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

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

August 19, 2022 00:27 ET (04:27 GMT)

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