Market Wraps
Watch For:
Speeches by Fed officials Mary Daly, Loretta Mester, Raphael Bostic
Today’s Headlines/Must Reads
– A Soft Corporate-Earnings Season Poses Next Test for Stock Market Rally
– Last Mile of the Inflation Fight Will Be the Hardest
– Yellen Trip Aids Fragile Effort by U.S., China to Keep Talking
– Disney World Hasn’t Felt This Empty in Years
Opening Call:
Stock futures were under pressure on Monday ahead of crucial inflation data and the start of second-quarter earnings season.
“Markets are unable to shake of the shackles of interest rate rises which apparently have further to go, with the resilience of the U.S. economy and persistent inflation currently confirming the trend,” Interactive Investor said.
Consequently, Wednesday’s consumer price index data due will be firmly in focus for traders, analysts noted.
“U.S. inflation is expected to have fallen from 4% to around 3% in June, with a possibly uptick in the monthly data. But core inflation could prove stickier at around the 5% mark,” Swissquote Bank said.
“In all cases, softening, and ideally softer-than-expected inflation figures carry the potential of pushing the Fed hawks back. That could give quick support to the U.S. stocks which ended the first week of July, and the first week of H2, in the negative,” Swissquote added.
Not helping the mood on Monday was news out of China, where data illustrating deflationary pressures cemented concerns that the world’s second biggest economy is struggling for traction.
Such a negative narrative tends to be counteracted by accompanying hopes that the authorities in Beijing will unleash more stimulus, and so the reaction is nuanced.
Chinese stocks lost steam but Hong Kong’s Hang Seng Index rose 2.7% led by technology stocks before giving back gains after the inflation data. It was last up 0.6%.
Other global indexes declined moderately. The Stoxx Europe 600 retreated 0.2% and Japan’s Nikkei 225 edged down 0.6%.
Premarket Movers
ADRs of Alibaba fell 1.2%. The U.S.-listed shares rose 8% on Friday after China’s financial regulators levied a fine of nearly $1 billion on Alibaba affiliate Ant Group. The move signals that regulatory pressures on Ant Group and the larger Chinese tech sector could finally be drawing to a close.
Icahn Enterprises rose 4.6% after The Wall Street Journal reported that Carl Icahn and major banks finalized amended loan agreements that untie his personal loans from the trading price of the company’s shares, a key risk that was raised by short-seller Hindenburg Research.
Meta Platforms fell 0.4% as Threads surpassed 100 million users since its launch on Wednesday.
Forex:
The dollar has recovered modestly, having dropped to a two-and-a-half week low against a basket of currencies on Friday following the weaker-than-expected jobs data, but the currency’s steep falls in reaction to the data weren’t justified, Commerzbank said.
Instead, “previous dollar levels were obviously based on an overly optimistic view of the U.S. labor market,” it said.
“The fact that the U.S. jobs machine is no longer red hot but still running smoothly should come as no surprise to anyone with a realistic view of the U.S. economy, but it was a surprise to the currency market.”
Energy:
Oil prices fell in early trading, with this week’s focus on the IEA and OPEC market reports to see how demand is faring, ANZ said.
The U.S.’s plans to purchase 6 million barrels of oil for its Strategic Reserve could also add impetus for prices, ANZ added.
Metals:
Metal prices were lower as traders looked to U.S. CPI data, which will likely determine whether the Federal Reserve will stop hiking interest rates in the near term.
However, market fundamentals for metals are starting to tighten, with copper inventories in LME warehouses down 37% in June, ANZ.
Today’s Top Headlines
TPG to Buy Forcepoint Unit From Francisco Partners for $2.45 Billion
Buyout shop TPG is acquiring a business unit of software provider Forcepoint for $2.45 billion, a price tag that is more than double what technology-focused private-equity firm Francisco Partners paid for Forcepoint in 2021, people familiar with the matter said.
The firms are expected to announce the deal as soon as Monday, the people added.
Electric-Vehicle Startup Fisker Is Reborn Into a Crowded, Competitive Field
California-based Fisker Inc. is finally putting its first cars into the hands of U.S. customers, 2 1/2 years after going public amid a frenzy on Wall Street for electric-vehicle startups.
The question now: Is it too late off the starting line?
In Battle With Microsoft, Google Bets on Medical AI Program to Crack Healthcare Industry
Google is testing an artificial-intelligence program trained to expertly answer medical questions, racing against rivals including Microsoft to translate recent AI advances into products that would be used widely by clinicians.
