For once, investors are betting big on Europe’s leaders


To say market expectations for the proposed European Union recovery fund are high is a bit of an understatement.

Since the initial Franco-German proposal for joint debt issuance was announced on May 18, the Stoxx Europe 600
SXXP,
-0.46%

has climbed 13%, and the euro
EURUSD,
+0.17%

has zoomed from the $1.08 level to flirting with the $1.14 mark.

Importantly, yields on 10-year Italian government debt
TMBMKIT-10Y,
1.180%

have fallen from 1.85% to 1.18%.

It is true that other things have happened during that time period, as well, notably a rapid decline in Europe, particularly compared with the U.S., in the number of new coronavirus cases and deaths. But expectations for the proposed 750 billion–euro fund from the European Union are not small.

“Ever since the creation of the eurozone, the one massive, massive, problem is that there is no fiscal union,” said Daniel White, senior research and strategy manager at Canada Life Investments, in a recent interview. “This is possibly the very first step toward that resolution.”

As European leaders meet on Friday and Saturday, the key will be whether the region’s economic leaders, France and Germany, can overcome the opposition from the so-called Frugal Four, comprising Austria, Denmark, the Netherlands and Sweden.

Analysts at French bank BNP Paribas say agreement will be reached — though possibly not this weekend. They say “principles” may be reached, though another emergency summit may be required.

“We maintain that the deal will keep the essence of the Franco-German and European Commission proposals, including: disbursement over three to four years; a preponderance off grants over loans; and a split favoring the Mediterranean economies, at least on the margin,” they said.

In typical European compromise style, one compromise could be to keep the headline €750 billion figure of the fund, while lowering the long-term budget on which the fund is supposed to add.

And the fund isn’t exactly front-loaded. The EU proposal is for as little as €120 billion to be raised next year.

But the symbolism may be as important as the semantics. “As important as the fund is, we should also bear in mind the broader objective of signaling European solidarity and establishing a framework for risk sharing that could be revisited in future crises,” said Hetal Mehta, senior European economist at Legal & General Investment Management.

By Monday, markets may have rendered a verdict.

“Expect an overt thumbs-up or thumbs-down by eurozone investors on Monday, depending on what [the weekend] meeting concludes,” said Chris Bailey, European strategist at Raymond James.



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ASML sticks to 2020 outlook as net profit rises


An employee walks past an ASML logo, a Dutch company which is currently the largest supplier in the world of semiconductor manufacturing machines via photolithography systems in Veldhoven on April 17, 2018.
They call it “the shrink” — it’s the challenge of how to pack more information onto the microchips which power everything from our phones to our computers, even our coffee machines. And pushing today’s boundaries of science and technology is the Dutch company ASML, which since its foundation in 1984 has quietly become a world leader in the semiconductor business.
/ AFP PHOTO / EMMANUEL DUNANDEMMANUEL DUNAND/AFP/Getty Images


emmanuel dunand/Agence France-Presse/Getty Images

ASML Holding NV said Wednesday that net profit for the second quarter rose sharply, driven by higher sales, and that its growth outlook for 2020 remains unchanged relative to the start of the year despite the coronavirus pandemic.

The Dutch maker of semiconductor equipment
ASML,
+0.36%

ASML,
+2.11%

made a quarterly net profit of 751 million euros ($856.2 million) compared with EUR476 million for the year-earlier period.

Net sales for the second quarter rose to EUR3.33 billion from EUR2.57 billion a year before, ASML said. The company had previously said revenue it wasn’t able to recognize in the first quarter would shift to the second and third quarters.

ASML shipped nine extreme ultraviolet lithography, or EUV, systems–its most advanced technology–in the quarter. The company said its operational capabilities are now largely back to normal.

The company, which hadn’t provided guidance for the second quarter in light of uncertainty caused by the pandemic, said it expects sales for the third quarter to be between EUR3.6 billion and EUR3.8 billion, with a gross margin of between 47% and 48%. In the second quarter, ASML’s gross margin was 48.2%.

“Our 2020 growth expectations are largely unchanged relative to our view at the start of the year,” ASML President and Chief Executive Peter Wennink said.

ASML said it has agreed to acquire Berliner Glas, a privately held manufacturer of ceramic and optical modules. Financial details of the deal won’t be disclosed, it said.



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Tucker Carlson lashes out at those who exposed writer’s racist posts


Tucker Carlson, host of “Tucker Carlson Tonight ” on Fox News.


AP

NEW YORK — Fox News’ Tucker Carlson said Monday that his former writer who posted racist comments online was wrong but criticized “ghouls now beating their chest in triumph” after his staffer’s resignation.

