MARKET WRAPS

Watch For:

U.S. Trade for April; Canada Trade for April

Opening Call:

Stock futures traded lower Tuesday as bonds sold off with investors fearing the Federal Reserve and other global central banks will have to be more aggressive in their efforts to tame inflation.

The Reserve Bank of Australia surprised markets Tuesday with a larger-than-expected interest rate hike of half a point. Read more here.

A stronger-than-expected jobs report for May along with rising wages are just the latest data points that have Wall Street believing the Fed will have continue to raise interest rates aggressively.

U.S. inflation data, due Friday, will be closely scrutinized. Economists expect an increase in the consumer price index for May of 8.2% from a year earlier. Core inflation, which strips out food and energy, is forecast at 5.9% vs. 6.2% a month earlier.

Jeffrey Halley, senior market analyst at OANDA, said he wasn't entirely convinced the rise in yields above 3% was driven by inflation and fears of Fed tightening. He noted how $96 billion of U.S. bond debt will be sold later this week.

"Time will tell although if most of the U.S. curve is still above 3% come Friday, the post-U.S. inflation price action could be frisky indeed, " Halley added.

In premarket trading, Kohl's jumped more than 13% after The Wall Street Journal reported the department-store chain is in exclusive talks to be sold to retail holding company Franchise Group. The deal may value the company at around $8 billion.

Twitter declined 0.8%, extending Monday's slide after Elon Musk threatened to end his acquisition of the social-media platform, saying the company didn't comply with requests for data about spam accounts.

Overseas, the pan-continental Stoxx Europe 600 slipped 0.3% while major benchmarks in Asia were mixed.

Forex:

The dollar edged higher as stocks fell in Europe, and ING analysts expect the currency will remain propped up by prospects of further Fed interest-rate rises and evidence of a solid U.S. economy.

"We think the dollar will remain broadly supported on balance, as the underlying stories of Fed tightening and good U.S. economic momentum continue to put a floor under the greenback."

Sterling was lower after Monday's close no-confidence vote for Boris Johnson, which he survived by 211-148 votes to remain as prime minister.

"The triggering of the confidence vote itself along with the fact that 41% of Tory MPs failed to back him [Johnson] are both politically corrosive, leaving the Prime Minister wounded," said Victoria Scholar, head of investment at Interactive Investor.

The pound was "suffering amid a lack of international investor confidence in the U.K. both economically and politically."

Bonds:

The yield on the 10-year Treasury was at 3.027% early Tuesday, after rising above 3% Monday for the first time since mid-May.

Markets are "positioning themselves for perhaps what they perceive to be another round of high inflation" said Spartan's Peter Cardillo. "I believe that structural inflation has peaked, but the transitory inflation is probably the real problem."

Cardillo expects energy and food prices to remain strong even as other prices cool down, leading the Fed to hike by 50 basis points at least twice more. Cardillo thinks the 10-year yield is unlikely to go higher than its March peak of 3.12%.

Energy:

Oil prices ticked slightly higher in Europe on doubts that OPEC will be able to meet its increased production targets

While OPEC+ has agreed to increase its collective output, potentially easing tightness in the market, many cartel members are expected to be unlikely to meet their quotas, leaving a gap between what the group targets and ultimately produces.

"While the new increased monthly targets continue to be driven by proportional contributions from all participants (including Russia), it is unrealistic to expect an increase close to the headline figure," wrote SPI Asset Management.

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Global prices for natural gas and LNG look set to rise as China's exiting of its Covid-19 lockdowns boosts demand, said Goldman Sachs. "We believe the recent increase in Asian LNG buying will be the next bullish catalyst for the global gas markets."

Other factors such as extreme heat in India and Pakistan, and nuclear power plant maintenance in Japan, are also lending price support, Goldman Sachs said. With diesel prices now higher than gas, there is also incentive for Asian consumers to pick gas over other fuels.

Other News:

Venezuela is gradually returning to international oil markets after Eni and Repsol were given the green light from Washington to resume sourcing oil from the sanctioned South American country, tanker owners at the Posidonia shipping conference in Athens told WSJ. Washington's blessing comes as Europe tries to cut its energy dependence from Moscow.

"The imports will be limited in the beginning, but could take off by the end of the summer," one owner that runs more than two dozen tankers said.

Washington is also looking at a request by Chevron to resume shipments from Venezuela, two years after the U.S. tightened oil sanctions on Caracas that effectively banned oil shipments to Western markets.

