Market Wraps
Watch For:
Chicago Business Barometer – ISM-Chicago Business Survey for September; Personal Income and Outlays for August; University of Michigan Final Consumer Survey for September; Canada GDP for July; Carnival earnings
Today’s Headlines/Must Reads
– Consumer Spending Could Flash Mixed Signals. Here’s What You Need to Watch
– Investors’ Bets on Mother Nature Are Paying Off Big
– Turmoil Over Migrants at U.S.-Mexico Border Is Straining Trade Flows
– Apple, China Met to Discuss Beijing’s Crackdown on Western Apps
Opening Call:
Stock futures rose on Friday, ahead of data that could show an inflation gauge favored by the Federal Reserve falling below a 4% level for the first time in more than two years.
“Today’s U.S. inflation and personal spending numbers could go some way to tempering expectations about a November rate hike from the Fed,” CMC Markets said.
Though the S&P 500 has climbed for two straight days, it’s set to end the month with a loss of around 5%, as long-term yields have climbed.
“By early summer, investors looked increasingly confident that the global economy was escaping the plague of stagflation. They are having a second thought – rightly so,” Generali Insurance Asset Management said, which is underweight equities but has a small preference for U.S. equities.
“The U.S. economy has been exceptionally resilient to the 525bp Fed tightening but is now showing signs of fatigue. Surging oil prices may keep inflation high for longer.”
Overseas
European stocks and bonds rallied. The pan-continental Stoxx Europe 600 added nearly 1% and the yield on the benchmark 10-year German bund fell back. Data out Friday showed eurozone-wide inflation softened more than expected. In Asia, mainland Chinese markets were closed for a public holiday.
Premarket Movers
BlackBerry reported a second-quarter loss narrower than analysts’ expectations, but revenue missed forecasts. Its shares rose 0.2%.
Ford rose 0.2%, General Motors was up 0.6%, and Stellantis gained 0.2% as another strike deadline loomed for the auto makers.
Nike stock rose 7.9% after it reported fiscal first-quarter profit that beat analysts’ estimates. Shares of other athletic footwear and accessory companies rose. Foot Locker was up 3%, Under Armour rose 3.4%, and On Holding gained 6.7%.
Tesla was up 1.8%. It was sued on Thursday by the Equal Employment Opportunity Commission. Meanwhile, Tesla is expected to report third-quarter deliveries on Monday and Citi trimmed Tesla’s quarterly sales estimate to 450,000 vehicles, down from a previous expectation of 468,500.
Forex:
The dollar fell on month-end profit taking and as Treasury yields retreated from high levels, but the currency’s “underlying strength” has not been reversed, with the DXY dollar index still trading around 106, UniCredit Research said.
Friday’s eurozone inflation plus U.S. core PCE and personal income data could test whether investor sentiment has become less bullish on the dollar, UniCredit Research said.
Very low eurozone inflation could send EUR/USD lower, especially if U.S. data show price pressures aren’t easing sufficiently, it added.
Energy:
Crude futures inched higher in Europe, with the recent rally tempered on Thursday over worries that oil had become overbought, ING said.
“There is likely reluctance amongst participants to push too much higher right now with the market clearly in overbought territory,” ING said.
“There is also possible nervousness that OPEC+ and specifically Saudi Arabia could start to ease cuts earlier than scheduled if prices move much higher.”
Metals:
Base metals and gold made solid gains as the dollar eased back, but with the greenback generally remaining strong, BMI said it saw little scope for a strong rise in prices in the coming months.
Competition for labor, equipment and raw materials will likely continue lifting construction and operating costs for lithium producers, especially while demand growth for the battery ingredient remain high, Wood Mackenzie said.
“Development and operational risk will also likely increase over time, as lithium is sourced from more complex deposits in higher risk jurisdictions,” while “more expensive debt and equity, and higher disruption rates are to be expected.”
Today’s Top Headlines
EVs Will Hit Detroit Harder Than a UAW Raise
What kind of raise can Detroit afford to give auto workers? It depends partly on when American car buyers go electric.
The United Auto Workers strike entered its third week Friday with the threat of further escalation. There have been few recent signs of progress in the union’s negotiations with the Detroit automakers, which argue that its demands are untenable.
Tesla Is Accused of Racial Harassment at California Factory
Tesla was accused of subjecting Black employees at its California auto-assembly plant to racial harassment and a hostile work environment in a federal lawsuit filed Thursday.
