Market Wraps
Watch For:
PPI for June; Weekly Jobless Claims; Federal Reserve Board Governor Christopher Waller speaks at Money Marketeers event; Earnings from Delta and PepsiCo
Today’s Top Headlines/Must Reads:
– The Bond Market Gets Less Scary
– Is the Banking Crisis Over? We Could Be About to Find Out
– China’s Drop in Exports Signals Deepening Slowdown in Global Trade
– Xi Jinping Chokes Off Crucial Engine of China’s Economy
Opening Call:
Stock futures pushed to fresh highs for the year on Thursday, as traders welcomed cooling inflation and as attention turned to the corporate earning season.
“…the good news is the disinflation process looks increasingly benign, especially when set against a U.S. economy characterized by low unemployment and solid growth,” SPI Asset Management said.
There was a broad “risk on” tone across global markets. Hong Kong’s Hang Seng rose 2.6% and Japan’s Nikkei 225 added 1.5% as Asian markets caught up with Wednesday’s rally in the U.S.
In Europe, gains were more modest, with markets having rallied on Wednesday.
Extending the rally on Wall Street now likely depends on how the second-quarter corporate earnings season is received.
Overall, S&P 500 earnings are expected to fall by 6.4%, according to Refinitiv, though much of this is because of large losses for energy companies.
Pre-Market Movers
Delta Air Lines rose 1.8% ahead of the release of its second-quarter earnings, while PepsiCo rose 0.5%.
Imax said it would buy out its Chinese subsidiary, pushing shares up more than 2%.
The FTC said it would appeal a judge’s ruling that cleared Microsoft to proceed with its $69 billion acquisition of Activision Blizzard. Microsoft shares rose 0.6%, while Activision declined 0.3%.
The AI stock frenzy keeps pushing up perceived winners of the nascent technology, with shares of Meta Platforms and Nvidia both rising more than 1%.
MillerKnoll reported a loss in the fiscal fourth quarter after another sequential drop in sales and higher costs as it goes through a restructuring plan. Shares were falling 5%.
Viasat fell more than 16% after the company said a new satellite suffered an unexpected event that may impact its performance.
Walt Disney said it extended the contract of CEO Bob Iger to 2026, pushing shares up 1%.
Forex:
The dollar fell to its lowest level in nearly 15 months against a basket of currencies and the euro after Wednesday’s inflation data.
“We [and increasingly the market] doubt that the Fed will hike again after the 26 July meeting,” Standard Chartered said.
“We think the recent dollar underperformance reflects a qualitative shift in market comfort with being short dollar as the terminal Fed policy rate looks increasingly capped.”
ING said the dollar could be starting a cyclical decline as interest rates look likely to peak after an expected increase later this month.
“For the big dollar trend, this may be the start of the long-awaited cyclical decline. Yesterday’s surprisingly soft June CPI numbers may be the first sign this year that sharp Fed rate hikes are finally starting to bite.”
The DXY dollar index fell to 100.3400 and ING said it is likely to drop toward 100, adding that weak PPI and jobless claims could prompt further losses.
Bonds:
HSBC Global Research is bullish on Treasurys, expecting yields to drop from current levels in the coming months.
“At close to 4.0%, 10-year Treasurys are close to the top of the 3.25-4.0% range of the last eight months, when yields last peaked,” it said.
HSBC likes the risk-reward at current levels, and said yields are unlikely to rise by much but could fall significantly.
It forecasts the 10-year yield at 3.0% for end-2023 and 2.50% for the end of 2024.
Energy:
Crude oil prices rose slightly in Europe, with investors steering towards risk assets after the inflation data.
ANZ said the focus will shift to tightening oil supply. “OPEC+ output cuts of 1.1 million barrels a day are yet to take full effect, and additional cuts by Saudi Arabia could materially tighten the market.”
It added that it expects jet fuel to be the catalyst for the next leg up in oil demand growth. “We still expect overall demand to grow by 2 million barrels a day, keeping the market under-supplied through this year.”
