MARKET WRAPS
Watch For:
UK July BRC-KPMG Rtail Sales Monitor; Updates from Siemens
Energy, Porsche, MTN Group
Opening Call:
Stocks in Europe are seen opening higher after closing lower
Friday. In Asia, stock benchmarks were mostly lower; the dollar
weakened; Treasury yields were mixed; oil rose; and gold edged
lower.
Equities:
European stocks look poised to push higher at the open today,
after declining Friday following much stronger-than-expected U.S.
jobs data, which increases the prospect of further hefty rate rises
by the Fed.
The data left investors with a mixed picture: A key pillar of
the economy remains strong, which should be good news for markets.
But strong data means the rate increases that have sent stock and
bond prices lower this year aren't likely to go away anytime
soon.
"[Friday's] jobs report is the exact opposite of a slowing
economy," said Thomas Tzitzouris, head of fixed-income research at
Strategas. "This report means it's going to be very difficult to
support the view of rate cuts happening anytime before the end of
next year."
The monthly employment report, however, is a lagging indicator.
And investors and policy makers still have lots of data to sift
through between now and the Fed's September policy meeting. The
next reading of the U.S. consumer-price index will be released
Wednesday.
"Friday's extremely strong jobs data suggests that many
businesses are not allowing recession fears to stand in the way of
hiring," said Ryan Belanger, managing principal and founder at
Claro Advisors. "The jury is out on whether this robust pace of
hiring can continue as many large and small companies have recently
taken steps to slow hiring or even layoff existing employees."
Belanger said he thinks the inflation data on Wednesday will
weigh more heavily on the Fed than the jobs report, as fighting
inflation is the Fed's top focus.
Forex:
The dollar edged lower in Asia today, after rising Friday
following a strong jobs report.
The reaction to a shockingly impressive payroll report was a
surge in Treasury yields that bolstered the dollar," said Oanda's
Edward Moya.
"King dollar is here to stay as the debate for higher Fed rate
increases will likely be supported by the next round of inflation
data. The euro defended parity against the dollar, but it will be
hard for that to last as the interest rate differential will
continue to widen more to the greenback's favor and as the global
economic slowdown will lead to more safe-haven flows," Moya
said.
Bonds:
Treasury yields were mixed early Moday after jumping sharply
Friday on the July jobs report. That stoked expectations the Fed
will continue to aggressively raise rates to contain inflation.
However, the spread in yields between shorter-term and
longer-term bonds widened further, deepening what's known as a
yield curve inversion.
Energy:
Crude-oil futures rose in Asia.
Surging natural-gas prices, freight rates and a stronger U.S.
dollar have boosted the cost of transporting Brent crude oil from
the ground into retail pumps, Goldman said.
While Goldman still expects Brent to trade at a wide discount to
retail fuel prices, prices could soon rise to $110/bbl-$125/bbl on
short supply.
Metals:
Gold inched lower in Asia.
The price of the precious metal may come under pressure after
strong payrolls data on Friday, ANZ said.
That could give rise to fears that the Fed may persist with its
aggressive rate-hike cycle, ANZ said.
--
Aluminum pushed a tad higher, supported by prospects of supply
reductions prompted by rising energy shortages.
Sentiment seems more positive in the base metals sector, ANZ
said.
Meanwhile, commodities giant Glencore warned last week that
Europe's energy crisis poses a substantial threat to supply, ANZ
said.
The company noted that its smelters in the region are barely
turning a profit, given that aluminum is the most energy-intensive
metal, added ANZ.
--
Chinese iron ore futures advanced in a likely technical rebound
after prices fell in the latter half of last week, though further
gains may be capped.
China's steel demand is facing significant headwinds from the
property sector, where mortgage boycotts threaten to derail
property construction further, CBA said.
With presold apartments an important funding source for property
developers, mortgage boycotts threaten to amplify the risk that
projects under construction remain uncompleted, CBA added.
TODAY'S TOP HEADLINES
Senate Passes Democrats' Climate, Healthcare and Tax Bill
WASHINGTON-The Senate passed a bill spending hundreds of
billions of dollars on climate and healthcare programs while
raising taxes on large, profitable companies, as Democrats unified
around elements of President Biden's agenda after a year of
frustrated efforts to advance a broader package.
The legislation, which passed the Senate 51-50 on Sunday with a
tiebreaking vote by Vice President Kamala Harris, offers tax
incentives for reducing carbon emissions, seeks to allow Medicare
to negotiate the price of some prescription drugs, allots roughly
$80 billion to the Internal Revenue Service and extends subsidies
for health insurance under the Affordable Care Act.
