UKX FTSE 100 Index

MARKET WRAPS

Watch For:

Eurozone economic bulletin; Germany June manufacturing orders, June manufacturing turnover; Bank of England rate decision, UK July monthly car registration figures, July consttruction PMI; updates from Lufthansa, Merck, Adidas, Bayer, Hannover Rueck, Beiersdorf, Zalando, Credit Agricole, Pirelli, Banca Monte dei Paschi di Siena, Glencore, Rolls-Royce, Evraz, Serco Group, Mondi, Hikma Pharmaceuticals, ING Group, VEON, Novo Nordisk, Informa, Next, Impala Platinum

Opening Call:

Overnight gains on Wall Street should support gains early Thursday. In Asia, major stock benchmarks rose, alongside oil and gold; Treasury yields were mixed.

Equities:

European stock futures point to gains at the open on Thursday.

U.S. stocks rose Wednesday on the strength of fresh earnings reports and a key reading on the services sector, shrugging off pressure from geopolitical concerns over Speaker Pelosi's Taiwan visit and further comments from Fed officials that the central bank is likely to continue raising interest rates at coming meetings.

After opening August with two straight losing sessions, stocks gained on "generally upbeat risk sentiment," said StoneX Financial analyst Matt Weller. Corporate earnings and the ISM report have mitigated fears of an imminent recession, he said.

Earnings have been pretty good in terms of beating expectations, said Olivier Marciot, global macro portfolio manager at Unigestion, but the market has bigger problems as well. "There is still a lot of inflation, central banks are keeping that hawkish rhetoric and we get some geopolitics on top of that," he said.

In the U.K., the Bank of England is expected to raise its key rate by 50 basis points today.

Forex:

The dollar edged lower in Asia as risk appetite returned.

"Implied volatility is falling and risk-sensitive currencies are recovering after US House Speaker Nancy Pelosi's aircraft exited Taiwanese airspace without triggering a military response from China," said Corpay's Karl Schamotta.

"Commodities are firmer, equity indices are marching higher, and safe haven currencies--the dollar, yen, and Swiss franc--are back on the defensive as traders position ahead of what is expected to be a strong non-farm payrolls report on Friday," the chief market strategist said.

Bonds:

Treasury yields were mixed in Asia.

Overnight, "Wednesday was a day of confirmation; 2s/10s inverted further, reaching -37 basis points (bp) -- confirming our target zone of -40 bp to -55 bp remains relevant (and perhaps insufficiently ambitious). 10-year yields confirm 2.75% was a more compelling focal point than 3.00%," BMO Capital Markets said.

"A dizzying array of Fed speakers reiterated that inflation remains enemy number one for the real economy -- leaving the debate between 50 bp and 75 bp as the most relevant discussion for September," BMO said.

FOMC members in speeches, the FOMC minutes and the U.S. CPI report next week are expected to make the case that the fed funds rate has considerable upside from current levels, CBA said.

Energy:

Oil futures rose in Asia, recovering from overnight losses as front-month WTI futures ended at a nearly six-month low, after U.S. government data showed an unexpected rise in crude and gasoline inventories.

However, despite factors such as still very low product and crude inventories, the recent loosening in global supply-demand conditions and demand risks coming from the U.S. and China suggest crude oil could move materially below the $90/bbl level, said Bart Melek, TD's head of commodity strategy.

Metals:

Gold edged higher in Asian trading after closing lower overnight.

The precious metal may be weighed by risk appetite spurred by overnight gains on Wall Street and strong U.S. economic data.

But the main driver for gold will probably be Wall Street's assessment of how many more massive rate increases the Fed will conduct until it enters a period of keeping policy steady, said Oanda senior market analyst Edward Moya.

"It looks like the chances of a 75 basis-point rate increase at the September FOMC meeting are very much on the table and that might keep the dollar supported, which should make it hard for gold to rally above the $1,800 level for now," Moya added.

--

Copper advanced in Asia in a possible technical rebound after the three-month LME copper contract fell to its weakest intraday level since July 27.

Last month's soft global manufacturing data add to Citi's view that weakness in base metals will probably continue for the next six to nine months on the back of a Europe-led global economic slowdown, the bank said.

Citi remains bearish on copper and nickel.

--

Chinese iron-ore futures declined, weakening after a recent rally.

Market expectations of higher steel production have been rather sufficiently reflected after a strong iron-ore price rebound in the past week, Guotai Junan Futures said.

TODAY'S TOP HEADLINES

Top Fed officials back aggressive interest-rate hikes until inflation eases

A bevy of top officials at the Federal Reserve said this week that the central bank needs to raise interest rates a lot higher and keep them high for awhile to contain the worst inflation in almost 41 years, even if tighter money risks a recession.

