Market Wraps
Watch For:
CPI for August; EIA Weekly Petroleum Status Report
Today’s Top Headlines/Must Reads:
– What to Watch in the CPI Report: Did Inflation Continue to Cool in August?
– As OPEC’s Energy Influence Wanes, China’s Minerals Clout Rises
– China Denies Ban on Apple’s iPhones
Opening Call:
Stock futures stalled on Wednesday, with meagre moves, as traders shelved big bets until the release of the consumer price index data.
Few investors expect the inflation report to shift the outlook for this month’s Federal Reserve meeting, with derivative markets showing that traders largely expect the central bank to hold interest rates steady in the 5.25%-5.5% range.
The consumer-price index is expected to show that headline inflation rose 3.6% in August from a year earlier, versus 3.2% in July.
Greater focus will be on the core measure, and here August is expected to show an annual increase of 4.3%, lower than July’s 4.7%, while the monthly change is forecast to have stayed the same at 0.2%.
“Any large deviations from these expectations will move markets and would certainly rekindle fears of higher rates for longer, which would in turn be negative for equities in the shorter term,” Interactive Investor said.
Investors will also have an eye on the expected pricing later in the day of ARM’s initial public offering, which may value the chip designer at up to $55 billion.
Premarket Movers
Apple was rising 0.2%, a day after declining 1.7% following the release of its new iPhone lineup.
U.S.-listed shares of BP rose 2.4% in premarket trading after CEO Bernard Looney resigned amid an investigation into new allegations of his personal relationships with colleagues. Looney had pushed for the oil giant’s transition to clean energy.
Ford, General Motors gained ahead of the opening bell, as talks with the United Auto Workers union continued ahead of the expiration of current contracts on Thursday. UAW has softened its pay demands in recent days.
Oracle slipped premarket after Tuesday’s 13% wipeout, which marked its biggest daily percentage loss since 2002.
Rocket Pharmaceuticals rose 17% after the company said it reached alignment with the FDA regarding its global Phase 2 trial for a treatment of Danon disease, a fatal genetic cardiac disease.
The SEC sued Virtu Financial for allegedly misleading customers about how it safeguarded confidential trading data. Shares fell in offhours trading.
ADRs of NIO fell 2.3%, XPeng was down 2.7%, and Li Auto fell 1.6% after European Commission President Ursula von der Leyen said an anti-subsidy investigation would be launched into Chinese electric-vehicle makers.
Tuesday’s Post-Close Movers
Evolution Petroleum reported that its revenue dropped sharply in the fiscal fourth quarter. The company broke even on a per-share basis after selling lower volumes of oil and natural gas at lower realized prices. Shares fell 13%.
KULR Technology Group announced it was planning an underwritten public offering of common stock in order to pay down an outstanding balance owed under a credit facility. The company also will use the proceeds for general corporate purposes and working capital. Shares fell 23%.
Forex:
The inflation data could cause volatility in the dollar if, as expected, it gives a mixed picture with headline inflation rising but core inflation falling, DZ Bank Research said.
“The expectation that the overall and core rates will move in different directions could initially make for more volatile dollar action, with the greenback likely to ultimately opt for the ‘hawkish’ side due to the solid economic environment.”
Sterling fell to a three-month low against the dollar and a one-month low against the euro as recent weak U.K. data dampened expectations for multiple interest-rate increases by the BOE, MUFG said.
“The U.K. rate market is currently attaching around a 50:50 probability to the BOE delivering one final hike after next week’s 25bp hike, which is viewed as almost a done deal.”
Energy:
Oil futures held steady at a roughly 10-month high in Europe as investors continued to worry about supply cuts tightening the market.
Metals:
Base metals prices were subdued in early London trade, as concerns over China’s property sector continued to linger.
Concerns about the sector have been a consistent drag on metals in recent weeks. Home sales in China are slowing while worries about the nation’s real-estate giants remain high, ANZ said.
“Industrial metals fell as the outlook for China’s property sector weakened. Investor sentiment remains bleak,” ANZ said.
Today’s Top Headlines
UPS Aims to Offset Costs From New Labor Contract
United Parcel Service is working to offset higher costs and win back lost business now that a labor contract between the package-delivery giant and union leaders has been struck, finance chief Brian Newman said in an interview.
The Atlanta-based company and union leaders in July agreed to a new five-year pact that would cover about 330,000 package-delivery drivers and package sorters. The International Brotherhood of Teamsters in August ratified the contract, which granted the average full-time driver $170,000 in annual pay and benefits. UPS’s full-time drivers with at least four years at the company had been earning an average of about $95,000 annually.
