MARKET WRAPS
Watch For:
Germany Balance of Payments; OPEC, IEA Monthly Oil Market
Reports; updates from Siemens, ThyssenKrupp, RWE, Hapag Lloyd,
Deutsche Telekom, Daimler Truck, Zurich Insurance, Antofagasta,
AEGON, Entain
Opening Call:
A strong finish on Wall Street, with Nasdaq entering a new bull
market, should support European stocks on Thursday. In Asia, most
major indexes were solidly higher; the dollar steadied after its
post U.S. CPI slide; Treasury yields were little changed; and oil
and metals fell.
Equities:
European stocks should extend gains early Thursday, as investors
continue to react to the latest U.S. inflation data and news that
Russian oil pipeline flows halted to Central Europe have
resumed.
U.S. stock indexes closed at their highest levels since early
May on Wednesday, after July's headline consumer price index showed
inflation slowing, due largely to lower energy prices, and
potentially easing the burden on the Federal Reserve's monetary
policy.
"A number of components that people have been flagging as being
potentially problematic and keeping inflation persistent at high
levels, started to show some easing," said Key Private Bank, adding
that it "opens the possibility to the Fed considering 50 basis
point hikes instead of 75."
The Fed will consider the data ahead of its September 20-21
policy meeting where it is expected to raise its benchmark interest
rate again.
Read: Fed Likely to Want Further Evidence of Inflation
Slowdown
Read: Stock-Market Investors Cheer Inflation Data. Big-Name
Firms Like Pimco, BlackRock Aren't So Sure
Economic Insight:
A standstill at a key bottleneck on the Rhine river, the Kaub,
could completely halt shipping on the German river as happened in
2018, when transport to and from the southern industrial sites had
to be interrupted, said Deutsche Bank.
Though transport is still possible at this stage, it is becoming
increasingly expensive due to reduced loading capacity for ships
and additional surcharges for low water levels.
Transport by rail could take on some loads, but capacities are
already stretched, so that wouldn't solve the whole problem,
Deutsche Bank said.
Truck transport couldn't be a viable substitute either, as the
loads transported by water are much larger than those that can be
moved by truck, and Germany already has a truck-driver
shortage.
Forex:
The dollar made modest gains in Asia after it slumped on
Wednesday, with the ICE Dollar Index down by the most since June
and earlier in the day had traded at its lowest levels since March
2020.
"Investors are convinced the Fed will have a much slower rate
hiking cycle now," said OANDA. "The top of the dollar could be in
place right now if inflation continues to decelerate sharply."
Bonds:
U.S. bond yields barely moved in Asia, having fallen on
Wednesday as investors increased their bets on a less hawkish Fed
next month, reducing the inverted spread to its lowest point in
five days.
But some pundits warned it is too early to call victory over
inflation. Amherst Pierpont said that CPI analysis by the Cleveland
and the Atlanta Fed show inflation's underlying trend well above
target. PPI due later Thursday is forecast to slow down, and
jobless claims are expected to be slightly higher.
Asset manager Louis Navellier said that concerns for an even
more hawkish Fed are easing, which is "best reflected by the shift
in expectations for the next Fed increase in September from 75bps
to 50bps, with 50bps now considered a 2/3 likelihood from 1/3
before the CPI numbers."
Read: Pre-Covid Inflation Levels Seen as Unlikely to Return
Energy:
Crude-oil prices edged lower in early Asian trade, likely due to
the easing of global supply concerns as Russian pipeline operator
Transneft resumed supplying to the Druzhba pipeline toward Ukraine,
said ANZ.
Oil futures finished more than 1% higher on Wednesday, erasing
earlier losses after EIA data showed a bigger-than-expected drop in
U.S. gasoline inventories and a jump in refinery utilization,
though crude inventories rose.
Metals:
Gold futures weakened as risk appetite improved.
OANDA said gold's trajectory remains higher, but this might take
a little longer if equities stay bid for a while.
