European stocks held solid gains on Wednesday, with investors
awaiting the minutes from the Federal Reserve's last meeting that
will be scrutinized for insights for the central bank's efforts to
tame inflation and the state of the economy.
A dim economic outlook and weak consumer sentiment have prompted
investors to shift their views about the aggressiveness of central
bank tightening. Markets are beginning to price in a pivot on
policy from the Fed, despite inflation still being at a more than
The energy sector was in focus after the Norwegian government
intervened to end an oil workers strike on Tuesday evening that
threatened to more than halve the country's gas exports, a key
source of energy for the region.
Stocks to Watch:
Adidas's full-year targets seem at risk as Chinese lockdowns
continue to drag second-quarter sales and challenging macro
conditions squeeze margins, Hauck & Aufhaeuser said, cutting
its rating on the stock to sell from buy.
Earnings before interest and taxes at the German sportswear
giant is expected to drop by 42% to EUR313 million in 2Q, with the
margin down at 5.6%, the bank said. To meet its full-year
Adidas is banking on 20% adjusted sales growth in the 2H, which
looks challenging as the broad-based price increases previously
announced by the company could support profitability but also
burden volumes, Hauck & Aufhaeuser said. It expects Adidas to
post a full-year EBIT margin of 6.8%, compared with the company's
The European Central Bank is aiming for a soft landing,
Santander Asset Management said. The ECB wants to influence price
developments quickly in order to prevent second-round effects and a
sustained rise in inflation expectations above their price
stability target, it said.
The central bank also wants to ensure that private households,
companies and financial markets can cope with the tighter monetary
policy and that a recession doesn't occur, the asset manager said.
"The challenge for central banks is very big at the moment. It is
very important that they clearly communicate their determination to
fight inflation," it said.
Citi's global supply chain pressure index posted its first
meaningful decline since January. The good news is that the retreat
in the index suggests that pressures in the global goods sectors,
which have been a central driver of inflation, might be easing, it
The bad news is that this looks to be occurring on the back of
weaker global consumer demand for goods, especially for
discretionary goods, and thus might signal rising recession risks,
Citi warned. "This is hardly an all clear signal for supply
chains," it said. There are many risks still in play, such as
pandemic-related disruptions and economic challenges from the
Russia-Ukraine war, Citi said.
Stock futures wobbled ahead of jobs data and minutes from the
latest meeting of the Fed.
"The momentum is clearly slowing and a recession is not
impossible," said Northern Trust Wealth Management.
"[A] recession would probably look more like a garden-variety
income statement recession and not the deeper and more damaging
style of balance sheet recession that has followed large asset
bubbles and suppresses consumer and corporate spending on a large
Jobs data in the form of JOLTs job openings will also be closely
watched as indicators of economic health. Signs of weakening could
actually prove positive for stocks; should the U.S. economy appear
weaker, it could tame further extreme moves from the Fed. Consensus
expectations are for a print of 11.1 million job vacancies.
"U.S. JOLTs Job Openings will cause recession head-scratching
above 11 million," said Oanda.
The pound rose even as U.K. Prime Minister Boris Johnson fights
for political survival after two senior ministers resigned in
protest of his leadership. Chancellor of the Exchequer Rishi Sunak
and Health Secretary Sajid Javid, two of Mr. Johnson's most senior
ministers, quit on Tuesday night following a string of scandals
under Johnson's leadership.
"Sterling has tended to ignore the indiscretions of Boris
Johnson's government--largely because the Conservatives have a
large majority," ING said. However, the resignations will leave the
prime minister "rocking," it said. It isn't clear whether new
finance chief, Nadhim Zahawi, will represent a shift in economic
policy, although he may be tempted to loosen fiscal policy earlier
than expected, ING said.
Increased UK Political Uncertainty Considered Negative for
Pound's Rise After New UK Finance Minister Appointed Might Prove
Traditional safe-haven currencies of the dollar, Swiss franc and
Japanese yen should continue to outperform in the near term on
fears over weaker global economic growth, MUFG Bank said.
Price action in the currency market is "being increasingly
driven by safe haven demand as fears over a sharper
slowdown/recession for the global economy continue to intensify,"
it said. "Those intensifying growth fears are clearly evident now
across a wide range of financial markets."
