MARKET WRAPS
Watch For:
Euro area June balance of payments; Germany July PPI; Italy June
balance of payments; UK July retail sales figures, public sector
finances
Opening Call:
Europe faces a mixed start early Friday, with the FTSE 100
possibly making slight gains. In Asia, major stock benchmarks were
mixed, along with Treasury yields; the dollar edged higher; while
oil and gold fell.
Equities:
European stocks may open mixed Friday, with the FTSE 100 poised
to see slight gains while the DAX could fall.
U.S. stock benchmarks eked out slight gains after wavering
between gains and losses for much of Thursday's session as
investors parsed earnings reports, economic data and minutes from
the Federal Reserve's latest policy meeting for clues about the
trajectory of the economy and interest rates.
According to one analyst, resurgent fretting over central bank
monetary policy tightening is being used as an excuse for
profit-taking.
"After a very strong run for risk assets thanks to a narrative
that we might have seen 'peak inflation,' Wednesday put a stop to
that as multiple headlines came through that poured cold water on
the prospect that central banks were about to let up on hiking
rates," said Henry Allen, macro strategist at Deutsche Bank.
Nathan Sheets, global chief economist at Citi, said that even
though financial markets had become more positive of late, "we
remain concerned about the underlying fundamentals of the global
economy. Our sense is that economic performance is likely to be
plagued by high inflation, slowing real GDP growth, and rapidly
tightening monetary policy for some time to come."
Forex:
The dollar rose in Asia after hawkish comments from Fed
officials overnight.
St. Louis Fed President James Bullard said he backed another
75-basis-point rate increase at the FOMC's September meeting, while
nonvoting member Mary Daly said "a little" above 3% by year-end is
needed while pushing back against aggressive rate cuts next year,
said IG market strategist Yeap Jun Rong.
The dollar is getting help from economic indicators that support
the idea that the Fed can still be aggressive with policy
tightening, said Oanda's Edward Moya.
Existing home sales numbers show Fed tightening is cooling the
housing market, he said. He also pointed to Philadelphia Fed
manufacturing data and initial jobless claims numbers. Also, "it
doesn't hurt that we got some Fedspeak and that keeps the market
sharp," Moya said.
Bonds:
Treasury yields were mixed in Asia after a dearth of
market-moving news in the U.S. on Thursday.
Traders focused elsewhere instead. European Central Bank board
member Isabel Schnabel said the region's inflation outlook has
failed to improve, suggesting she favors another large
interest-rate increase even as recession risks firm.
In geopolitics, the U.S. agreed to hold trade talks with Taiwan
in a new show of support for the island, which is battling tensions
with its large neighbor China.
That development "could be underpinning some strength" in bonds,
said Larry Milstein, senior managing director of government debt
trading at R.W. Pressprich & Co.
Separately, demand for government bonds could be seen from
Japanese investors and the 10-year yield has recently been hovering
around the attractive level of 2.9%, a trader said.
Meanwhile, Treasury's $8 billion auction of 30-year TIPS
produced "the largest stop through on record," according to BMO
Capital Markets strategist Ben Jeffery.
Yields had moved higher Wednesday after data showed the annual
rate of inflation in the U.K. breached 10% for the first time in
more than 40 years, raising fears that many economies have yet to
register peak inflation.
Energy:
Oil futures fell in Asia after closing higher overnight as
traders digested recent data showing a sharp drop in U.S.
inventories.
However, "recession fears remain elevated for key markets,
including the U.S. and EU, raising concerns over the strength of
future oil demand," Fitch Solutions said.
Meanwhile, developments relating to a potential nuclear deal
with Iran will also be closely watched.
--
In other news, the year 2022 has seen record-breaking fuel price
increases, according to the U.S. Bureau of Transportation
Statistics.
The price increase from February to March for both regular motor
gasoline and diesel fuel was the largest month-over-month gain on
record. The price of diesel fuel was up 27% in March from February,
while the price of gasoline rose 20%.
From January to June, the price of regular motor gasoline rose
49% and the price of diesel fuel rose just over 55%, the BTS said.
