MARKET WRAPS
Stocks:
European shares held modest gains following Wednesday's rally, with investors hopeful the Federal Reserve's tightening cycle will end soon.
The positive market mood was further helped by data that showed the U.K. economy contracted slightly less than expected in May, although the economic resilience will likely leave the Bank of England on course to continue raising interest rates.
Track reactions to the U.K. data.
Stocks to Watch
U.K. housebuilders topped the FTSE 100 fallers after industry data showed U.K. house prices fell in June at their fastest since 2009. The national net house-price balance fell to -46% in June from -30% in May, while new buyer enquiries slipped to -45% from -20% beforehand. Read more.
Economic Insight
Social tensions in France are likely hampering consumer confidence, ING said, after protests against pension reform in early 2023 were followed by unrest following the death of a young man during a police stop.
The overall macroeconomic impact of these events might be limited, but they have dominated headlines and likely helped to keep consumer confidence at historic low levels, ING said.
Adding to high interest rates and inflation, this is stymieing momentum in domestic demand, and is likely to continue in the coming years, given France's social problems and President Emmanuel Macron's lack of parliamentary majority, ING said.
U.S. Markets: Markets:
Stock futures rose as earnings season is about to kick off with numbers from PepsiCo and Delta Air Lines.
After consumer inflation fell in June, Wall Street is also watching for the Labor Department's producer-price index.
Stocks to Watch
Disney said it extended the contract of CEO Bob Iger to 2026, pushing shares up 1% in premarket trading.
Imax said it would buy out its Chinese subsidiary, pushing shares up more than 2% in premarket trading.
The AI stock frenzy keeps pushing up perceived winners of the nascent technology, with shares of Meta Platforms and Nvidia both rising more than 1% before the bell.
Viasat shares fell more than 16% premarket after the company said a new satellite suffered an unexpected event that may impact its performance.
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Forex:
Sterling rose above the psychological $1.30 mark, its highest in nearly 15 months, as the dollar remained weaken following the below-forecast U.S. CPI data, while U.K. data showed the economy didn't contract as much as expected in May.
This could leave the Bank of England on course to continue raising interest rates, Premier Miton Investors said.
"With inflation still rife, this keeps the pressure firmly on the [BOE] to keep raising interest rates."
The dollar remained at its lowest level in nearly 15 months against a basket of currencies and the euro after Wednesday's inflation data suggested the Federal Reserve could stop raising rates soon, even as most analysts still expect an increase later this month.
"We [and increasingly the market] doubt that the Fed will hike again after the 26 July meeting," Standard Chartered said.
"We think the recent dollar underperformance reflects a qualitative shift in market comfort with being short dollar as the terminal Fed policy rate looks increasingly capped."
ING said the dollar could be starting a cyclical decline as U.S. interest rates look likely to peak after an expected increase later this month.
"For the big dollar trend, this may be the start of the long-awaited cyclical decline. Yesterday's surprisingly soft U.S. June CPI numbers may be the first sign this year that sharp Fed rate hikes are finally starting to bite."
The DXY dollar index fell to 100.3400 and ING said it is likely to drop toward 100, adding that weak U.S. PPI and jobless claims at 1230 GMT could prompt further losses.
Read EUR/USD's Weekly MACD Seems Set to Cross Into Positive Territory, Charts Show
Bonds:
HSBC Global Research is bullish on Treasurys, expecting yields to drop from current levels in the coming months.
"At close to 4%, 10-year Treasurys are close to the top of the 3.25-4% range of the last eight months, when yields last peaked," HSBC said.
It likes the risk-reward at current levels, adding that yields are unlikely to rise by much but could fall significantly.
HSBC forecasts the 10-year yield at 3% for end-2023 and 2.5% for the end of 2024.
Eurozone bond market focus will turn to the European Central Bank's release of minutes from the June meeting for any clarification on the bank's reaction in the context of a softening growth outlook, Citi said.
"How worried policy makers are about a stagflationary scenario could determine how high the bar is to a dovish pivot," Citi said.
For now, money market forecasts still reflect a 68% chance of a 25 basis-point ECB interest-rate rise in September, it said. A rate rise in September would come on top of a 25 basis-point rate rise in July that is fully priced in.
Read High Volume of Redemptions Seen Supportive of Eurozone Bond Markets
Energy:
Crude oil prices rose slightly, with investors steering towards risk assets after the U.S. inflation data.