EUR/USD may fall further after breaking below critical support
at 1.0350 on Tuesday, based on technical charts, UOB said. This
break has been accompanied by solid downward momentum, and EUR/USD
is likely to weaken further within these couple of months, the bank
While round-number levels of 1.0200 and 1.0100 could offer some
support, the key level to monitor is 1.0000, UOB said. Only a break
above declining trendline resistance and the 55-day exponential
moving average, both of which are near 1.0510, would signal
EUR/USD's downtrend from earlier this year has stabilized, it
Eurozone government bond yields edged higher, bouncing slightly
after Tuesday's rally, but a flight-to-safety response is set to
remain as growth concerns are spreading, analysts said. "Recession
fears are shifting to Europe, triggering broad flight-to-Bunds and
EUR weakness," Commerzbank said.
On Wednesday, Germany will launch the new 1.70% August 2032 Bund
which is trading at a yield of 1.255% in grey markets, where bonds
trade ahead of their launch. Besides Germany, Portugal will conduct
a bond exchange operation, buying back 2023- and 2024-dated bonds
and selling 2028- and 2035-dated ones.
Oil prices recovered some of the previous session's steep losses
in early trading with SPI Asset Management suggesting Tuesday's
price action "seemed to point to positioning and recession
probabilities getting brought forward due to Europe's doomsday
Energy derivatives are likely to outperform base metals in the
current weak macro environment, UBS said. The Russia-Ukraine war
will likely continue to have a greater impact on energy vs. metal
prices, with the EU's push to decrease its dependence on energy
supply from Russia keeping prices buoyant, the bank said.
As the global economy moves beyond the Covid-19 pandemic, global
consumption may also shift toward travel and services, which are
energy-intensive compared with consumer-discretionary goods that
have been a major focus of pandemic spending, UBS said.
Base metals were mixed in Europe and gold a touch higher, with
CBA saying "industrial metal prices will likely continue to react
the most negatively to global growth fears, rising interest rates
and a surging dollar."
DOW JONES NEWSPLUS
German Manufacturing Orders Unexpectedly Rose in May
German manufacturing orders increased slightly in May, beating
forecasts for a decline amid rising producer prices and supply
Manufacturing orders rose 0.1% on month in adjusted terms,
according to data from the German Economics Ministry released
Amazon Strikes Partnership Deal with Grubhub That Could Include
Small Equity Stake
Amazon.com Inc. agreed to add Grubhub to its suite of Prime
services in the U.S., in a deal that also gives the e-commerce
giant the option to acquire a small stake, the parent of the
food-ordering company said.
Grubhub's parent, Netherlands-based Just Eat Takeaway.com NV,
said Amazon has an initial option to take a 2% stake in U.S.-based
Grubhub, and U.S. Prime members can have their delivery fees waived
from select restaurants. Amazon could bump up its total stake to
15% of Grubhub based on performance terms focused on adding new
customers, Just Eat said.
Bang & Olufsen Swung to 4Q Net Loss, Cautions on Low
Bang & Olufsen AS said Wednesday it swung to a fiscal
fourth-quarter net loss and cautioned that the outlook for the year
ahead is subject to unusually high uncertainty due to high
inflation, rising interest rates and the war in Ukraine.
The Danish consumer-electronics company posted a fiscal
fourth-quarter net loss of 25 million Danish kroner ($3.4 million)
for the three months to May 31. Analysts had expected a net loss of
DKK28 million, according to a FactSet poll.
U.K. Chancellor Rishi Sunak and Health Secretary Sajid Javid
Resign From Boris Johnson's Government
LONDON-British Prime Minister Boris Johnson suffered a
potentially fatal political blow Tuesday as his treasury chief and
health secretary resigned from his cabinet, saying they no longer
had confidence in his leadership.
The coordinated departures of Chancellor of the Exchequer Rishi
Sunak and Health Secretary Sajid Javid, two of Mr. Johnson's most
senior ministers, represent a severe challenge to his ability to
hold on to power.
