MARKET WRAPS
Watch For:
Germany balance of payments; France CPI; Italy foreign trade; UK industrial production, trade, GDP first quarterly estimate, GDP monthly estimates, index of services, business investment in the UK; IEA oil market report; ILO unemployment; trading updates from Sberbank, Pandora
Opening Call:
Shares could stumble in Europe on Friday as investors weigh U.S. economic data. In Asia, stock benchmarks were mostly in the red; Treasury yields advanced; the dollar was mixed; while oil edged down and gold retreated.
Equities:
European stocks could venture into negative territory on Friday, with investors digesting a benign U.S. July inflation report and an uptick in weekly jobless claims.
Last month's U.S. CPI rose a mild 0.2%, the same as in June, while core prices also increased just 0.2% in both months.
The slowdown in price pressures may be enough to deter the Federal Reserve from raising interest rates at its September meeting.
"The grounds are there for the Fed not to have to hike at the next meeting," said Hirtle Callaghan & Co. "The recent numbers point towards being on a steady-as-she-goes, sustainable path for the economy and that is good for markets."
However, some market participants are worried that Thursday's higher-than-expected jobless claims could signal weakness ahead.
"At this point, it's all eyes on the labor market," said Girard, a wealth advisory firm backed by Univest.
Initial claims, a proxy for layoffs, increased to a seasonally adjusted 248,000 in the week ended Aug. 5, the Labor Department said. Economists were expecting 230,000 initial claims.
Forex:
The U.S. dollar was mixed in Asia amid conflicting signals.
U.S. July CPI data released overnight matched expectations and bolstered the case for the FOMC to keep rates unchanged at its September meeting, said CBA.
However, San Francisco Fed President Daly said the FOMC has more work to do and shouldn't declare victory yet on inflation, CBA added.
Traders are pricing in a roughly 90% probability that the Fed leaves rates unchanged in its September meeting, up from 72% a month ago, according to federal-funds futures.
Bonds:
Treasury yields extended gains, as traders assessed a weaker-than-expected 30-year bond auction, the latest U.S. inflation data, and remarks by San Francisco Fed President Mary Daly.
It is the first time in more than a year that the annual headline rate has gone up again, though the report was in line with the expectations of traders.
Thursday afternoon's $23 billion auction of 30-year bonds came in "soft" and produced a modest selloff in the longest-dated maturities, according to BMO Capital Markets.
Meanwhile, Daly of the San Francisco Fed told Yahoo Finance that it is premature to say whether policy makers have done enough on rates.
"For now, the risks of inflation spiraling higher appear to have fallen, so we expect headline CPI to remain around the 3% level for the coming months," said Insight Investment.
"We expect the Fed will take some comfort from core CPI, which is making consistent, albeit slow, progress," Insight Investment said. "There will be another print before the FOMC [Federal Open Market Committee] next meets in September; depending on the outcome, we currently expect the committee is biased toward holding rates steady."
Energy:
Oil futures nudged lower in Asia amid worries that a trend toward higher inflation may be stirring, one that could lead to more demand-destroying Fed action.
A monthly report on U.S. inflation showed a reacceleration higher after 12 consecutive months of easing, as the annual CPI rate rose to 3.2% in July versus 3.0% in June.
However, prices are supported by several positive catalysts.
Continued supply reductions by Saudi Arabia, together with sharp increases in official selling prices, higher demand for U.S. crude oil in the international market and low inventory at the Cushing storage hub in Oklahoma are all driving spot WTI prices up, ING said.
Metals:
Gold weakened in Asia, although soft U.S. inflation data is underpinning investor optimism about the likelihood of the Fed pausing its interest-rate increases.
Gold typically has an inverse relationship with the U.S. dollar. A peak in the dollar might be in place, Oanda said. However, a surge in gold prices is unlikely, given investor belief that equities will outperform, it said.
Vantage said the importance of Thursday's CPI report is "slightly diluted" as investors will get one final set of inflation data before the next Federal Reserve policy meeting in September.
"Focus will also turn to Jackson Hole at the end of this month which could see Chair Powell confirm the Fed's rate hike intentions," it said.
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Copper prices were flat as investors awaited the next moves from both the U.S. Federal Reserve and Beijing officials.
The lower-than-expected rise in U.S. inflation leaves investors unsure which way the Fed will move on interest rates at its next meeting, ANZ said.
There also remains uncertainty surrounding Beijing's economic support measures after China reported weak inflation data earlier this week, ANZ added.