Metals:

Base metals weakened, under pressure from a stronger dollar, with investors also waiting for more signs that China's easing pandemic lockdowns were lifting economic activity.

Jefferies is cautiously optimistic that a gradual recovery in Chinese commodity demand is coming, as it increased its iron-ore and coal price forecasts, and upgraded miners including BHP, Rio Tinto, Anglo American, Vale and South32 to buy from hold.

Jefferies reckons a stimulus-induced shift in China should partly offset weaker demand elsewhere. Of course, there are a number of threats to commodity demand, and mining stocks will consequently be volatile, it said.

"Macro risks are still clearly elevated as an economic hurricane could be coming, but we would buy the miners to ride out the storm and maximize leverage to the subsequent recovery."

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Commonwealth Bank of Australia analyst Vivek Dhar said China's aim to curb steel production again in 2022 will likely weigh on the country's output later this year, although the extent to which its production needs to fall heading into year-end should be milder than in 2021.

"That should correspondingly see a smaller fall in iron-ore prices" versus late-2021.

Dhar has forecast that iron ore will fall to $100 a metric ton in the fourth quarter. Ultimately, "iron-ore prices remain in China's hands," said Dhar.


TODAY'S TOP HEADLINES


Elon Musk Threatens to End Twitter Deal Over Lack of Information on Spam Accounts

Elon Musk threatened to terminate his deal to buy Twitter Inc. in a letter accusing the company of not complying with his request for data on the number of spam and fake accounts on the social-media platform.

Mr. Musk said Twitter has refused to provide the data necessary for him to facilitate his own evaluation of the number of spam and fake accounts. In April, Twitter accepted Mr. Musk's $44 billion bid to take over the company and go private.


Kohl's Enters Exclusive Talks to Be Sold to Vitamin Shoppe Owner

Kohl's Corp. is in advanced talks to be sold in a deal that could value the department-store chain at roughly $8 billion.

The Wisconsin company said it has entered exclusive talks with retail holding company Franchise Group Inc., confirming an earlier report by The Wall Street Journal. The exclusivity period is to last three weeks, the company said, adding that a deal isn't guaranteed.


BuzzFeed Shares Drop 41% in Wake of Investor Lockup Expiration

BuzzFeed Inc.'s stock plummeted 41% on Monday, shortly after a ban preventing executives and major institutional investors from selling their shares was lifted.

The plunge was the worst percentage drop in the digital-media company's short trading history, and the its market capitalization has now shrunk by more than three-quarters since its December trading debut. BuzzFeed went public through a merger with special-purpose-acquisition company 890 5th Avenue.


Peloton Swaps Out Finance Chief as It Navigates Persistent Losses

Peloton Interactive Inc. is exchanging its top finance executive about four months after it named a new chief executive, a move that comes as the fitness-equipment maker navigates persistent losses.

The New York-based at-home exercise equipment company on Monday said Liz Coddington will serve as its chief financial officer, effective June 13. Peloton said its current CFO, Jill Woodworth, decided to leave after more than four years with the company.


J&J Says It Plans to End Covid-19 Vaccine Supply Deal With Emergent BioSolutions

Johnson & Johnson said Monday it planned to terminate its Covid-19 vaccine supply deal with contract manufacturer Emergent BioSolutions Inc., as both companies accused each other of breaching the agreement.

J&J informed Emergent last week of its plan to terminate the 2020 manufacturing agreement "based on Emergent's breaches, including failure to supply Covid-19 vaccine drug substance," J&J said in a written statement.


'Top Gun: Maverick' Studio Paramount Is Sued Over Copyright

The family of the writer whose story launched the 1986 "Top Gun" movie has sued Paramount Pictures, claiming the studio failed to get story rights for the blockbuster sequel "Top Gun: Maverick."

The original "Top Gun" was based on a magazine story by Ehud Yonay titled "Top Guns," focused on fighter pilots at a naval training base. Paramount secured the exclusive motion picture rights to the story immediately after it was published in 1983, according to the lawsuit.


Obvious Raises Two New Funds Focused on Social Impacts

Obvious Ventures, the venture-capital firm founded in part by Twitter Inc. co-founder Ev Williams, announced Tuesday that it raised $461 million in two new funds.


Bain Capital Raises Over US$2 Billion for Asia-Focused Fund

(MORE TO FOLLOW) Dow Jones Newswires

06-07-22 0543ET