Market Wraps
Watch For:
Flash PMIs, Weekly Export Sales
Today’s Top Headlines/Must Reads:
– Central-Bank Action Finally Cooling Global Economy, Data Indicate
– Where’s the Recession We Were Promised?
– Chemical Makers, Tool Suppliers Can Now Get Chips Act Money
– Twitter Shows ‘Strong Willingness’ to Comply With Digital-Content Law, EU Regulator Says
Opening Call:
Stock futures were lower on Friday on concerns that global interest-rate hikes could push the world economy into recession.
A clutch of overseas central banks have raised borrowing costs in recent days, while making the case for rates to keep rising to slow inflation. The Federal Reserve, meanwhile, said its inflation-fighting campaign had further to run.
The moves bolstered confidence among investors that central banks will get inflation under control, but raised worries that doing so will cause a downturn.
Overseas stocks were mixed. Europe’s Stoxx 600 inched higher. In Asia, the Shanghai Composite Index retreated 1.3% and Japan’s Nikkei 225 lost almost 1.5%.
Pre-Market Movers
3M agreed to pay up to $12.5 billion to settle lawsuits that said drinking water was contaminated by “forever chemicals” made by 3M. Shares rose 4.2% in premarket trading.
ADRs of GSK rose 5.5% after the British drug maker announced a settlement of the first case set to go to trial over the company’s blockbuster heartburn medication Zantac.
Siemens Energy withdrew its fiscal-year profit guidance and said it could cost upward of 1 billion euros, equivalent to around $1.1 billion, to fix issues related to wind-turbine component failures in its Siemens Gamesa subsidiary. Shares fell more than 30% in European trading, following a 14% selloff in U.S.-listed shares Thursday.
Smith & Wesson Brands gained 8.5% in premarket trading after the firearms maker reported fiscal fourth-quarter earnings and sales that beat expectations and raised its quarterly dividend by 20%.
Virgin Galactic shares dropped 17% premarket after the company said in a regulatory filing it was seeking to raise $400 million by selling shares.
Forex:
The dollar strengthened broadly after Jerome Powell said interest rates were likely to rise further, noting that inflation and economic activity haven’t slowed as much as many officials had anticipated this year.
Thursday’s existing home sales data came in better than expected, “adding to the optimism that the U.S. real estate market could be doing better after months of negative pressure,” Swissquote said.
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The euro fell to a one-week low against the dollar after weaker-than-expected purchasing managers’ index surveys, with the HCOB flash eurozone composite index, falling to a five-month low of 50.3 in June.
The individual reading for France was particularly weak, with the composite PMI dropping to 47.3, well below the 50 level which signals a contraction in activity.
Energy:
Crude futures fell for a second day in Europe as higher interest rates globally threatened to weigh on demand.
Bigger-than-expected rate hikes in the U.K. and Norway have added to hawkish comments from Powell. Higher rates increase the cost of holding oil and are pushing producers to sell off their stocks, ANZ said.
Coupled with this, easing inflation is reducing investors’ appetite for commodities, which typically are seen as an inflation hedge, the bank added.
Metals:
Base metals were weaker with gold flat in early London trade, as a hawkish outlook from the Fed continued to boost haven assets.
“Gold prices fell sharply on [Jerome] Powell’s comments on interest rates to the Senate Banking Committee,” ANZ Research said.
“The prospect of two further rate hikes pushed Treasuries lower while the dollar gained, hurting investor demand for the precious metal,” it added.
ANZ said that the market is now pricing in a recession, something which should boost gold demand.
Today’s Top Headlines
Ford Prepares New Round of Layoffs for U.S. Salaried Workers
Ford Motor is preparing to initiate another round of layoffs in the coming weeks, according to people familiar with the matter, the latest in a broader effort by the automaker to streamline operations and reduce costs.
The layoffs, expected to mostly include U.S. salaried workers, would be one of several that Ford has initiated in less than a year and could be announced as early as next week, some of the people said.
3M Settles ‘Forever Chemicals’ Litigation for Up to $12.5 Billion
3M agreed to pay up to $12.5 billion to settle hundreds of lawsuits brought by cities that said their drinking water was contaminated with “forever chemicals” the company made for decades.
The tentative national class-action settlement in a landmark environmental fight involving PFAS chemicals in firefighting foam was reached Thursday. 3M will pay between $10.5 billion and $12.5 billion, and the settlement will cover public water systems across the U.S., plaintiffs’ attorneys said.
Eurozone Economy Loses Momentum in June, PMIs Suggest
Business activity in the eurozone weakened in June and though it still eked out growth for a sixth straight month, the loss of momentum points to a struggling economy, data from a purchasing managers’ survey showed Friday.
The HCOB Flash Eurozone Composite PMI Output Index-which gauges activity in the manufacturing and services sectors-fell to a five-month low of 50.3 in June, from a downwardly revised 52.8 in May.
Japan Consumer Prices Rose at Slightly Slower Pace in May
TOKYO-The pace of Japan’s consumer inflation slowed slightly in May due to declines in electricity prices.
Overall consumer prices rose 3.2% from a year earlier in May, compared with a 3.5% increase in April, government data showed Friday.
Trump Prosecutors Struggled Over Motives. Then They Heard the Tape.
WASHINGTON-Justice Department and FBI officials disagreed back in August about whether their investigation into the handling of sensitive documents justified the search of Donald Trump’s Mar-a-Lago resort. Fewer officials had doubts earlier this month, when prosecutors took an even bolder step: asking a grand jury to indict the former president on 37 counts.
What turned the tide was an audio tape and other evidence investigators confirmed around February from meetings Trump held almost two years earlier and a thousand miles from the former president’s Palm Beach, Fla., resort, according to people familiar with the matter.
Biden Hails Stronger U.S. Ties to India in Meeting With Modi
WASHINGTON-President Biden said U.S. ties to India were strengthening rapidly, as he concluded a round of talks with India’s leader in which the two countries announced defense deals aimed at weaning New Delhi off arms purchases from Russia.
At a news conference at the White House with Indian Prime Minister Narendra Modi, Biden said India would invest more than $2 billion in state-of-the-art manufacturing in the U.S., as well as Indian purchases of U.S. drones and the joint production of jet-fighter engines.
Drone Deal Will Help India Track Chinese Troops on Disputed Border
NEW DELHI-In the far reaches of the Himalayas, drones sweep across the sky on a high-priority mission for India: scouring the vast, rugged terrain below for Chinese movement along the border of the two countries.Until a few years ago, India relied largely on human patrols to watch the disputed boundary. But that was a different, less-fraught era of relations between the neighbors. A deadly 2020 confrontation between their security forces jolted New Delhi and cast a chill over ties, driving both sides to increase border deployments of troops, weapons and surveillance equipment.
India plans to purchase upgraded MQ-9B drones in a transaction valued at roughly $3 billion. The deal was announced by the U.S. and India Thursday in Washington, during Prime Minister Narendra Modi’s first state visit to the U.S.
Source: Dow Jones Newswires