EU Lawmakers Approve Sweeping Digital Regulations
European lawmakers approved two sweeping new pieces of digital
regulation, paving the way for clashes between regulators and some
of the world's biggest tech companies over how the rules should be
The European Parliament on Tuesday voted its stamp of approval
for the two laws-one focused on anticompetitive behavior, the other
on content deemed illegal in Europe-after reaching an agreement on
them with European Union member states in the spring.
Norway's Government Ends Strike After European Gas Prices
The Norwegian government stepped in to end a strike that
threatened to more than halve the country's gas exports, saying it
was causing widespread risks to energy security.
Before the strike was halted, a benchmark for gas futures
contracts in northwestern Europe rose as much as 14% to EUR172.88,
or about $180, a megawatt-hour Tuesday, the highest level since
March. Electricity prices across the region also rose, as many
power plants run on gas.
Ben & Jerry's Sues Unilever Over Sale of Ice Cream Business
Ben & Jerry's is suing parent company Unilever PLC to block
the sale of its Israeli business to a licensee, the latest twist in
a rift over the ice cream maker's decision to end sales in
Israeli-occupied West Bank and contested East Jerusalem.
In a complaint filed in U.S. District Court in Manhattan on
Tuesday, Ben & Jerry's said Unilever's decision to sell the
business in Israel last week was done without the approval of Ben
& Jerry's independent board of directors.
U.A.E. Trade Provides Iran With Western Goods, From Perfume to
SHARJAH, United Arab Emirates-Workers crammed dozens of boxes
into a wood-hulled dhow before it set sail from a Sharjah jetty,
headed across the Persian Gulf for Iran. The cargo: a range of
Western products from perfume to hair dryers and laptops.
"We are the Iranian Amazon," said the dhow's captain. "Business
Israel-Lebanon Maritime Dispute Threatens Gas-Extraction
TEL AVIV-Threats from Iran-backed militant group Hezbollah could
stall Israel's plan to deliver natural gas to Europe, Israeli
officials said, as Israel's caretaker prime minister pursued help
from France to defuse a crisis over its maritime border with
The border dispute risks turning into an armed conflict after
Hezbollah, the Lebanese militant and political group that has
fought several conflicts with Israel, threatened to take action
aimed at stopping work in the Israeli-controlled Karish gas
CureVac Sues BioNTech Over mRNA and Covid Vaccines. Pfizer Stock
CureVac is suing BioNTech over intellectual property rights
linked to mRNA technology, putting the Covid-19 vaccine developed
by Pfizer and BioNTech in the crosshairs.
CureVac (ticker: CVAC) said Tuesday that it had filed a lawsuit
in the German regional court in Düsseldorf against BioNTech (BNTX)
and two of its subsidiaries. The company said it is seeking fair
compensation for the infringement of intellectual property rights
that aided in the manufacture and sale of Comirnaty-the ubiquitous
Covid-19 vaccine developed by BioNTech and Pfizer (PFE).
NATO Advances Sweden, Finland Toward Membership as Fighting
Rages in Eastern Ukraine
Russian artillery pounded Sloviansk, one of Ukraine's last lines
of defense to protect the remaining Kyiv-held strongholds in
eastern Ukraine, while the North Atlantic Treaty Organization on
Tuesday advanced plans to add Sweden and Finland to the
Vadim Lyakh, the mayor of Sloviansk, reported "massive shelling"
of the city in a Facebook post and said the central market was on
fire. Pavlo Kyrylenko, head of military administration in the
eastern region of Donetsk, said on Telegram that at least two
people died and seven were injured.
Food and Energy Inflation Spur New Social Spending Around the
Governments around the world are rushing to cushion the blow of
food and energy inflation, launching new subsidies and boosting
social-spending programs to stave off unrest and hunger amid the
rising cost of daily living.
The United Arab Emirates and Saudi Arabia are spending a
combined nearly $13 billion to support lower-income citizens, while
in Europe, governments from Germany to Greece, Spain and Portugal
have in recent months announced tax rebates and energy
Oil Prices Pulled Lower by Dimming Demand
Slowing demand and recession fears helped bring the benchmark
U.S. oil price below $100 a barrel Tuesday, continuing a rapid
turnaround from soaring levels in recent months.
