Market Wraps
Watch For:
Factory Orders for July
Today’s Top Headlines/Must Reads:
– How Slowing Inflation Can Hit Corporate Profits
– Utility Stocks Can’t Compete in a World Awash With Yield
– China’s Country Garden Makes Overdue Dollar-Bond Payments, Narrowly Avoiding Default
Opening Call:
Stock futures and Treasury bonds lost some ground on Tuesday after Chinese data pointed to a slowdown in services activity, fueling more concerns about global growth.
A Caixin survey showed China’s service sector expanded in August at its slowest pace in eight months, providing further evidence that the country’s post-pandemic recovery was faltering.
Read China Caixin Services PMI Fell in August
“Sentiment has turned downbeat again on China as fresh brushstrokes are painted on the picture of its slowing economy,” Hargreaves Lansdown said.
“The data has overshadowed relief that the struggling property giant Country Garden has managed to make key interest payments on its debt, reducing, for now, concerns about contagion in the financial sector. China appears to be taking one step forward, but two steps back, as optimism one day turns to pessimism the next.”
Overseas stocks mostly fell, with the Shanghai Composite Index retreating nearly 1%, and Hong Kong’s Hang Seng Index lost over 2%. Japan’s Nikkei 225 advanced slightly and Europe’s Stoxx 600 declined around 0.5%.
Premarket Movers
Albemarle raised its takeover bid for Liontown Resources to $4.25 billion in a last-ditched attempt to acquire the rival miner. Albemarle’s stock fell 1% in premarket trading.
Blackstone and Airbnb rose after S&P Dow Jones Indices said late Friday that they would join the S&P 500 on Sept. 18, replacing Lincoln National and Newell Brands. Blackstone was up 3.9%, while Airbnb rose almost 5%.
Novo Nordisk shares edged higher in Danish trading, extending its lead over LVMH Moët Hennessy Louis Vuitton as Europe’s most-valuable company. Novo Nordisk’s ADRs wavered in premarket trading.
Trip.com ADRs dropped more than 5% premarket after it posted disappointing quarterly earnings.
Forex:
The dollar rose to a three-month high against a basket of currencies as markets turned risk averse, with equities falling after the Chinese PMI services data, benefiting the safe-haven currency.
“U.S. markets reopen today after the Labor Day holiday and the dollar remains broadly firm, as reflected by the dollar index trading back above 104,” UniCredit Research said.
Investors are likely to stay mostly sidelined ahead of next week’s ECB decision, it added.
Tuesday’s data calendar gives little hope for new direction for the euro, DZ Bank Research said.
In the next few days, market attention will turn more intensively to upcoming central bank meetings, particularly ECB’s next meeting on Sept. 14, it said.
Money markets price an almost 72% probability of unchanged policy rates and 28% for a 25 basis point rate rise, according to Refinitiv data.
Bonds:
The recent volatility in Treasury yields is expected to end and yields are likely to fall in the next six to twelve months, UBS said.
Restrictive monetary policy and declining inflation are among the main reasons for expecting lower yields, it said.
The sharp rise in long-term yields, faster than the increase in short-term yields, is also “cyclical and local to the U.S.”
“Today’s high bond yields provide investors with a good opportunity to lock in currently elevated rates for an extended period.”
Energy:
Oil prices were mixed in Europe, as weak Chinese data counteracted expectations of tight supplies.
A private reading of China’s services PMI showed activity slowing in August, another negative sign about China’s struggling economy, which has been a significant drag on oil prices in recent months.
A one million barrel a day supply cut from Saudi Arabia has helped push the market into a deficit, Goldman Sachs said.
It now expects Riyadh to extend the cuts for another month this week rather than partially unwinding them, as it had previously expected.
Metals:
Base metals and gold prices were falling in early London trading, with a strong dollar and worries about more interest-rate hikes from the Fed spooking investors.
“The macro mood is mixed,” Peak Trading Research said, pointing to a “stubbornly strong” dollar.
Bond markets are pricing a roughly 40% chance of additional rate hikes in 2023, Peak said, adding that “next week’s CPI inflation data will shift those odds and move our commodity markets via the dollar and overall risk vibe.”
Today’s Top Headlines
Spotify’s $1 Billion Podcast Bet Turns Into a Serial Drama
Spotify spent more than $1 billion to build a podcasting empire. It struck splashy deals with Kim Kardashian, the Obamas and Prince Harry and Meghan Markle. It paid $286 million for a pair of podcast studios and spent $250,000 and more an episode on exclusive shows to lure new listeners.
The bet hasn’t paid off.
Chevron LNG Workers in Australia Plan Two-Week Strike
Workers at two giant natural-gas operations run by Chevron in Australia are planning a two-week strike starting Sept. 14, said Offshore Alliance, a partnership between two local unions.
The strike would begin after a week of other types of industrial action, including a number of work bans and shorter stoppages, which are due to occur from Thursday, Offshore Alliance said in a statement on Tuesday.
Investors Flock to Battery Recyclers in Hunt for Climate Law Winners
Investors are racing to find the clean-energy startups best positioned to capitalize on last year’s landmark climate law. Many are betting on an industry that is seen as crucial to the U.S. ending its reliance on China for batteries.
Major investors including BlackRock and Goldman Sachs Asset Management are pouring money into battery recycling, the nascent business of producing reusable battery parts for electric vehicles from scrap metal or old batteries. They are anticipating the startups will survive a turbulent market for clean-energy companies and remain in demand once government incentives dry up.
Yes, There Is a Bull Case for Investing in China
Given the endless bad news about China’s economy, the contrarian in me wants to be bullish.
It’s true that debt, housing, local government and consumer demand are all a mess, and dire demographics raise the prospect of a Japanese-style economic disaster. But there are three things working in China’s favor as an investment destination: Stocks rarely have been this cheap compared with the U.S.; its entire weight in a global benchmark is smaller than Apple’s; and a weaker dollar might help.
Russia-Led Theatrics Take Center Stage at U.N.
UNITED NATIONS-Rock star Roger Waters was in Switzerland when he heard from his friend Randy Credico, a comedian and radio personality who rose to prominence during special counsel Robert Mueller’s investigation of Russian interference in the 2016 election.
Credico told Waters, a Pink Floyd co-founder, that Russia was eager to have him speak at the U.N. Security Council, the premier venue for diplomats and-increasingly-entertainers.
Western Officials Plan to Warn U.A.E. Over Trade With Russia
U.S., U.K. and European Union officials plan to jointly press the United Arab Emirates this week to halt shipments of goods to Russia that could help Moscow in its war against Ukraine, according to U.S. and European officials.
Officials from Washington and European capitals are visiting the U.A.E. from Monday as part of a collective global push to keep computer chips, electronic components and other so-called dual-use products, which have both civilian and military applications, out of Russian hands.
Source: Dow Jones Newswires