“When we pose as blameless in order to hurt other people, we are committing the gravest sin of all,” the Fox host said on “Tucker Carlson Tonight.”

Carlson, who said the online commentary by Blake Neff had no connection to his show, said he would be taking the rest of the week off to go trout fishing.

Neff resigned Friday after CNN reported that he used the pseudonym CharlesXII to post bigoted remarks about Black and Asian people on the online forum AutoAdmit. He also repeatedly mocked a woman about her dating life.

Fox News Media CEO Suzanne Scott and President Jay Wallace said Saturday in a memo to staff that the company “strongly condemns this horrific racist, misogynistic and homophobic behavior.”

Neff began working on “Tucker Carlson Tonight” in 2016 and was known as Carlson’s top writer. Neff previously worked as a reporter for the conservative news outlet The Daily Caller, which Carlson co-founded.

The Dartmouth College graduate was recently written about in the college’s alumni magazine, saying about Carlson that “anything he’s reading off the TelePrompter, the first draft was written by me.” He said he and Carlson “see eye-to-eye on most issues.”

Carlson addressed the story toward the end of his show Monday, noting that Neff was horrified and ashamed by the story.

“What Blake wrote anonymously was wrong,” Carlson said. “We don’t endorse those words. They have no connection to the show. It is wrong to attack people for qualities they cannot control. In this country, we judge people for what they do, not for how they were born.”

He added, though, that “we should also point out to the ghouls now beating their chests in triumph at the destruction of a young man that self-righteousness also has its costs.

“We are all human,” Carlson said. “When we pretend that we are holy, we are lying. When we pose as blameless in order to hurt other people, we are committing the gravest sin of all. And we will be punished for it. There’s no question.”

Carlson joined Fox’s prime-time lineup in 2016 and has made several controversial comments. He has said immigration makes the country dirtier and, following a mass shooting in 2019 by a man who targeted Latinos, said white supremacy was “not a real problem” in America.

He has been sharply critical of the Black Lives Matter movement, saying “they flood the street with angry young people who break things and they hurt anyone who gets in their way.”

Last week, he took on Sen. Tammy Duckworth, an Illinois Democrat who lost two legs in Iraq, calling her a “deeply silly and unimpressive person.”

On many nights lately, he’s been the most popular host on cable news, routinely drawing more than 4 million viewers a night, and he has had one of the top-rated shows in all of television.

Yet he’s seen an exodus of prominent national advertisers. Monday’s show featured three ads from Fox fan Mark Lindell and his MyPillow.com site, as well as ads touting Bible bedtime stories, medicine to cure toe fungus and a website selling coronavirus masks.

MarketWatch parent News Corp.
NWSA,
-0.25%

and Fox News parent Fox Corp.
FOX,
-1.33%

share common ownership.



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Dow ends 360 points lower but Nasdaq notches 26th record of 2020 as investors find safety in tech


U.S. stocks closed mostly lower Thursday, but off the low of the day, as investors sought safety in technology and tech-related investments amid rising cases of coronavirus in states like Arizona and Florida.

A 7-2 Supreme Court decision ruling that a New York prosecutor could have access to President Donald Trump’s tax returns, also was parsed by Wall Street.

The Dow Jones Industrial Average closed 361.19 points, or 1.4%, to end at 25,706.09, but had been down by as many as 544 points at the day’s low. The blue-chip index was weighed down by component Walgreens.

The S&P 500 index lost 17.89 points, or 0.6%, at 3,152.05, after touching an intraday low at 3,115.70. The Nasdaq Composite Index resumed its advance following a stint in negative territory, with the tech-laden index closing up 55.25 points, or 0.5%, at 10,547.75, marking its second record in a row and its 26th of 2020.

The Nasdaq-100 index
NDX,
+0.82%
,
consisting of the largest companies within the Nasdaq by market value, closed up 0.8% at 10,754.59, while the small-cap Russell 2000 index
RUT,
-1.99%
,
more sensitive to the economic outlook, finished off 2% at 1,398.92.

What’s driving the market?

It was a bumpy ride for stocks Thursday, with investors clutching for a handful of technology stocks amid resurgent concerns about the shape of the economic recovery from the COVID-19 pandemic that continues to wreak havoc on the domestic economy.

Investors are betting that large-cap tech names will be the clear winners in the aftermath of the viral pandemic, supported by a heavy dose of stimulus by the Federal Reserve and the U.S. government.

