MARKET WRAPS

Watch For:

MBA Weekly Mortgage Applications Survey; Johnson Redbook Retail Sales Index; FRB New York President John Williams speaks at New York Fed Web Series on Culture; Services PMI for June; ISM Report On Business Services PMI for June; Job Openings & Labor Turnover Survey for May; Global Services PMI for June; Federal Open Market Committee meeting minutes and economic forecast; API Weekly Statistical Bulletin; Canada Official International Reserves

Opening Call:

Stock futures inched lower ahead of minutes from the Federal Reserve that will be scrutinized for insights into the state of the economy and the central bank's efforts to tame inflation through interest-rate increases.

Stocks have edged up in recent days, as some investors shifted their views about the aggressiveness of central bank tightening as economic growth and consumer sentiment weakened. Markets are beginning to price in a pivot on policy from the Fed, despite inflation still being at a more than a four-decade high.

"Over the last couple of days, markets priced out some of the hawkishness that they were expecting for the Fed. What's going to be interesting is to see whether the Fed in the short term will try to push back," Carmignac said. "At least for the foreseeable future, it's all about inflation."

Investors will also look to data on the services sector.

"We are awaiting some kind of short-term rebound because the movement has been extremely quick from a historical point of view," Amundi said.

"The hope is that central banks, to some extent, are stopping hiking rates and entering into a wait-and-see approach" to assess how much economic growth and corporate earnings are being affected, it said.

Overseas, European stocks bounced back after heavy losses in the previous trading session, while most major benchmarks in Asia declined.

Economic Insight:

Employers in the U.S. are expected to have added 290,000 jobs in June, down from 390,000 in May, but still a solid increase, Citi said. The bank expects a 0.4% increase in average hourly earnings and a drop in the unemployment rate to 3.5%, data that should encourage the Federal Reserve to proceed with another interest rate increase of 75 basis points in July, it said.

"June is likely too soon to see much slowing in labor demand, but markets could be particularly sensitive to a downside surprise given other recently softer activity data," Citi said. U.S. June employment report is due Friday. Economists polled by The Wall Street Journal expect payrolls to increase by 250,000.

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The U.S. economy was in a technical recession in the second quarter as GDP is expected to have contracted by 0.3% from April to June after falling 1.5% in 1Q, High Frequency Economics said.

Economic data initially showed strong positive momentum for the economy in 1H--with a surprising disconnect between consumer confidence and spending--but May's income and spending report showed not only a decline in real spending that month but also downward revisions to readings going back to January, it said.

"Based on the new information and our forecast for June, we expect an even slower 1.0% rise in consumption in 2Q," the economic-research consultancy said.

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Citi's global supply chain pressure index posted its first meaningful decline since January. The good news is that the retreat in the index suggests that pressures in the global goods sectors, which have been a central driver of inflation, might be easing, it said.

The bad news is that this looks to be occurring on the back of weaker global consumer demand for goods, especially for discretionary goods, and thus might signal rising recession risks, Citi warned. "This is hardly an all clear signal for supply chains," it said. There are many risks still in play, such as pandemic-related disruptions and economic challenges from the Russia-Ukraine war, Citi said.

Forex:

Traditional safe-haven currencies of the dollar, Swiss franc and Japanese yen should continue to outperform in the near term on fears over weaker global economic growth, MUFG Bank said.

Price action in the currency market is "being increasingly driven by safe haven demand as fears over a sharper slowdown/recession for the global economy continue to intensify," it said. "Those intensifying growth fears are clearly evident now across a wide range of financial markets."

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EUR/USD may fall further after breaking below critical support at 1.0350 on Tuesday, based on technical charts, said UOB.

This break has been accompanied by solid downward momentum, and EUR/USD is likely to weaken further within these couple of months.

While round-number levels of 1.0200 and 1.0100 could offer some support, the key level to monitor is 1.0000. Only a break above declining trendline resistance and the 55-day exponential moving average, both of which are near 1.0510, would signal EUR/USD's downtrend from earlier this year has stabilized, UOB said.

Energy:

Oil prices recovered some of the previous session's steep losses in early trading with SPI Asset Management suggesting Tuesday's price action "seemed to point to positioning and recession probabilities getting brought forward due to Europe's doomsday economic concerns."

