MARKET WRAPS
Watch For:
Germany industrial production index; U.K. Halifax house price index, BRC-KPMG retail sales monitor; trading updates from Siemens Energy, Dechra Pharmaceuticals, SAS
Opening Call:
European shares may open lower at the start of the week. In Asia, stock benchmarks were largely lower; the dollar steadied; Treasury yields inched higher; while oil and gold futures edged lower.
Equities:
Stock futures point to declines for European shares at the open after posting gains to close out last week in the wake of U.S. jobs data.
U.S. indexes ended Friday lower as parsed the July jobs report and Big Tech earnings from Amazon and Apple.
The jobs report was "pretty benign," being neither too hot nor too cold, said Randy Frederick, Charles Schwab's managing director of trading and derivatives.
"Recession seems highly unlikely in 2023," while traders, after digesting the employment data, still expect the Federal Reserve to hold interest rates steady at its meeting next month, he said.
Slowing job growth may bolster hopes that the Fed's rate hikes could succeed in cooling the economy -- and inflation with it -- without leading to a hard landing.
However, many economists and analysts flagged the slightly hotter-than-expected wage growth in July as a potential sticking point for the Fed. The annualized 4.4% rise is well above the Fed's target of 2% inflation, said Bankrate senior economic analyst Mark Hamrick.
Adam Farstrup, head of the multiasset team for the Americas at Schroders, said his base case is for a "soft landing" for the U.S. economy, but he's monitoring wage growth and a recent rise in oil prices as possible sources for a potential second round of inflation.
Forex:
The dollar steadied amid a cautious mood ahead of global economic data, such as China trade and U.S. CPI reports due out this week.
The U.S. inflation report is the "marquee" event risk, said Pepperstone. There are some signs of a possible above-consensus print, which wouldn't be taken well by risk assets, Pepperstone said.
Bonds:
Treasury yields rose slightly early Monday after falling sharply Friday in the wake of the U.S. jobs report for July.
Treasury securities at the long end of the curve tumbled in value last week on signs the U.S. economy was still growing at a solid clip.
Traders and investors were also focused on the U.S.'s deteriorating fiscal outlook as underscored by the Treasury's plans to borrow $1 trillion in the third quarter and Fitch's downgrade of the government's top AAA rating.
"This jobs report is definitely not a game changer," said Seema Shah, chief global strategist at Principal Financial Management.
"The Fed still has another report to come before their next meeting but, if no clear direction emerges, the Fed is likely to stay put," she said.
Fed Chair Jerome Powell "seems to need a very compelling reason to hike again so, with the hurdle so high, it would likely take a meaningful upside surprise to both job gains and wage growth to prompt Fed action in September."
The steepening of the yield curve, with rates at the long end rising as shorter-dated yields fell, "has been a function of the Treasury Department's increase in auction sizes and signaling that there is more to come in November -- and February could also see greater borrowing needs translate into larger nominal coupon auction sizes," said strategists Ian Lyngen and Benjamin Jeffery of BMO Capital Markets.
Read: Rising Treasury yields spooked the stock market. Now, a key test lies ahead.
Energy:
Oil futures edged lower in Asia ahead of Chinese economic data such as trade balance that are due this week.
The crude-oil price rally could persist if the data confirms that part of the world's demand for oil is growing, said Oanda.
The $85/bbl level should offer major resistance for WTI crude, but if this doesn't slow the rally, every trader will have their eyes on the $90/bbl level, Oanda said.
Metals:
Gold futures fell early Monday in Asian trading. Galaxy Futures thinks the precious metal is likely to remain in a range-bound pattern in the near term. There are growing investor expectations for less aggressive Fed tightening at the central bank's September meeting after the latest release of weaker-than-expected U.S. jobs data, the brokerage says, adding this could offer some relief for gold prices.
But still, technical analysis points to continued pressure for the metal, especially given continued strength in the dollar, which makes the safe-haven commodity less attractive, Galaxy Futures said.
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Copper prices declined, with market sentiment weighed down by China's weak manufacturing activity.
Although China's State Council released a slew of policies to support consumption, including easing restrictions on car purchases and supporting people's demand for buying their homes, data show ongoing weakness in manufacturing activity, ANZ said.