Stocks may have taken a leg lower late-morning after the Supreme Court ruled 7-2 that the president lacks immunity to withhold his tax returns from prosecutors. It was a bit of a “knee-jerk” reaction, said Joe Saluzzi, co-manager of trading at Themis Trading.

“Markets are a bit more friendly to the president and his policies,” Saluzzi said in an interview, “so anything that’s seen as negative to him might provoke a tiny reaction. “

The moves come after a report on weekly jobless claims showed that another 1.3 million Americans filed for first-time employment benefits in the most recent week, below the 1.4 million forecast in the MarketWatch survey, and down from 1.43 million in the prior week.

That keeps intact a decelerating trend since peaking last March, but still marks the 15th straight week of claims of at least a million.

“Initial claims remain very high and the improvement since late March has almost come to a halt,” wrote analysts at UniCredit in a daily research note. “The re-imposition of restrictions in several states facing growing numbers of new COVID-19 cases could have already had an effect,” the analysts said.

The jobless claims report came about a week after the monthly nonfarm-payroll report showed that U.S. economy regained 7.5 million jobs in May and June. That pales compared with the 22 million jobs lost during the first two months of the pandemic.

Against that backdrop, infections derived from the novel strain of coronavirus haven’t abated. Bloomberg News reported that Florida saw records in both new hospitalizations and deaths, while Arizona added 4,057 new cases.

Overall, the U.S. reported more than 58,000 new cases on Wednesday, according to data compiled by Johns Hopkins University, down slightly from the previous day. The country’s death toll stands at more than 132,309.

During a podcast with the Wall Street Journal on Wednesday, Dr. Anthony Fauci, the foremost expert on infectious diseases in the U.S., said that we remain in the throes of the first wave of the deadly pandemic.

“We have never gotten out of the first wave,” he said. “So I wish we would stop talking about waves and just look at the reality of where we are right now. ”

Indeed, cases in California, Texas and Florida, hot spots in this resurgence, also hit new daily record highs on Wednesday.

That said, Florida Gov. Ron DeSantis has encouraged Walt Disney Co
DIS,
+0.12%
.
to proceed with its phased plan to reopen its theme parks starting on Thursday and through July 15. In New York, indoor shopping malls outside of New York City are eligible to reopen Friday, New York Gov. Andrew Cuomo said.

Meanwhile, Treasury Secretary Steven Mnuchin told CNBC during an interview on Thursday that the Trump administration supports a narrower aid package for Americans hurt by the pandemic. Mnuchin said that the White House backs a further extension of the Paycheck Protection Program, which has been extended to Aug. 8, and stimulus checks for individuals but at lesser level than the initial phases of recovery aid.

“The market has priced in the reality that virus is something we have to live with, mortalities are under control, and we’re not going back to a full societal lockdown,” said David Bahnsen, chief investment officer of Newport Beach, Calif.-based The Bahnsen Group, with over $2.25 billion in assets. 

“The market’s much more focused on the Fed,” Bahnsen said in an interview, “which is not necessarily a good thing but it’s sure hard for the market to form an opinion against risk assets with the liquidity and tight spreads that the Fed has produced.” 

Check out: Coronavirus tally: Global cases of COVID-19 top 12 million; 549,846 deaths and 38 U.S. states still see rising cases

Which stocks are in focus?

  • Shares of Bed Bath & Beyond
    BBBY,
    -24.49%

    sank 24.5% after the retailer said it would close 20% of its stores.

  • U.S.-listed shares of Hexo Corp.
    HEXO,
    +5.93%

    rose by about 6% Thursday, after the Canada-based cannabis company said it would start selling medical cannabis in Israel, marking the first time its medical cannabis products will be available outside of Canada.

  • Shares of Allegiant Travel Co.
    ALGT,
    -7.68%

    slid 7.7% even though the company said its bookings averaged $4 million a day, “exceeding” its expectations.

  • Tesla Inc.
    TSLA,
    +2.07%

    shares powered 2.1% higher on the back of a Wedbush analysis suggesting the car company may see a “snapback of demand.”

  • Shares of Harley-Davidson Inc.
    HOG,
    +0.62%

    rose 0.6% Thursday after the motorcycle maker disclosed that it will cut about 14% of its workforce as part of a restructuring, and said Chief Financial Officer John Olin is stepping down, effective immediately, after 10 years in the role.

  • Walgreens Boots Alliance
    WBA,
    -7.75%

    stock closed down nearly 8% after the pharmacy chain said it would cut 4,000 jobs.

  • Shares of Wells Fargo & Co.
    WFC,
    -2.07%

    fell 2.1% on reports that the bank is seen cutting thousands of jobs.

How are other assets performing?

