Market Wraps
Watch For:
Canada Industrial Product Prices for July; Earnings from Deere, Estée Lauder, Palo Alto Networks
Today’s Top Headlines/Must Reads:
– Investors Fear China’s ‘Lehman Moment’ Is Looming
– Is China’s Data Manipulated, or Flawed? Maybe Both
– China Evergrande Seeks U.S. Court Approval for $19 Billion Debt Restructuring
– Hawaii Fires Turn a Safe Investment into a Big Risk
Opening Call:
Stock futures on Friday were trading near the lowest closing value in about two months, as investors reacted to rising bond yields and China’s economic turmoil.
The big story in markets is the deteriorating value of longer-duration government bonds, with the 10-year yield near its highest level since 2008, and the 30-year yield at its highest level in more than a decade.
The expiration of key options contracts may add volatility, particularly were the S&P 500 to decline to the 4,320 level, according to Nomura.
Attention was also on China after builder Evergrande filed for bankruptcy protection in U.S. courts, and the People’s Bank of China stepped in to help its beleaguered currency.
Overseas stocks declined, with Hong Kong’s Hang Seng Index falling roughly 2%, while stocks in Germany, the U.K. and France also sold off.
Pre-Market Movers
Applied Materials’s third quarter earnings topped Wall Street expectations as did its fourth-quarter outlook, sending shares up 2.8% in premarket trading.
Bill Holdings said it expects fiscal 2024 revenue of $1.29 billion to below $1.31 billion, below analysts’ expectations. Shares declined 4.5%.
Farfetch fell 38% after the company’s second-quarter sales of $572 million missed analysts’ expectations of $650 million.
Keysight Technologies issued a weaker-than-expected fiscal fourth-quarter outlook and the stock was falling 11%.
Ross Stores posted better-than-expected second-quarter earnings and raised guidance. The stock was up 5.3%.
Forex:
The euro is currently stuck in a range against the dollar around $1.09 but risk aversion, rising U.S. bond yields and a strengthening U.S. economy should cause the dollar to rise, Danske Bank said.
“We still think the mix of U.S. outperformance, rising U.S. yields and declining equities seem to be a good cocktail for further dollar appreciation.”
ING said the euro has proved resilient, despite growing concerns about China’s economy, which should enable it to keep within a range against the dollar.
“After a week that has brought to the table some serious concerns about China’s near and medium-term outlook, it is quite a success for EUR/USD to be trading around 1.0900.”
The euro should “weather this Chinese turmoil without taking much damage, ” although these worries will also delay any substantial rally against the dollar, ING said.
“EUR/USD may keep trading in narrow ranges for now, with a modestly bearish bias to the 1.0850 level.”
Energy:
Oil prices edged higher in early European trading, though set to lose more than 3% this week as weak demand helped pressure commodities across the board.
Tightening supply from OPEC+ have kept a floor under prices, according to BMI, but for now there is also limited upside.
“Global economic growth is slowing, the U.S. looks set to enter a recession next year and the Mainland Chinese economic recovery is under strain,” BMI said, adding that the market is unlikely to rally unless there is significant supply side disruption.
Metals:
Base metals prices held steady while gold was higher in early London trade, as weak demand, especially from the Chinese property sector, diminishes sentiment.
“Weak manufacturing activity is dragging down metals. Softening demand is evident in that the future price is more than spot price across the sector,” ANZ Research said.
It added that the Chinese property sector in particular is looking bleak. “Despite easing monetary policy, credit growth remains lackluster. Investments in real estate is faltering due to slumping property sales and prices.”
Today’s Top Headlines
The Ozempic Craze Could Put These Companies on a Crash Diet
The obesity epidemic has taken a horrible toll on Americans, and not just their health: It costs the country about $200 billion a year through health-related problems such as diabetes and heart disease.
We could now be at a turning point, with a new class of medications helping people lose serious amounts of weight. For industries whose bottom lines are directly tied to America’s love of sugary drinks and fatty foods, that could be a problem. A few affected companies have taken the attitude of “If you can’t beat ’em, join ’em” and been richly rewarded by investors.
Outback Steakhouse Owner Draws Activist Investor
Starboard Value, whose victory in a proxy fight with Darden Restaurants nearly a decade ago is the stuff of Wall Street legend, has another restaurant chain in its sights: Outback Steakhouse owner Bloomin’ Brands.
Starboard has built a stake of more than 5% in Bloomin’ Brands, making it one of the company’s top-five shareholders, according to people familiar with the matter.
Traders brace for explosion of volatility Friday as $2.2 trillion in stock options expire
It’s that time again: monthly stock-market options for August are set to expire on Friday, potentially spurring more volatility in stocks after a bruising three-week run.
U.S. stock option contracts with a notional value of $2.2 trillion are set to expire, according to Rocky Fishman, founder of newly formed strategy firm Asym 500 and a former head of index derivatives strategy at Goldman Sachs Group. Notional value measures the market value of the stocks, indexes and exchange-traded funds controlled by the options, although the premiums paid by holders of the options are worth much less.
UK Retail Sales Fell in July After Rain Hit Footfall – Update
U.K. retail sales fell more than expected in July, as unseasonably wet weather in the month kept shoppers away despite the summer sales season.
Retail-sales volumes ticked down 1.2% on month, a swing from the 0.6% increase in June, data from the Office for National Statistics showed Friday, weaker than expectations of a 0.4% decline in volumes from a consensus of economists polled by The Wall Street Journal.
Bitcoin remains under pressure following flash-crash of $2,000
Bitcoin prices were under pressure on Friday, hours after a mini flash-crash sent the cryptocurrency tumbling by more than $2,000 within minutes.
The sharp fall occurred around 6 p.m. Eastern on Thursday, taking the No. 1 digital currency BTCUSD down to under $26,000, from over $28,400 earlier in the session, a fall of more than 9%. Early Friday, bitcoin was trading at $26,497, a drop of 4%.
Donald Trump’s Lawyers Ask for April 2026 Trial Date for Federal Jan. 6 Case
WASHINGTON-Lawyers for former President Donald Trump asked a judge Thursday not to hold his federal trial on charges that he tried to overturn the 2020 election until April 2026, nearly a year and a half after the 2024 race in which he is the Republican front-runner.
In requesting the long delay, Trump’s lawyers cited the large volume of evidence they will have to examine-as much as 11.5 million pages of materials and testimony from hundreds of witnesses-as well as the historic nature of the case. Trump is the first president in American history accused of blocking the peaceful transfer of power to his successor.
Maui Emergency-Management Chief Resigns
A Maui County official criticized for his handling of the wildfire disaster that tore through historic Lahaina resigned Thursday, citing health reasons, officials said.
Maui Emergency Management Agency administrator Herman Andaya tendered his resignation effective immediately, according to Maui County Mayor Richard Bissen.
Source: Dow Jones Newswires