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Energy derivatives are likely to outperform base metals in the current weak macro environment, UBS said. The Russia-Ukraine war will likely continue to have a greater impact on energy vs. metal prices, with the EU's push to decrease its dependence on energy supply from Russia keeping prices buoyant, the bank said.

As the global economy moves beyond the Covid-19 pandemic, global consumption may also shift toward travel and services, which are energy-intensive compared with consumer-discretionary goods that have been a major focus of pandemic spending, UBS said.

Metals:

Base metals were mixed in Europe and gold a touch higher, with CBA saying "industrial metal prices will likely continue to react the most negatively to global growth fears, rising interest rates and a surging dollar."

TODAY'S TOP HEADLINES

Batteries Become Do-Or-Die for Air-Taxi Startups

The dream of electric air taxis has always depended on the reality of batteries. With money for moonshots drying up, investors may be wise to focus on today's technology rather than tomorrow's.

Vertical Aerospace, a British startup focused on electric vertical takeoff and landing aircraft, or eVTOL, will source batteries from cell supplier Molicel for its VX4 model-a move which hasn't previously been reported. The Taiwan-owned manufacturer has already made the prototype lithium-ion cells that Vertical will use. It will open a new gigafactory to fulfill the orders, and said it has secured key raw materials such as lithium and graphite.

Highflying Cyber Firms Cut Staff After Raising Hundreds of Millions of Dollars

Companies that help businesses battle hackers and comply with privacy regulations now face a potentially more formidable adversary: market turmoil.

About 1,400 workers have been laid off since late May from cyber and privacy firms, many of which raised hundreds of millions of dollars in recent years. OneTrust LLC laid off about 950 people last month after touting a $5.3 billion valuation in 2020. IronNet Inc., led by a former head of the National Security Agency, laid off 55 workers in June after raising nearly $137 million in gross proceeds when it went public last year.

Amazon Strikes Partnership Deal with Grubhub That Could Include Small Equity Stake

Amazon.com Inc. agreed to add Grubhub to its suite of Prime services in the U.S., in a deal that also gives the e-commerce giant the option to acquire a small stake, the parent of the food-ordering company said.

Grubhub's parent, Netherlands-based Just Eat Takeaway.com NV, said Amazon has an initial option to take a 2% stake in U.S.-based Grubhub, and U.S. Prime members can have their delivery fees waived from select restaurants. Amazon could bump up its total stake to 15% of Grubhub based on performance terms focused on adding new customers, Just Eat said.

Crypto Broker Voyager Digital Files for Bankruptcy Protection

Cryptocurrency broker Voyager Digital Ltd. said that it has filed for Chapter 11 bankruptcy protection, days after it suspended withdrawals and trading on its platform amid growing turmoil in digital-currency markets.

The company said that it has initiated Chapter 11 restructuring in New York, where it is based, and will seek recognition of the case in Canada, where it is listed.

Tiger Global's Flagship Hedge Fund Has First Gain Since October

Tiger Global Management eked out a 3.4% gain in June in its flagship hedge fund, according to a person familiar with the firm, in what marks the fund's first gain since October. Still, the hedge fund remains down 50.1% for the first half of the year, worse than losses notched by major stock-market indexes and other large hedge funds investing in growth.

The figure was a flash estimate Tiger shared with investors Tuesday evening and didn't include any commentary. In comparison, the tech-laden Nasdaq Composite lost 8.7% in June including dividends; the S&P 500 lost 8.3% including dividends.

FDA Suspends Ban on Juul While Vaping Company Appeals

The Food and Drug Administration said it would suspend its ban on Juul Labs Inc.'s products while the e-cigarette maker appeals the agency's decision.

The FDA in June ordered the vaping company to pull its e-cigarettes off the U.S. market, saying Juul hadn't submitted sufficient evidence that they were safe. A federal appeals court then granted Juul a temporary stay of the order, and Juul was asking the court for a longer stay to continue selling its e-cigarettes for the duration of the appeal process. Juul separately had asked the FDA to stay its own order pending the appeal.

Spirit Airlines Prevails in Battle for Newark Airport Position

The U.S. Department of Transportation awarded Spirit Airlines Inc. rights to operate flights at Newark-Liberty International Airport at the busiest times of day, capping more than two years of legal wrangling.

The dispute arose after Southwest Airlines Co. pulled out of Newark in 2019, sparking a turf war among rival airlines at the congested New Jersey hub. Low-cost airlines including Spirit saw a rare chance to expand their footprint at the airport and add flights at peak times of day, which they previously hadn't been able to do.