The November release of ChatGPT, a computer program that can fluently respond to a range of queries across subjects, has sparked early experiments at health systems across the U.S. to use the underlying technology in patient care.
Snap’s Push to Tempt Creators Seems to Be Working
Snap’s efforts to lure creators and their followers back to its platform show early signs of traction, enticing popular internet personalities with a slice of the ad revenue their content generates.
The company behind the social-media app Snapchat-which previously lost creators after cutting a big payout program-started testing a new program last year that allows participants to earn a portion of revenue from the ads shown between their posts.
Janet Yellen Hails Progress in Stabilizing Rocky U.S.-China Ties
BEIJING- Treasury Secretary Janet Yellen hailed progress in stabilizing ties between the U.S. and China, as she concluded a trip that marked an improvement in tone for a relationship that has deteriorated to near historic lows in recent months.
The relationship remains volatile nevertheless, and Washington and Beijing are still far apart on core matters of national security.
Business Insurance Roiled by Climate, Inflation
Business insurance has been roiled by severe weather and inflation, the same forces disrupting home insurance markets in catastrophe-prone areas of the U.S., with companies facing tougher conditions as they try to insure their properties against disaster.
The problem of how-or even if-properties can be insured in areas at risk of wildfires, hurricanes and other damaging weather has come to the fore as several insurance companies have in recent weeks stopped writing new home insurance policies in California and elsewhere. The U.S. Treasury Department last month warned that climate risk poses a major challenge to the insurance industry.
Anywhere but China: Asia Stocks Rally Leaves the Biggest Market Behind
The shaky performance of Chinese stocks this year has been good news for other Asian markets.
China was once by far the most attractive stock market in the region for global investors. But as the world’s second-largest economy has spluttered, those investors have turned their attention elsewhere. Hong Kong’s Hang Seng Index, which includes many of the biggest mainland Chinese companies, is down more than 6% this year. Stock indexes in Japan, South Korea and Taiwan are up by double digits in percentage terms.
Five Ways the Bull Market Makes Investors Nervous
A familiar question has crept back onto Wall Street: Could this be the most-hated bull market ever?
The S&P 500 charged into bull-market territory in the first six months of 2023, marking a 20% rally from a recent low, yet investors say they can’t stop looking over their shoulders. Even after U.S. stocks overcame big risks-including repeated interest-rate hikes and a banking crisis-money managers say they aren’t convinced this rally is sustainable.
Congress Dives Back Into Fights on Spending Cuts, Military as Deadline Draws Near
WASHINGTON-Lawmakers face a stacked legislative agenda with the threat of a government shutdown looming in the fall, marking a fresh test of Republican House Speaker Kevin McCarthy’s ability to keep his conference in line and Congress functioning.
Top of mind on Capitol Hill as lawmakers return from recess this week are the annual spending bills to keep the government open, which must be enacted by the time the new fiscal year starts on Oct. 1. Other priorities include legislation authorizing military programs, updating agriculture and food-aid policy and keeping the country’s airports running, all of which must also be enacted by the new fiscal year, although Congress can also agree to temporarily extend current programs.
Amid Ukraine War and Internal Spats, NATO Seeks Show of Unity
BRUSSELS-The outcome of NATO’s annual summit, a gathering of three-dozen world leaders in the planning for months, is going down to the wire amid wrangling over what to offer Ukraine, which isn’t a member.
At issue is how much of a promise the North Atlantic Treaty Organization will make to Ukraine over its eventual membership. NATO in 2008 promised Ukraine a place at its table-eventually. Now, Kyiv’s unexpected success eroding Russia’s army and even sparking a mutiny by Russian paramilitaries has emboldened President Volodymyr Zelensky to agitate for fast action on accession.
NATO’s New Focus on China Creates Internal Tension About Mission Creep
TOKYO-NATO was created to deter Soviet tanks and missiles in Europe. Now it is also in the business of deterring China’s global ambitions, spurring concern among some members about mission creep and accusations by Beijing of inciting confrontation.
Leaders from Australia, New Zealand, South Korea and Japan-known as the Asia-Pacific Four-will attend the annual North Atlantic Treaty Organization summit meeting for the second successive year. On the agenda at the summit, set for next week in Lithuania, is increased cooperation in areas such as maritime and cybersecurity, with challenges from China front of mind.
Source: Dow Jones Newswires