of Oakland Close to a Standstill

Truckers protesting a new California law that toughens the definition of nonemployee drivers shut down some operations at the Port of Oakland on Tuesday, adding new disruptions to already fragile U.S. supply chains.

Ed DeNike, president of SSA Containers, which handles about 70% of the cargo entering and leaving the Port of Oakland, said truckers blocked truck gates into and out of the company’s container terminal.


Vital Russian Gas Supplies to Europe Aren’t Expected to Restart, Says European Commission

SINGAPORE-The European Union is working under the assumption that Russia’s Nord Stream pipeline won’t return to operation when scheduled maintenance ends this week, officials said Tuesday, and are working through contingency planning even as they hold out hope the gas flows will resume.

Nord Stream, the main artery for Russian gas to Europe, closed on July 11 for annual maintenance that is expected to last 10 days. Many in the West fear that Moscow might prolong the closure, possibly permanently, and deprive Germany, Europe’s industrial powerhouse, of a key ingredient for its and its neighbors’ factories.


U.K. Plans Regulation Revamp to Boost London as Financial Center

LONDON-The U.K. government said it is moving to ease rules on banks, insurers and investors to help London remain Europe’s financial hub after Brexit and revive the country’s stalling economy.

The U.K.’s new finance minister, Nadhim Zahawi, said Tuesday that the government would introduce legislation to replace hundreds of European Union financial regulations. The changes would attract investors and companies to London and “unleash the power of enterprise, boost innovation and support job creation,” he said in a speech.


Russian Threat to U.S. Elections Persists Even Amid War in Ukraine, Officials Say

NEW YORK-Russia continues to pose a cyber threat to the U.S. midterm elections despite Kremlin-linked hackers’ focus on supporting the country’s war against Ukraine, U.S. national security officials said.

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July 20, 2022 00:33 ET (04:33 GMT)

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