Nasdaq, NYSE Win Court Battle With SEC Over Market Data

A federal court partly rejected a Securities and Exchange Commission plan to loosen the control that stock exchanges have over public market-data feeds, handing a victory to Nasdaq Inc. and the New York Stock Exchange.

In a ruling released Tuesday, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit found that the SEC had exceeded its authority under federal law when it issued a 2020 order overhauling the governance of the data feeds.

Walmart Tells Suppliers New Fuel and Pickup Fees Are Coming

Walmart Inc. said it would charge some of its suppliers a new fee to transport goods to its warehouses and stores, according to a memo viewed by The Wall Street Journal, the latest example of how businesses are looking to offset rising costs for things such as transportation and fuel.

Companies that use Walmart to transport goods to the retailer's warehouses and stores will be charged a fuel surcharge and a "collect pickup charge" starting Aug. 1, said the memo. The shift "is a result of Walmart adapting to the significant transformation and increased cost seen in the transportation industry over the past few years," said the memo sent to suppliers last Friday.

German Manufacturing Orders Unexpectedly Rose in May

German manufacturing orders increased slightly in May, beating forecasts for a decline amid rising producer prices and supply constraints.

Manufacturing orders rose 0.1% on month in adjusted terms, according to data from the German Economics Ministry released Wednesday.

Malaysia's Central Bank Raises Benchmark Interest Rate as Expected

Malaysia's central bank raised its benchmark interest rate amid rising inflation and signs that the country's economy is recovering.

Bank Negara Malaysia on Wednesday raised its overnight policy rate by 25 basis points to 2.25%. The decision was expected by all eight economists previously polled by The Wall Street Journal.

Derby's Take: Once Again, Bond Yields Have Ominous Message on Outlook

The U.S. Treasury market sent out another warning signal about the U.S. economic outlook Tuesday.

The difference between the two-year and 10-year Treasury notes turned negative-it was at negative one basis point at 5 p.m. E.T.-and created what's called an inversion of the yield curve. That is when the normally positive relationship between these two yields flips, and it is a key metric for market participants, as yield curve inversions have a very strong track record of predicting downturns.

Norway's Government Ends Strike After European Gas Prices Soar

The Norwegian government stepped in to end a strike that threatened to more than halve the country's gas exports, saying it was causing widespread risks to energy security.

Before the strike was halted, a benchmark for gas futures contracts in northwestern Europe rose as much as 14% to EUR172.88, or about $180, a megawatt-hour Tuesday, the highest level since March. Electricity prices across the region also rose, as many power plants run on gas.

OPEC Secretary-General Mohammed Barkindo Dies

Mohammed Barkindo, who transformed the role of OPEC secretary-general and oversaw an expansion of the oil-producing group's role in the markets, has died. He was 63 years old.

Mr. Barkindo's unexpected death on Tuesday night came just a few weeks before he was due to end his six-year tenure at the top of the Organization of the Petroleum Exporting Countries.

NATO Advances Sweden, Finland Toward Membership as Fighting Rages in Eastern Ukraine

Russian artillery pounded Sloviansk, one of Ukraine's last lines of defense to protect the remaining Kyiv-held strongholds in eastern Ukraine, while the North Atlantic Treaty Organization on Tuesday advanced plans to add Sweden and Finland to the alliance.

Vadim Lyakh, the mayor of Sloviansk, reported "massive shelling" of the city in a Facebook post and said the central market was on fire. Pavlo Kyrylenko, head of military administration in the eastern region of Donetsk, said on Telegram that at least two people died and seven were injured.

U.N. Atomic Chief Warns of Growing Nuclear Risks

The head of the United Nations nuclear agency gave a sharp warning Tuesday about growing nuclear risks, saying that Iran's activities risked a regional nuclear arms race and that Russia's occupation of Ukrainian nuclear sites threatened to imperil the agency's ability to ensure nuclear material wasn't being misused.

In a wide-ranging speech at the Australian National University in Canberra, Rafael Grossi, the head of the International Atomic Energy Agency, warned that "we are reaching a defining moment for global nuclear nonproliferation," in which the risks of the spread of nuclear weapons "pose a problem for everyone."

Biden Administration Sues Arizona Over Proof-of-Citizenship Voter Law

The Biden administration on Tuesday sued Arizona, saying the state violates federal law by requiring proof of citizenship to vote for president.