China’s Electric-Vehicle Makers Face EU Antisubsidy Probe
BRUSSELS-The European Union is launching an antisubsidy investigation into China’s electric-vehicle makers, opening a new front in the battle for leadership of the global clean-technology industry.
The probe, announced Wednesday, reflects growing concern in Europe about the impact of low-price products from China on the bloc’s domestic industries. It could result in tariffs if officials from the European Commission, the bloc’s executive body, conclude that Chinese EV manufacturers are receiving subsidies that are hurting Europe’s auto industry.
UAW Threatens Strikes at Certain Auto Plants if It Can’t Reach Labor Deals
The United Auto Workers union plans to hold targeted strikes at certain U.S. auto factories if it can’t reach new labor deals with Detroit automakers by late Thursday, an unusual strategy that could broadly disrupt assembly-line production.
In a video call with leaders of union locals Tuesday, UAW President Shawn Fain rolled out the work-stoppage plans, which also call for the actions to escalate the longer the union goes without a new contract agreement, including picketing more plants, according to people familiar with the presentation.
Will the ECB hike rates or not? Decision set to be cliff hanger as economic data sours
Central bankers love to steer the market, but the messages coming from European Central Bank officials on what they will do on Thursday are anything but crystal clear.
Swaps trading imply a roughly one-in-three chance the ECB will hike interest rates from the deposit rate’s current 3.75%. That’s as the central bank has to balance inflation still uncomfortably high, at 5.3% year-over-year for both the headline and for core, with survey data showing the economy weakening, if not unravelling.
Tax Cuts Are Here to Stay-And So Are Exploding Budget Deficits
WASHINGTON-President Biden and Republicans are gearing up for a hyperbolic election-year battle over extending the 2017 law that lowered taxes for individuals and businesses. Ignore the noise. Most of the fight is already over, and tax cuts are winning again.
The core individual tax provisions of the 2017 law, which Republicans pushed through Congress and then-president Donald Trump signed, are scheduled to expire after 2025. That means lawmakers will have to revisit the tax cuts shortly after the election, no matter who wins control of Congress and the White House. Biden calls the law an expensive failure and an unjustified giveaway to the wealthy, while Republicans promise to extend all of the tax cuts, which they see as an unqualified economic success.
Hedge Funds’ Big Bet Against Treasurys Isn’t What You Think
The basis trade, an innocuous-looking practice at the center of some of Wall Street’s historic blowups, is back.
A popular way for hedge funds to profit from bond trading while minimizing their exposure to swings in the market, the basis trade exploits the price difference between Treasurys and Treasury futures. The resurgence is attracting fresh scrutiny from Wall Street because previous meltdowns have rattled global markets.
Kim Jong Un and Vladimir Putin Meet at Russia’s Vostochny Cosmodrome
Vladimir Putin welcomed North Korea’s Kim Jong Un at Russia’s main spaceport, as the leaders from two of the U.S.’s nuclear-armed adversaries seek to strengthen military ties.
The 39-year-old dictator shook hands with Putin on Wednesday morning, according to video footage released by the Kremlin. The two leaders toured the Vostochny cosmodrome, located in Russia’s Far East, then sat down for talks, which are expected to last around three hours, Russian state media reported. North Korean media didn’t have an immediate report on Wednesday’s proceedings.
Russian Navy Shipyard Targeted by Missile Strikes in Sevastopol; Two Vessels Hit
ODESA, Ukraine-Ukrainian missile strikes hit Russian navy shipyards in the Crimean port city of Sevastopol overnight, causing huge blasts and a fire that damaged two warships undergoing repair, Russian authorities said.
There was no immediate claim of responsibility by Ukraine, which in recent months has carried out a series of missile and drone attacks on key Russian military and logistics targets in Crimea, an area that Moscow seized in 2014.
Americans Haven’t Elected a President Younger Than 43. Does 38-Year-Old Vivek Ramaswamy Stand a Chance?
LACONIA, N.H.-The 38-year-old Republican presidential hopeful Vivek Ramaswamy stood on stage at a recent campaign event here and read the audience a text message that he said came from a billionaire GOP mega donor.
“Your youth and lack of experience will become an even bigger issue when you get foreign policy wrong,” the donor told Ramaswamy, according to the candidate’s retelling. “It makes people question whether you should be in charge of the nuclear codes.”
Source: Dow Jones Newswires