Goldman Sachs late on Tuesday reduced its forecasts for the
precious metal, along with silver, citing increased focus on the
Federal Reserve's shifting priorities.
Goldman cut its 3, 6 and 12-month gold forecasts to $1850, $1950
and $1950 an ounce from a prior $2100, $2300 and $2500,
respectively. The bank expects silver to reach $21, $23 and $25 an
ounce, respectively, from a prior $30 an ounce across that
multimonth time frame.
"While we expected nominal rates to increase on the back of Fed
hikes, we did not expect inflation expectations to fall so much
after the failure of the transitory narrative and high persistent
inflation surprises," said Goldman Sachs.
"The main conclusion is that in the current environment of
tightening policy and persistent recession concerns, the tactical
direction of gold will be determined by shifts in Fed priority
function between inflation fight and growth support."
---
Base metals were mixed, as market participants assessed various
developments.
Copper edged higher, erasing earlier losses, and aluminum
advanced while zinc fell. Traders seem to have weighed up an
uncertain economic backdrop against continuing supply-side issues,
said ANZ.
TD Securities said metals supply risk was trending higher.
Covid-19 cases continue to rise in China's industrial regions,
leading officials to reportedly lock down urban areas in Guixi
city, which has massive copper smelters.
---
Chinese iron-ore futures were higher on generally positive
market sentiment, spurred by the softer-than-expected U.S.
inflation reading.
TODAY'S TOP HEADLINES
Fed Likely to Want Further Evidence of Inflation Slowdown
A slowdown in inflation last month, following recent indications
of a robust labor market, complicates the Federal Reserve's
decision on how much to raise interest rates next month.
Data on inflation and economic activity are likely to guide
whether central bank officials lift their benchmark federal-funds
rate by a half-percentage point or three-quarters of a point at
their Sept. 20-21 policy meeting. They have said they want to see
evidence that price pressures and economic growth are cooling
before they moderate their pace of rate increases.
Lower Gasoline Prices Portend Higher Consumer Confidence, Affect
Inflation
Consumers are likely to travel and spend more because U.S.
national gasoline prices have fallen for weeks, economists said,
delivering an expected boost to the economy.
The average cost of a gallon of regular unleaded gasoline fell
below $4 on Wednesday, according to energy data provider OPIS. That
is well below the record high of $5.02 reached in mid-June but
still about 80 cents a gallon higher than prices were a year
ago.
Regulators Weigh Asking Hedge Funds to Report Crypto
Exposure
WASHINGTON-The collapse in cryptocurrency prices this year has
left U.S. regulators scrambling to understand the risks that
digital-asset markets could pose to the broader economy.
They may soon enlist hedge funds in the effort.
Ukraine Wins Investor Approval to Pause Payments on Foreign
Debts
Investors approved a two-year payment delay on roughly $20
billion of Ukraine's foreign-currency debt, heeding calls from
Washington and other allied governments to grant the embattled
nation a financial reprieve as it burns through cash.
Ukraine asked bondholders last month to push back payments of
interest and principal on a clutch of dollar- and euro-denominated
government bonds, with a combined face value of nearly $20 billion,
by two years. The government's request came as little surprise to
creditors, who had expected that Kyiv would need to restructure its
debts as the war dragged on.
Write to paul.larkins@dowjones.com
Expected Major Events for Thursday
06:00/ROM: Jul CPI
06:00/DEN: 2Q Consumer credit
07:00/SVK: Jun Employment and average monthly wage in selected
branches
07:00/SVK: Jun Turnover in selected branches of economy, incl
Industry & Construction
07:00/TUR: Jun Balance of Payments
08:00/FRA: Aug IEA Oil Market Report
08:30/UK: 2Q Mortgage and landlord possession statistics
08:30/UK: 2Q Mortgage Arrears and Possessions data
10:00/IRL: Jul CPI
16:59/GER: Jun Balance of Payments
16:59/AUT: Aug OPEC Monthly Oil Market Report
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(END) Dow Jones Newswires
August 11, 2022 00:34 ET (04:34 GMT)
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