"Consumer confidence will need to pick up quickly before the market has any confidence that demand will respond to the government initiatives," ANZ added.
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Iron ore futures declined in China as a selloff continues on fading optimism over China's stimulus and worries of production curbs being imposed by the government.
"Amidst the broad industrial metals post-Politburo fade, the most significant sell-off has been in iron ore," Goldman Sachs said. This is related to the increasing risk of China policy intervention affecting steel production and in turn iron-ore demand, the bank added.
TODAY'S TOP HEADLINES
Fed's Bowman says more interest-rate hikes will likely be needed
The Federal Reserve will likely need to raise interest rates even higher to bring inflation down to tolerable levels, Fed Gov. Michelle Bowman said Saturday.
Speaking at a meeting of the Kansas Bankers Association in Colorado, Bowman - a former Kansas banking regulator - said she expects "that additional rate increases will likely be needed to get inflation on a path down to the [Federal Open Market Committee]'s 2% target."
JPMorgan abandons U.S. recession call, instead sees 'subpar growth' in 2024
A top economist at JPMorgan Chase & Co. JPM no longer expects a recession to arrive in the U.S. before the end of 2023. He doesn't expect one in 2024 either, but said the risk of a potential downturn remains elevated.
Michael Feroli, chief U.S. economist at JPMorgan, on Friday officially abandoned the bank's earlier recession forecast, putting the largest U.S. bank by assets more in line with others on Wall Street in thinking that a recession might be avoided even though the Federal Reserve has increased rates to a 22-year high.
Deadline for Niger Coup Leaders to Back Down Passes Without Intervention
A deadline set by other West African countries for coup leaders in Niger to back down and liberate the nation's elected president passed on Sunday without regional militaries launching the armed intervention they had threatened.
Eleven leaders from the Economic Community of West African States at an emergency summit last weekend said they would consider using force to return Nigerien President Mohamed Bazoum to power.
Russia and China Sent Large Naval Patrol Near Alaska
A combined Russian and Chinese naval force patrolled near the coast of Alaska last week in what U.S. experts said appeared to be the largest such flotilla to approach American shores.
Eleven Russian and Chinese ships steamed close to the Aleutian Islands, according to U.S. officials. The ships, which never entered U.S. territorial waters and have since left, were shadowed by four U.S. destroyers and P-8 Poseidon aircraft.
The West Sanctioned Russia's Billionaires. Now They Are Fighting Back.
LONDON-Over a year ago the West launched a new foreign-policy weapon to pressure the Kremlin to halt its war in Ukraine: It sanctioned more than a hundred leading Russian businessmen and their families, hoping that they would prod Russian President Vladimir Putin to give up his expansionist plans.
So far the strategy hasn't worked. The war still rages and very few Russian billionaires have publicly denounced Putin or sold off their Russian assets. Meanwhile, a handful of deep-pocketed oligarchs are pushing back, intensifying their legal challenges in U.K. and European Union courts in a long-shot attempt to remove restrictions that include travel bans and asset freezes.
With China Attending, Ukraine Peace Discussions Inch Forward
Efforts to forge an international consensus around a durable and fair peace settlement to the war in Ukraine inched forward Saturday after discussions in Saudi Arabia among senior officials from 42 countries, including the U.S., China, India and Ukraine.
Ukraine and its Western backers have pitched the talks as an effort to rally global support behind conditions for ending the war that would favor Ukraine. Many big developing countries have been largely neutral on the conflict.
Space Companies Struggle to Meet Lofty Goals
Newer players in the space industry are running up against harsh business realities.
Several space-related companies have been shedding employees, finding other ways to reduce spending or have reined in their plans.
Ukrainian Sea Drones Attack Russian Oil Tanker in Black Sea
ISTANBUL-Ukrainian sea drones attacked an oil tanker sanctioned by the U.S. for working for the Russian military, potentially bringing the war into a new phase that threatens Russia's vital shipping lanes in the Black Sea.
The attack struck a Russian oil tanker Sig overnight near the Kerch Bridge that links Russia to the occupied Crimean Peninsula, damaging the engine room, according to the Russian state news agency TASS. TASS cited the Marine Rescue Coordination Center of Novorossiysk.
Pratt & Whitney Engine Problems Lead Some Airlines to Reduce Flights
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08-07-23 0017ET