ANZ said the focus will shift to tightening oil supply. "OPEC+ output cuts of 1.1 million barrels a day are yet to take full effect, and additional cuts by Saudi Arabia could materially tighten the market."
It added that it expects jet fuel to be the catalyst for the next leg up in oil demand growth. "We still expect overall demand to grow by 2 million barrels a day, keeping the market under-supplied through this year."
Metals:
Base metals and gold were higher, with a less hawkish Fed and a weaker dollar helping to lift commodity prices.
"Bond markets are now pricing a 'One and Done' scenario: One final 25 basis point hike in two weeks, then interest rate cuts in early 2024," Peak Trading Research said, adding that "this is a bullish macro environment."
Read Central Bank Support for Gold Likely to Wane as Rates Peak, UBS Says
DOW JONES NEWSPLUS
EMEA HEADLINES
UK Economy Contracted in May as Industry Feels Pain - Update
The U.K. economy contracted in May as industrial output slid on month, a signal that rising Bank of England interest rates are weighing on economic activity.
The country's gross domestic product declined 0.1% on month in May, from a 0.2% growth in April, data from the Office for National Statistics showed Thursday.
Barratt Developments Prices Rose But Completions Fell in FY 2023
Barratt Developments PLC said Thursday that selling prices rose but completions fell in fiscal 2023, and that it sees fewer completions in the current fiscal year.
The home builder said that for the year ended June 30, its average selling price rose to 320,000 pounds ($415,616) from GBP300,200 a year prior. The number of completions including joint ventures fell 3.9% to 17,206 from 17,908 a year before, Barratt said.
Casino Expects Lower Earnings, Sales in France as Revised Restructuring Offers Loom
Casino Guichard-Perrachon said late Wednesday that earnings and sales for its France operations are expected to fall in the second quarter, and that revised offers for the restructuring of the company's debt are expected on Friday.
The French group said it expects its France sales to have reached 3.6 billion euros ($4.01 billion) in the second quarter, from EUR4 billion the year prior.
Swatch Reports Rise in 1H Profit After Asian Sales Recovery
Swatch Group on Thursday reported an increase in first-half sales and net profit, boosted by the lifting of travel restrictions in Asia.
The Swiss watchmaker said it made 486 million Swiss francs in first-half net profit ($560.2 million), compared with CHF311 million in the prior-year period, on sales that grew 11% to CHF4.02 billion.
Aker Solutions 2Q Earnings Beat Forecast, Lifts Revenue Guidance
Aker Solutions on Thursday posted a forecast-beating rise in second-quarter earnings and raised its full-year revenue guidance amid increasing activity in the energy sector.
The energy-industry service provider reported a second-quarter net profit attributable to shareholders of 528 million Norwegian kroner ($52.2 million), compared with NOK269 million a year earlier. Revenue rose 34% to NOK14.25 billion.
GLOBAL NEWS
Xi Jinping Chokes Off Crucial Engine of China's Economy
Desperate for capital and with their economies struggling, China's cities are wooing Western businesses with previously unavailable goodies. Beijing has labeled 2023 the "Year of Investing in China" and local officials have embarked on promotional tours overseas to drum up interest from investors.
That effort is running headlong into President Xi Jinping's national-security agenda, with its focus on fending off perceived foreign threats. That has made any Chinese investment a potential minefield for foreign firms.
China's June Exports Fell More Than Expected on Weakening Global Demand
China's exports fell more than the market expected in June, official data showed Thursday, pointing to rapidly weakening global demand.
Outbound shipments fell 12.8% from a year earlier, compared with a 7.5% decline recorded in May, the General Administration of Customs said.
Saudi Arabia to Lose Top Spot in OPEC+ as Production Cuts Take Effect
Saudi Arabia is set to fall below Russia as the largest oil producer in the OPEC+ alliance as its production cuts begin to bite, tightening the oil market just as prices appear to be turning higher, the IEA said.
The Gulf Kingdom, de facto leader of the Organization of the Petroleum Exporting Countries, has in recent months slashed its oil output, sacrificing its market share within the oil producers' group, in an attempt to buoy low oil prices that have crimped its revenue.
S&P 500 could top the 4,500 mark, but not for long, says Oxford Economics
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07-13-23 0530ET