The U.S. Equal Employment Opportunity Commission also alleged that Tesla unlawfully retaliated against Black employees and engaged in discriminatory conduct since at least 2015.
Clear Channel Outdoor to Pay $26 Million in China Bribery Probe Settlement
Outdoor advertising company Clear Channel Outdoor Holdings agreed to pay more than $26 million to resolve a U.S. probe into bribes the company allegedly paid in China.
A majority-owned Chinese subsidiary of San Antonio-based Clear Channel allegedly bribed Chinese government officials directly and through third parties to win contracts that let it sell advertisements for display on bus shelters, street furniture and billboards, the Securities and Exchange Commission said Thursday.
Energy Stocks Are Hot. The Fourth Quarter Will be Trickier.
With oil prices nearing $100 a barrel, energy stocks are finishing up an exceptionally strong third quarter. Exxon Mobil hit a record high on Wednesday, and energy is the only sector of the S&P 500 trading in positive territory over the past month.
But the months ahead could well be trickier. Oil traders are already very bullish on the commodity, making it less likely that new money will move the needle for the stocks. And some analysts expect supply-demand dynamics to be less bullish in the coming quarter.
The 2023 Stock-Market Rally Sputters in New World of Yield
It seemed like nothing could stop the 2023 market rally. Then the third quarter arrived.
Yields on longer-term government bonds soared, blunting the advance of a stock market powered by richly valued technology shares. The S&P 500, which had been up nearly 20% for the year just two months ago, is hanging on to a 12% increase.
Eurozone Inflation Cools More Than Expected in September
The eurozone’s inflation rate was lower than expected in September, potentially signalling that the European Central Bank may have reached the peak in its current tightening cycle.
The euro area’s consumer prices rose 4.3% on year in September, preliminary data from the European Union’s statistics agency Eurostat showed Thursday, lower than the 4.5% that economists expected, according to a poll by The Wall Street Journal.
Reserve Bank of Australia Set to Extend Rate Pause But Retain Hawkish Hue
SYDNEY-The Reserve Bank of Australia is widely expected to leave its official cash rate on hold for a fourth month at its policy meeting on Tuesday, the first to be presided over by its recently appointed governor, Michele Bullock.
But even as the OCR is again held at 4.10%, the RBA is unlikely to telegraph to financial markets that it is becoming relaxed about the medium-term inflation outlook, according to economists.
Japan’s Economy Minister Warns of Risk From China’s Real-Estate Troubles
TOKYO-The struggles in China’s real-estate industry and weak Chinese domestic demand pose a risk to the Japanese and global economies, Japan’s new economy minister said Friday.
Yoshitaka Shindo, who assumed the cabinet post earlier this month, said that because China accounts for nearly a fifth of Japan’s exports, the Chinese economic troubles could cause Japan’s economy to move a notch downward.
Japan Finance Minister Pledges Appropriate Action Against Excessive Yen Moves
TOKYO-Japan’s Finance Minister Shunichi Suzuki renewed his pledge to take action against sharp falls in the yen as it weakened to its lowest level in almost a year.
“There is no change to our stance that we will take appropriate action against excessive moves without ruling out any options,” Suzuki said at a news conference on Friday. “We have a strong sense of urgency.”
Kevin McCarthy Wins Three, Loses One in Late-Night Spending Votes
WASHINGTON-House Republicans largely succeeded in passing a series of annual spending bills late Thursday night, trying to show that the often fractured conference can stay united on legislation headed into any last-gasp negotiations with Democrats to avert a government shutdown this weekend.
As the clock ticked toward midnight, the House passed the GOP’s annual State Department and foreign aid appropriations bill, then the yearlong Defense Department and Homeland Security measures, with only a handful of defections in the three votes. But the final bill of the evening-funding the Agriculture Department-failed, with more than two dozen Republicans joining Democrats in opposition.
China Blocks Executive at U.S. Firm Kroll From Leaving the Mainland
A senior executive at American risk advisory firm Kroll has been barred from leaving mainland China, the latest example of Chinese authorities imposing exit bans on the employees of foreign firms.
Michael Chan, a Hong Kong-based managing director who specializes in corporate restructuring, is assisting an investigation into a case that dates back a few years, according to people familiar with the matter. Neither Chan nor Kroll is the target of the investigation, the people said.
Source: Dow Jones Newswires