Oil prices shot higher earlier this year as war in Ukraine
disrupted supply lines and the world-wide postpandemic reopening
lifted demand. That move has contributed to the persistent
inflation that has gripped major economies in 2022. The growth
outlook is darkening as central banks work to get inflation under
control by cooling economic activity, pulling down traders'
forecasts for oil demand.
Strong Dollar Sends Euro to Lowest in More Than Decade
A flight to the U.S. dollar pushed currencies around the world
to their lowest levels in years, as economic prospects in Europe
and elsewhere darkened under the cloud of soaring energy
The euro neared a 20-year low against the dollar after
natural-gas and electricity prices surged on the continent.
Currency traders fear Europe's economy might buckle if Russia
completely shuts off natural-gas supplies that are used for heating
homes, keeping lights on and running factories. Energy prices were
further boosted by labor strikes at Western Europe's largest gas
fields in Norway.
U.S. factory orders jump 1.6% in May - but it's not quite as
good as it looks
U.S. factory orders jumped 1.6% in May, but the increase was
largely tied to petroleum-related products whose prices have risen
sharply. A more recent survey of top executives suggests demand
might be waning as the economy slows.
The increase in orders exceeded the 0.6% forecast of economists
polled by The Wall Street Journal. The rise in new orders in April
was also raised to 0.7% from 0.3%.
If Luxury Stocks Are a Good Inflation Hedge, Why Is No One
For the trinkets bought by the rich, inflation is running much
hotter than for everyday groceries. Even with that enticing hedge,
luxury stocks probably aren't about to fly off the shelf.
Luxury goods have an advantage over other consumer products:
When top-end brands charge more, their designs can become more
desirable to status-conscious shoppers. This gives the industry a
reputation for offering investors inflation protection. Over
roughly the last four decades, Forbes' Cost of Living Extremely
Well Index, which tracks the price of goods and services such as
luxury handbags, expensive watches and real estate management fees,
has risen 5% annually, compared with 3% gains in the U.S.
Accelerating Inflation in Asia Puts Pressure on Central Banks to
Accelerating inflation is rippling through the Asia-Pacific,
stoking expectations that policy makers will need to keep
ratcheting up borrowing costs to cool climbing prices.
Cautioning that inflation was yet to peak, Australia's central
bank on Tuesday raised its interest rate by half a percentage point
for the second straight month. The Reserve Bank of Australia
increased the official cash rate to 1.35% from 0.85%-adding to
June's 0.50 percentage-point hike and a 0.25 percentage-point
increase in May-as Gov. Philip Lowe said higher rates would help
create a more sustainable balance between supply and demand.
U.N. Atomic Chief Warns of Growing Nuclear Risks
The head of the United Nations nuclear agency gave a sharp
warning Tuesday about growing nuclear risks, saying that Iran's
activities risked a regional nuclear arms race and that Russia's
occupation of Ukrainian nuclear sites threatened to imperil the
agency's ability to ensure nuclear material wasn't being
In a wide-ranging speech at the Australian National University
in Canberra, Rafael Grossi, the head of the International Atomic
Energy Agency, warned that "we are reaching a defining moment for
global nuclear nonproliferation," in which the risks of the spread
of nuclear weapons "pose a problem for everyone."
Highland Park Parade Shooting Suspect Charged With First-Degree
A 21-year-old man who police said fired more than 70 rounds from
a rooftop into a crowd gathered for a Fourth of July parade in the
Chicago suburb of Highland Park, Ill., was charged with seven
counts of first-degree murder.
The suspect, Robert E. Crimo III, allegedly planned the attack
for weeks and dressed as a woman to hide his identity, officials
CERN's Large Hadron Collider Scientists Reveal New Particle
Discovery as Accelerator Research Resumes
The Large Hadron Collider resumed scientific operations on
Tuesday after a three-year hiatus for repairs and upgrades, opening
a new chapter in physicists' longstanding quest to understand the
fundamental building blocks of the universe.
The resumption came shortly after scientists with the European
Organization for Nuclear Research, or CERN-the international body
that operates the collider-announced that earlier research
conducted at the facility revealed three previously unknown
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(END) Dow Jones Newswires
July 06, 2022 06:26 ET (10:26 GMT)
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