UKX FTSE 100 Index

MARKET WRAPS

Watch For:

Germany GfK survey; France consumer confidence survey; Italy industrial turnover & orders; ECB forum on central banking; G7 summit concludes; NATO Summit opens; no major earnings scheduled

Opening Call:

Europe faces a negative open as a strong batch of economic data appeared to contradict signs of a slowing U.S. economy. In Asia, stocks were mostly lower, Treasurys, oil and gold all rose, while the dollar was little changed.

Equities:

European stock futures were weaker heading into Tuesday's opening session, tracking global losses.

U.S. stocks slipped on Monday, losing some momentum, in what traders described was a quiet day, with low volumes and investors in a holding pattern.

Wall Street struggled to hang on to opening gains after data showed durable-goods orders rose by 0.7% in May, versus forecasts for a 0.2% rise, and pending home sales rebounded last month, reversing a six-month decline. Investors were caught between recession and inflation fears.

"We're going to be dealing with this push-and-pull for some time to come now," said Dan Eye, chief investment officer at Fort Pitt Capital Group.

"I don't think we can expect to see a situation where inflation comes down significantly without a pretty significant slowdown in economic growth."

Stocks to Watch:

Volkswagen is close to selling a minority stake in its U.S. electric-vehicle charge business to an arm of Siemens, a deal that would value the network at more than $2 billion, according to people familiar with the matter.

Read more here.

Forex:

The dollar was little changed in a generally downbeat Asian session.

"The FX market continues to be focused on the probability of a global recession and central banks' policy tightening in response to high inflation. Hence, it should be data driven in the coming week," said Barclays.

Commonwealth Bank of Australia said volatility may pick up in the run-up to the end of the quarter and the half year on Thursday, as fund managers rebalance their portfolios.

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Societe Generale said investors should refrain from buying the euro while there is heightened uncertainty over the Russia-Ukraine conflict. The war represents a "huge negative tail risk" due to Europe's dependency on Russia's natural gas, SocGen said.

The European Central Bank faces a difficult task in taming inflation while still supporting the economy and the bond market.

"However, if in 12 months time we look back and the economic impact of the war has faded, the ECB has raised rates, inflation is lower and peripheral spreads are stable, the euro ought to be significantly stronger."

SocGen expects EUR/USD to rise to 1.20 by the second quarter of 2023.

Bonds:

Treasury yields eased back slightly with stocks mostly lowrer in Asia.

Yields rose for the second consecutive session on Monday after May durable goods orders topped expectations and auctions of new supply met tepid demand.

GDP data is coming up on Wednesday and PCE inflation on Thursday, with investors looking for signs of how far the Fed will need to go to fight rising prices.

"The process of translating higher policy rates into a cogent forecast for growth has become particularly challenging given the realities of a Fed poised to push target funds to levels not seen since at least 2008," wrote BMO Capital Markets.

"Investor sentiment has shifted quickly in terms of the outlook and we're increasingly of the mind that the peaks for U.S. rates have been established."

Read: Rising Rates, Tech Pullback Pummel Convertible Bonds

Energy:

Oil prices pushed higher in Asia, extending Monday's gains as better-than-expected U.S. economic data eased demand worries.

CBA said increasing signs of supply tightness were also lifting crude prices. Two major producers, Saudi Arabia and the U.A.E., appear to be very close to near-term capacity limits, while political unrest may curtail supply from producers like Ecuador and Libya, it said. Discussions on the G-7's proposed price cap on Russian oil continue to remain in focus, CBA added.

Traders continue to await the Energy Information Administration's release of the weekly U.S. petroleum supply report. The data were due out last Thursday but delayed indefinitely by the EIA. On Monday, the government agency said it discovered a "voltage irregularity" on June 17 that caused hardware failures on two of its main processing servers.

"If the data continues to be delayed, the supply side uncertainty could fuel further gains in the sessions ahead," said Sevens Report's Tyler Richey.

Metals:

Gold futures edged higher as investors debate whether the peak in Treasury yields is already in place.

While rising yields are providing near-term pressure on bullion, "gold will 'pop up' once Wall Street is convinced they have nailed down how high the Fed will take rates and rally on global recession fears," said OANDA's Ed Moya.