West Texas Intermediate U.S. crude futures for August delivery fell by $1.28, or 3.1%, to settle at $39.62 a barrel on the New York Mercantile Exchange, as virus concerns dogged demand on the New York Mercantile Exchange. In precious metals, August gold futures
GOLD,
-0.46%

fell $16.80, or 0.9%, to settle at $1,803.80 an ounce, after hitting its highest level since Sept. 2011 on Wednesday.

The 10-year Treasury note yield was down fell 3.6 basis point to 0.617%, around its lowest level since May 14. Bond prices move inversely to yields.

The greenback rose 0.4% against a basket of its major rivals, based on trading in the ICE U.S. Dollar Index. 

In European equities, the Stoxx Europe 600 index closed 0.8% lower, and London’s FTSE 100 fell 1.7%. In Asian markets overnight, China’s benchmark CSI 300 Index gained 1.4%, extending its weekly rally. Hong Kong’s Hang Seng Index rose 0.3%.

See also: ‘The market isn’t pricing in an all-clear on the economy,’ say BofA analysts, who say the S&P 500 will end the year at 2900



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My biggest money mistake changed me forever


“Money makes the world go round”—and that means we’re constantly making financial decisions. Almost inevitably, some go awry. Like everyone else, I’ve made a lot of financial mistakes over the years. Here are some I wish I could take back.

When I was age 23, I graduated from college with a history degree. It wouldn’t take long for me to realize it was a mistake. Early in my career, I was passed over three times for a promotion because I didn’t have a business degree. Tired of hearing the same response, I went back to school part-time and earned an MBA. Result: I lost the chance not only to draw a larger paycheck, but also to save more in my 401(k) and elsewhere during those early years.

Just as the stock market started to fall in 2000, I followed the advice of a financial talk radio personality and took a significant position in a tech-heavy exchange-traded index fund that’s now known as Invesco QQQ. The fund fell from my $71 average share price to just $20. It took many years for the QQQ to reach my breakeven share price.

During the 2000 bear market, I also failed to diversify my bond portfolio. After watching my stock portfolio get hammered, I panicked and sold the bonds at a loss when they started to lose value.

I received a phone call one day from the publisher of a magazine that I subscribed to. The sales representative talked me into forking over $350 for a new five-year subscription. It turned out the call wasn’t from the publisher, but from some outfit that was selling magazine subscriptions. Even though I complained to the Better Business Bureau, I lost my money and never received a single magazine issue. The company eventually filed for bankruptcy. Although it wasn’t a huge financial loss, it taught me an important lesson about doing financial transactions over the telephone.

Last year, I spent $10,000 repairing an 11-year-old car with 125,000 miles on it. I should have put that money toward a new or certified preowned car. Instead, I’m stuck driving an old, unreliable car during a pandemic.

But the money decision I regret the most was small in monetary value, but it had an emotional and psychological effect that haunts me to this day. After I graduated from college, I moved to San Diego, where I met another young man named Jim Evans. Jim and I became close friends. We worked for the same company, hung out together and even double-dated on a few occasions.

One day, a few employees were taking up a collection for Jim and his new bride Cheryl, who was pregnant with their first child. The money was to go toward a baby shower gift. I was more than happy to contribute and I signed the card, just like the other employees.

A few days later, Jim approached me and said, “I bet you gave a lot of money toward the gift.” After his comment, I realized I’d made a terrible mistake. I shouldn’t have contributed to a group gift, but instead bought Jim and his wife a gift by myself. I had treated Jim as if he were just another coworker, rather than one of my best friends. It was not only a terrible money mistake, but also a terrible relationship mistake. When you combine those two elements, it can be devastating—and my friendship with Jim was never the same.

After 41 years, I still feel terrible about how I handled that situation. Sometimes, I search online for information about Jim, hoping I could track him down and somehow erase the bad memory from my mind. I know it’s nearly impossible to find someone with a common name like Jim Evans, but I still try. One day, I was talking to a friend down at the gym. He was telling me about his son, a lawyer who works for the federal government. Since Jim eventually became a U.S. border control officer, I had this crazy idea that maybe his son could help me find him. No luck.

After all these years, I’ve pretty much given up trying to track Jim down. As far as I know, he might have moved to another state or even died. But this incident with Jim still influences how I handle my money. Every time there’s money coupled with friends and family, I make my intentions clear and I try to make sure there are no hard feelings.

This column originally appeared on Humble Dollar. It was republished with permission.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. His previous articles include Anybody’s GuessDon’t Count on Me and Don’t Go It Alone. Follow Dennis on Twitter @DMFrie.





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