In June, the price of gasoline averaged $5.02 a gallon, up from the
$3.15 recorded in June 2021, according to the U.S. Energy
Information Administration.
July saw a slight decline, with the average per gallon price
falling to $4.66, but still above the $3.23 reported in July 2021,
the EIA said.
Metals:
Gold futures edged lower following a fourth straight session
loss overnight on the back of strength in the dollar.
"The U.S. dollar might continue to strengthen if U.S. economic
data continues to surpass expectations," Oanda's Moya said.
"After breaking below $1,800, gold has been struggling to regain
its footing," he added.
--
Aluminum and zinc appear to be struggling to hold on to recent
gains despite signs of tighter supply amid Europe's energy crisis,
ANZ said.
"Weak economic data in China has increased headwinds for the
sector," ANZ added.
While China has responded with further stimulus measures, its
"credit impulse is slowing again in response to the restrictions
involved in its zero-Covid strategy," they said.
TODAY'S TOP HEADLINES
Fed's Bullard Leans Toward Favoring 0.75-Percentage-Point
September Rate Rise
Federal Reserve Bank of St. Louis President James Bullard said
Thursday he is considering support for another large rate rise at
the central bank's policy meeting next month and added he isn't
ready to say the economy has seen the worst of the inflation
surge.
"We should continue to move expeditiously to a level of the
policy rate that will put significant downward pressure on
inflation" and "I don't really see why you want to drag out
interest rate increases into next year," Mr. Bullard said in a Wall
Street Journal interview.
U.K. Consumer Confidence Hits Record Low in August
British consumer confidence fell to a record low in August as
cost-of-living pressures and dim economic prospects continued to
build.
The consumer-confidence barometer compiled by research firm GfK
declined to minus 44 in August from minus 41 in July, the lowest
level since the survey began in 1974 and below economists'
expectations of consumer confidence remaining unchanged from the
previous month.
U.K. Regulator Requires Audit Firms, Individual Auditors to
Apply to Join New Register
The U.K. Financial Reporting Council is set to gain greater
control over auditors with a register that will determine who can
audit the financial statements of large listed companies or
financial institutions-so-called public-interest entities-and who
cannot.
Ukraine Presses U.N. Over 'Nuclear Blackmail' at
Russian-Occupied Plant
ODESSA, Ukraine-Ukrainian President Volodymyr Zelensky met with
the leaders of Turkey and the United Nations on Thursday to discuss
food shipments from Ukraine and the increasingly tense situation at
the Zaporizhzhia nuclear plant, as a series of blasts targeted
Russian logistical hubs deep behind the front lines.
Following the meetings in the western Ukrainian city of Lviv,
Mr. Zelensky said that he had pressed U.N. Secretary-General
António Guterres about the nuclear plant, which Russia has occupied
since the early days of the war. Explosions around the plant in
recent days have knocked one reactor off the power grid and sparked
fears of a nuclear catastrophe.
Meme Lord Ryan Cohen Unloads Bed Bath & Beyond Bet, Sending
Shares Spiraling
Billionaire investor Ryan Cohen cashed out his entire position
in Bed Bath & Beyond Inc. this week, capping a wild stretch of
trading in the stock and marking the latest sign that meme-stock
mania is still alive.
Mr. Cohen, the co-founder of pet-supply retailer Chewy Inc.,
developed a deep fan base of individual investors last year after
he ascended to become chairman of GameStop Corp., the original meme
stock. In March, he revealed an activist position in Bed Bath &
Beyond, sparking a rally in its share price.
Write to hoishan.chan@dowjones.com
Expected Major Events for Friday
06:00/GER: Jul PPI
06:00/UK: Jul UK monthly retail sales figures
06:00/UK: Jul Public sector finances
06:30/SWI: 2Q Industrial Production
08:00/POL: Jul Average gross wages
08:00/EU: Jun Euro area balance of payments
08:00/POL: Jul PPI
08:00/POL: Jul Industrial Production Index
09:00/ITA: Jun Balance of Payments
15:59/GRE: Jun Balance of Payments
17:59/POR: Jun Balance of Payments
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(END) Dow Jones Newswires
August 19, 2022 00:27 ET (04:27 GMT)
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