Metals:
Base metals and gold were higher in early London trading, with a less hawkish Fed and a weaker dollar helping to lift commodity prices.
“Bond markets are now pricing a ‘One and Done’ scenario: One final 25 basis point hike in two weeks, then interest rate cuts in early 2024,” Peak Trading Research said, adding that “this is a bullish macro environment.”
Today’s Top Headlines
Meta’s Threads Now Has to Keep Its Millions of Users Engaged
Threads, the new text-first social app from Meta Platforms, made a splash after its release last week. Now the Instagram-dependent platform has to prove it can carve out a unique identity and persuade users to stay.
Threads hit 100 million users within the first five days. Twitter has roughly 500 million, by one measure, and it has been around for more than a decade.
Google’s Bard AI Chatbot Adds More Languages to Take On ChatGPT
Google is betting a new version of its artificial-intelligence chatbot will say hallo, olá and bonjour to broader adoption, part of its effort to keep up in the high-stakes race to commercialize generative AI, the technology behind ChatGPT.
The Alphabet unit plans Thursday to add several new features to Bard, its generative-AI chatbot, including the ability to converse in 43 additional languages, from Arabic to Vietnamese. The company will also make Bard available across much of Europe and in Brazil, territories that are home to hundreds of millions of people.
FTC Chair Lina Khan, Republicans to Face Off Over Twitter Probe
WASHINGTON-House Republicans and Federal Trade Commission Chair Lina Khan are set to clash Thursday over her agency’s investigation of Elon Musk’s Twitter and what her critics say is an antibusiness agenda.
The FTC is examining whether Twitter under Musk is protecting users’ privacy. House Judiciary Committee Chairman Rep. Jim Jordan (R., Ohio) and other Republicans on the panel claim Democrats are targeting Musk for actions such as reinstating banned conservative accounts, including that of former President Donald Trump. Khan is scheduled to appear before the committee Thursday.
Saudi Arabia to Lose Top Spot in OPEC+
Saudi Arabia is set to fall below Russia as the largest oil producer in the OPEC+ alliance as its production cuts begin to bite, tightening the oil market just as prices appear to be turning higher, the International Energy Agency said.
The Gulf kingdom, the de facto leader of the Organization of the Petroleum Exporting Countries, has in recent months slashed its oil output, sacrificing its market share within the oil producers’ group in an attempt to buoy low oil prices that have crimped its revenue.
UK Economy Contracted in May as Industry Feels Pain – Update
The U.K. economy contracted in May as industrial output slid on month, a signal that rising Bank of England interest rates are weighing on economic activity.
The country’s gross domestic product declined 0.1% on month in May, from a 0.2% growth in April, data from the Office for National Statistics showed Thursday.
Russia Detained Several Senior Military Officers in Wake of Wagner Mutiny
Hours after Russian paramilitary leader Yevgeny Prigozhin began a short-lived march on Moscow, the country’s domestic security service detained several high-ranking military officers, including Gen. Sergei Surovikin, head of aerospace forces, people familiar with the situation said.
Surovikin, known as General Armageddon for bombing campaigns he waged in Syria, is being held and interrogated in Moscow, the people said. He hasn’t been charged with a crime. One said Surovikin knew about plans for the insurrection but that the general wasn’t involved in the mutiny.
Chinese Hackers Breached Email of Commerce Secretary Gina Raimondo and State Department Officials
WASHINGTON-U.S. Commerce Secretary Gina Raimondo and senior officials at the State Department were victims of a newly discovered Chinese hacking campaign, American officials said Wednesday, a targeted spying effort in the spring that coincided with a Biden administration push to soothe rising tensions with Beijing.
The breaches of unclassified email systems, which some officials and experts said may have required extraordinary technical expertise to pull off, raise new alarms about the ability of Chinese hackers to orchestrate more sophisticated attacks and come at a fragile point in U.S.-China relations.
Source: Dow Jones Newswires