Fed's Michelle Bowman Says Large Interest-Rate Rises Could
Continue
A Federal Reserve official said the U.S. central bank could
follow two consecutive 0.75-percentage-point rate rises this summer
with a third such increase at its meeting next month.
Fed governor Michelle Bowman said she strongly supported the
Fed's 0.75-percentage-point rate increase last month and
"similarly-sized increases should be on the table until we see
inflation declining in a consistent, meaningful and lasting
way."
China's Export Growth Stays Unexpectedly Robust, Offsetting
Broader Weakness
HONG KONG-China's export machine remained surprisingly resilient
in July following a strong bounceback from the spring's harsh
Covid-19 restrictions, defying again predictions of softening
global demand for Chinese-made goods.
Chinese shipments to the rest of the world rose to $332.9
billion in July, China's General Administration of Customs said
Sunday, an 18% increase compared with a year earlier. The reading
beat a median forecast of 15.6% growth among economists polled by
The Wall Street Journal. July's year-over-year growth rate
represents an acceleration from the 17.9% pace in June.
Iran, U.S. Close In on Nuclear Deal Text but Hurdles Remain
Negotiations between Iran and the U.S. on reviving the 2015
nuclear deal are close to completion, the European Union's senior
negotiator at the talks said Sunday evening, but it remained
unclear whether Tehran will accept the final deal.
The text of an agreement could be closed in coming hours, said
the EU's Enrique Mora, the coordinator of the talks. However, Iran
must still decide whether to set aside its demand that the nuclear
deal can only be revived if a multiyear United Nations atomic
agency probe into its nuclear program is closed.
Investors Brace for More Market Volatility as Earnings Estimates
Slump
Corporate-earnings expectations are falling. That means the
stock market is again at risk of appearing expensive, even after
this year's tumble.
Wall Street often uses the ratio of a company's share price to
its earnings as a gauge for whether a stock appears cheap or
overpriced. By that metric, the market as a whole had been
especially pricey for much of the past two years when easy monetary
policy propelled major stock indexes to dozens of new highs.
UPS Nears Deal to Buy Italian Healthcare-Logistics Provider Bomi
Group
United Parcel Service Inc. is nearing a deal to acquire Italy's
Bomi Group, according to people familiar with the matter, as the
transportation giant looks to bolster its
medical-product-distribution business.
The deal, worth several hundred million dollars, could be
finalized as soon as Monday assuming the talks don't break down at
the last minute, the people said.
Explosions Rock Ukraine's Zaporizhzhia Nuclear Power Plant
ZAPORIZHZHIA, Ukraine-Explosions shook Europe's largest nuclear
plant over the weekend, prompting fears that the war could unleash
a nuclear catastrophe.
Located in the Russian-occupied city of Enerhodar along the
Dnipro river, which divides the Russian and Ukrainian forces in the
area, the Zaporizhzhia nuclear power plant is now perilously close
to the front lines of the fighting.
Oz Minerals Rejects BHP Takeover Proposal
ADELAIDE, Australia-Oz Minerals Ltd. on Monday rejected a
nonbinding takeover proposal from BHP Group Ltd. that values the
Australian copper-and-gold mining company at almost 8.4 billion
Australian dollars (US$5.8 billion), calling the approach highly
opportunistic following a fall in copper prices.
Adelaide-based Oz Minerals said it received on Friday the
unsolicited and conditional proposal from the world's largest
mining company by market value to acquire its shares for A$25.00
each. Its stock last traded at A$18.92 a share.
Ben & Jerry's to Take On Owner in Court Hearing Over Israeli
Business
A request by Ben & Jerry's to block parent company Unilever
PLC's sale of the ice-cream brand's Israeli business is set to be
heard by a New York court Monday in what lawyers say is a
first-of-its-kind case.
At the heart of the case is what powers Ben & Jerry's
independent board, a unique corporate-governance arrangement
Unilever granted when buying the brand, has in practice.
Write to hoishan.chan@dowjones.com
Expected Major Events for Monday
05:45/SWI: Jul Unemployment
06:00/DEN: Jun Industrial production & new orders
06:00/NOR: Jun Industrial Production Index
07:00/AUT: May Foreign Trade
07:00/CZE: Jun Industry, Construction
07:00/CZE: Jun External trade
07:00/HUN: Jun Preliminary External Trade
07:00/CZE: Jul Unemployment data
08:00/ICE: Jul External trade, preliminary figures
09:00/GRE: Jul CPI
10:00/IRL: Jul Irish Live Register latest monthly figures
23:01/UK: Jul BRC-KPMG Retail Sales Monitor
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(END) Dow Jones Newswires
August 08, 2022 00:35 ET (04:35 GMT)
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