A spate of eurozone inflation data expected later in the week could weigh on the yellow metal, since hotter-than-expected inflation would increase the pressure on the ECB to raise interest rates aggressively.

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Copper prices weakened on possible position adjustment ahead of the end of the quarter and the first half, and they could face further weakness due to recession risks.

Key commodities such as industrial metals tend to collapse during recessions or periods of sharp reductions in economic growth, said TD Securities.

Copper's historical peak-to-trough declines over the last several economic cycles were in 33%-65% range and the relative tilt toward oversupply owing to weakening demand, higher real rates, reduced liquidity and higher volatility are key drivers.

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Iron ore futures rose, supported by upbeat economic data.

According to data from China Real Estate Information, home sales in Shanghai and Shenzhen rose last week, said ANZ Research. Iron ore is used to make steel, for which the housing construction sector is typically a major consumer.

TODAY'S TOP HEADLINES

Consumer-Staples Stocks Are Bright Spot in Bleak Market

Almost everything has fallen in the stock market this year. Consumer-staples stocks are bucking the trend.

Shares of companies selling staples such as beer, chocolate and canned soup have raced past the broader market in 2022. Molson Coors Beverage Co. is up 19% for the year, while Hershey Co. has risen 14% and Campbell Soup Co. has gained 11%. That is compared with the S&P 500, which has fallen 18%.

Rising Rates, Tech Pullback Pummel Convertible Bonds

The collapse of a pandemic-era boom in bonds that can turn into stocks is punishing investors and pressuring some rapidly growing companies to start delivering profits.

New sales of so-called convertible bonds have all but dried up, and the ICE BofA U.S. Convertible Index has slid about 18% this year, roughly matching the S&P 500.

Volkswagen Nears Deal to Sell Stake in Electrify America to Siemens

Volkswagen AG is close to selling a minority stake in its U.S. electric-vehicle charge business to an arm of Siemens AG, a deal that would value the network at more than $2 billion, according to people familiar with the matter.

A sale of a stake in Volkswagen's Electrify America LLC would generate additional funding as part of a plan to more than double the number of EV charging stations that Electrify America operates across the U.S. and parts of Canada to 1,800 by 2026. Reston, Va.-based Electrify America also offers EV charging stations for use at home.

Russian Missiles Hit Ukraine Shopping Mall, Zelensky Says, as G-7 Leaders Pledge More Aid

Russian missiles hit a shopping mall in central Ukraine on Monday, President Volodymyr Zelensky said, as Russia's forces sought to surround the last major city in the eastern Luhansk region still under Kyiv's control despite Western efforts to squeeze Moscow.

The strike came as Mr. Zelensky, in a virtual address to Group of Seven leaders meeting in Germany on Monday, made clear he wants to shorten the war, according to U.S. national security adviser Jake Sullivan, and the U.S. said it would provide more support for Ukraine's military.

Zelensky Asks for Western Help to Push Russia Out of Ukraine Before Winter

TELFS-BUCHEN, Austria-Ukrainian President Volodymyr Zelensky appealed to Group of Seven leaders for more support from allies to push Russia out of newly conquered territories, according to officials present for the video address, as the U.S. said it would provide more military aid for Ukraine and impose new sanctions against Moscow to try to turn the tide of the war ahead of the winter months.

Mr. Zelensky told the G-7 leaders, who are meeting in the German Alps, that the harsh Ukrainian winter would make it more difficult for his troops to defend their positions and maintain supply lines to the front, which stretches over 2,000 kilometers, about 1,200 miles, from the north to the south of the country, officials said. Ukraine aims to push Russia back to the separation line before the February invasion, Mr. Zelensky said Monday, according to these officials.

Write to paul.larkins@dowjones.com

Expected Major Events for Tuesday

06:00/DEN: May Retail Sales Index

06:00/GER: Jul GfK consumer climate survey

06:00/SWE: May Retail sales

06:00/SWE: May Foreign trade

06:45/FRA: Jun Consumer confidence survey

07:00/SVK: May PPI

08:00/ITA: Apr Industrial turnover & orders

08:00/AUT: Jun Austria Manufacturing PMI

10:00/IRL: May Retail Sales Index

12:00/HUN: Jun Hungarian interest rate decision

23:01/UK: Jun Shop Price Index

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

(END) Dow Jones Newswires

June 28, 2022 00:14 ET (04:14 GMT)

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