The Fed is "nowhere near" being done in its fight against inflation, said Mary Daly, the San Francisco Federal Reserve Bank president, in a CNBC interview Tuesday.

China's Military Exercises Around Taiwan Put Major Shipping Lanes at Risk

China's plans for military exercises around Taiwan threaten to temporarily disrupt supply chains as shipping companies look to avoid the area, an important waterway for cargo.

Beijing is preparing live-fire military exercises from Thursday through Sunday in areas encircling Taiwan and in the Taiwan Strait. While the designated zones mainly lie in international waters, some of them are close to Taiwan's major ports.

Russian Oil Cap Push Faces Doubts From Energy, Finance Industry

WASHINGTON-A Biden administration proposal to cap the price of Russian oil is facing skepticism from some oil analysts and financiers who question whether the U.S. and its allies can effectively dictate the global sales price for a major supplier of oil.

Officials from the White House, Treasury Department and Energy Department have hosted a series of calls and meetings in recent weeks with banks, maritime insurers and oil companies about the price-cap idea, according to people familiar with the meetings. Those talks come on top of a range of diplomatic efforts with China, Europe and others to build support for the novel plan.

OPEC, Allies Agree to Modest Increase in Oil Production

OPEC and its allies agreed to a small increase in oil production Wednesday following calls by the U.S. and other major consumers for more supply, but the symbolic move is expected to have a minimal impact on crude prices.

The Saudi-led Organization of the Petroleum Exporting Countries was under some pressure after President Biden said he expected Riyadh to help boost global supplies following a high-profile trip to the kingdom last month. But OPEC needs to coordinate its production plan with a coalition of Russia-led producers with which it has an enduring alliance. Moscow prefers high prices.

Nuclear Power Plants Could Stay Open, Says Germany

BERLIN-German Chancellor Olaf Scholz said for the first time that his government could postpone the planned closure of its remaining nuclear reactors, as he criticized a decision by Russia to constrain gas flows to Germany-a move that could deal a severe blow to Europe's largest economy.

Last month, Russia shut down for maintenance its giant Nord Stream pipeline, which connects Russia and Germany under the Baltic Sea and is operated by Russian state-owned energy producer Gazprom PJSC.

Iran Nuclear Negotiators to Meet in Last-Ditch Effort to Revive Deal

Iran, the U.S. and the European Union said Wednesday that they would send negotiators to Vienna for what could be make-or-break talks on reviving the 2015 nuclear agreement with Tehran, but expectations of an agreement weren't high after months of stalled negotiations.

A senior Western official said the latest Vienna talks, which will start Thursday, were a chance to agree on the final points of a deal to revive the nuclear pact. That agreement lifted most international sanctions on Iran in exchange for tight but temporary restrictions on its nuclear work.

U.S. Senate Ratifies Adding Finland and Sweden to NATO

The U.S. Senate overwhelmingly ratified the addition of Finland and Sweden as members of the North Atlantic Treaty Organization, a move leaders of both parties portrayed as key to American security around the world following Russia's invasion of Ukraine.

The resolution passed 95-1 after Senate Majority Leader Chuck Schumer (D., N.Y.) and Minority Leader Mitch McConnell (R., Ky.) urged lawmakers to support the measure.

Russia Claims Capture of Donbas Position Long Held by Ukrainian Forces

KYIV, Ukraine-Russia claimed to have captured a major strategic position held by Ukraine's forces since 2015, marking what would be Moscow's first notable advance in the country's east since it began relocating forces ahead of an expected Ukrainian counteroffensive in the south.

Ukraine's armed forces denied the Russians had advanced around Avdiivka near the Russian-held city of Donetsk, saying that Russia had shelled the area overnight and had unsuccessfully tried to improve its tactical position there, retreating with losses. They didn't provide further details.

Write to hoishan.chan@dowjones.com

Expected Major Events for Thursday

00:01/IRL: Jul Ireland Services PMI

04:30/NED: Jul CPI

06:00/GER: Jun Manufacturing orders

06:00/GER: Jun Manufacturing turnover

06:00/NOR: Jun Credit Indicator C2

08:00/UK: Jul UK monthly car registrations figures

08:00/ICE: Jun Labour Force Survey

08:30/UK: Jul S&P Global / CIPS UK Construction PMI

09:00/CRO: Jul PPI

09:00/CYP: Jul CPI

10:00/IRL: Jul Monthly Unemployment

11:00/UK: Bank of England Monetary Policy Report

11:00/UK: UK interest rate decision

12:30/CZE: Czech interest rate decision

23:01/UK: Jul BRC-Sensormatic IQ Footfall Monitor

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(END) Dow Jones Newswires

August 04, 2022 00:32 ET (04:32 GMT)

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