In its latest challenge to Republican-backed changes to state voting procedures, the Justice Department said Arizona's newly enacted requirement that residents provide documentary proof of citizenship would keep eligible voters from participating in certain federal elections.

U.S. State Department Names New Global Anticorruption Coordinator

The U.S. State Department has named a sanctions and nuclear weapons expert as its coordinator for global anticorruption efforts, a position created after the Biden administration pledged to fight more vigorously against corruption.

It will be a return stint at the State Department for Richard Nephew, who most recently was a senior research scholar at Columbia University's Center on Global Energy Policy in New York, the department said on Tuesday.

Highland Park Parade Shooting Suspect Charged With First-Degree Murder

A 21-year-old man who police said fired more than 70 rounds from a rooftop into a crowd gathered for a Fourth of July parade in the Chicago suburb of Highland Park, Ill., was charged with seven counts of first-degree murder.

The suspect, Robert E. Crimo III, allegedly planned the attack for weeks and dressed as a woman to hide his identity, officials said Tuesday.

CERN's Large Hadron Collider Scientists Reveal New Particle Discovery as Accelerator Research Resumes

The Large Hadron Collider resumed scientific operations on Tuesday after a three-year hiatus for repairs and upgrades, opening a new chapter in physicists' longstanding quest to understand the fundamental building blocks of the universe.

The resumption came shortly after scientists with the European Organization for Nuclear Research, or CERN-the international body that operates the collider-announced that earlier research conducted at the facility revealed three previously unknown subatomic particles.

Write to nihad.ahmed@dowjones.com TODAY IN CANADA

Earnings:

- Nothing major scheduled

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Economic Indicators (ET):

- Nothing major scheduled

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Stocks to Watch:

- No items published

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Other News:

No items published

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Market Talk:

No items published

Expected Major Events for Wednesday

02:00/JPN: Jun Imported Vehicle Sales

06:00/GER: May Manufacturing orders

06:00/GER: May Manufacturing turnover

08:30/UK: Jun S&P Global / CIPS UK Construction PMI

08:30/UK: Jun Narrow money (Notes & Coin) and reserve balances

11:00/US: 07/01 MBA Weekly Mortgage Applications Survey

12:15/CAN: Jun Official International Reserves

12:55/US: 07/02 Johnson Redbook Retail Sales Index

13:45/US: Jun US Services PMI

14:00/US: Jun ISM Report On Business Services PMI

14:00/US: May Job Openings & Labor Turnover Survey

15:00/US: Jun Global Services PMI

20:30/US: 07/01 API Weekly Statistical Bulletin

23:01/UK: CBI and PwC Financial Services Survey

23:50/JPN: Jun International Reserves / Foreign Currency

23:50/JPN: Jun Provisional Trade Statistics for 1st 20 days of Month

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

Expected Earnings for Wednesday

ASA Gold & Precious Metals Ltd (ASA) is expected to report for 2Q.

BeyondSpring Inc (BYSI) is expected to report $-0.24 for 1Q.

Computer Services Inc (CSVI) is expected to report for 1Q.

Educational Development Corp (EDUC) is expected to report for 1Q.

Friedman Industries (FRD) is expected to report for 4Q.

Portage Biotech Inc (PBT.U-L,PRTG) is expected to report for 1Q.

Saratoga Investment (SAR) is expected to report $0.53 for 1Q.

Simulations Plus Inc (SLP) is expected to report $0.18 for 3Q.

Trilogy Metals Inc (TMQ,TMQ.T) is expected to report for 2Q.

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ANALYST RATINGS ACTIONS

Antero Resources Raised to Buy From Hold by Truist Securities

Aveanna Healthcare Cut to Hold From Buy by Truist Securities

Crocs Raised to Buy From Hold by Loop Capital

Excelerate Energy Raised to Overweight From Equal-Weight by Wells Fargo

HP Cut to In-Line From Outperform by Evercore ISI Group

Live Nation Raised to Outperform From Neutral by Macquarie

Micron Technology Cut to Equal-Weight From Overweight by Fox Advisors

PerkinElmer Cut to In-Line From Outperform by Evercore ISI Group

Talaris Therapeutics Cut to Equal-Weight From Overweight by Morgan Stanley

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

(END) Dow Jones Newswires

July 06, 2022 06:49 ET (10:49 GMT)

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