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Iron-ore futures were higher, reversing overnight losses on a possible technical rebound.
Demand for the ferrous metal has risen while supply remains weak, Guangfa Futures said.
However, demand in the second half is likely to be limited by China's output restriction on steel makers, it added.
TODAY'S TOP HEADLINES
Cooler July Inflation Opens Door to Fed Pause on Rates
Price pressures continued cooling last month, fresh inflation figures showed, likely deterring the Federal Reserve from raising interest rates at its September meeting.
The consumer-price index, a measure of goods and services prices across the economy, rose a mild 0.2% in July, the same as in June, the Labor Department said Thursday. Core prices, which exclude volatile food and energy categories, also increased just 0.2% in both months, extending a broader slowdown in price pressures.
Fed has 'more work to do' to get inflation back down, Daly says
San Francisco Federal Reserve President Mary Daly said Thursday it was premature to declare victory on inflation despite the soft consumer inflation data for July released earlier that morning.
"There's still more work to do," Daly said, in an interview on Yahoo Finance.
Ukraine's Sea Drones Alter Balance of Power in Black Sea
ISTANBUL-Ukraine has altered the military balance of power in the Black Sea in recent months, using sea drones to strike back at Russia's more powerful navy and threaten Russian military supply lines and shipping lanes.
Small, inexpensive and difficult to defend against, the homemade drones have allowed Ukraine to open up a new front in the war, attacking strategic military targets and symbols of Russia's dominance in the Black Sea-including the headquarters of Moscow's fleet in occupied Crimea and a bridge connecting the peninsula to Russia. Ukraine says the drones are developed and produced domestically, but has been secretive about the details of the program.
Russian Tech Giant's Co-Founder Speaks Out Against Ukraine War
The co-founder of Russian tech giant Yandex condemned what he described as Russia's barbaric war in Ukraine, in some of the most pointed criticism so far from a leader of the country's business community.
Arkady Volozh, the company's former chief executive, lamented the destruction being leveled upon Russia's smaller neighbor in what Russian President Vladimir Putin calls a special military operation.
Rio Tinto to Build Large Solar Plant to Power Diamond Mine in Canada's Northwest Territories
Rio Tinto will build Canada's largest solar power plant in the Northwest Territories to provide energy to its diamond mine there.
The Anglo-Australian metals and mining giant said the power plant will be made up of 6,600 solar panels generating about 4,200 megawatt-hours of carbon-free electricity annually for the Diavik Diamond Mine.
X CEO Yaccarino Says Platform Is Watching Threads but Has Its Own Vision
X Chief Executive Linda Yaccarino said the social-media app formerly known as Twitter will keep an eye on competition such as Threads from Meta Platforms, but that what she is building with billionaire owner Elon Musk would be something new.
"We're keeping an eye on everything that they're doing," Yaccarino said in an interview with CNBC on Thursday morning when asked about Threads. She added: "We're focused on what X will be, and it's an entirely different road map."
Amazon Cuts Dozens of House Brands as It Battles Costs, Regulators
https://urldefense.com/v3/__http://Amazon.com__;!!F0Stn7g!AFG3DKSXoXtlA6VgqXWEKzhkjelhA8xYYPate1aaow0xbrTEsDZmavg31SxsahmRZaT8NqxXor_SgPC3kuPmIaZcXLjHY25iat8GNOzgbAQ$ is jettisoning dozens of its in-house brands as part of a significant reduction of its private-label operation as it works to fend off antitrust scrutiny and shore up profit.
The Seattle-based company in the past year has decided to eliminate 27 of its 30 clothing brands, such as Lark & Ro, Daily Ritual and Goodthreads, according to people familiar with the matter. Some of the brands remain on Amazon's site for now as the company sells off remaining inventory, but when completed its house-label clothing division will have just three brands: Amazon Essentials, Amazon Collection and Amazon Aware.
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Expected Major Events for Friday
05:00/FIN: Jun Balance of Payments
05:30/FRA: 2Q ILO Unemployment and Labour Market-related indicators
06:00/ROM: Jul CPI
06:00/UK: 2Q Business investment in the UK: provisional results
06:00/UK: Jun Index of Production
06:00/UK: Jun UK trade
06:00/UK: Jun Index of services
06:00/UK: 2Q First quarterly estimate of GDP
06:00/UK: Jun Monthly GDP estimates
06:45/FRA: Jul CPI
07:00/SVK: Jun Employment and average monthly wage in selected branches
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08-11-23 0022ET
