MARKET WRAPS

Watch For:

Challenger Job-Cut Report for June; International Trade in Goods & Services for May; Unemployment Insurance Weekly Claims Report; EIA Weekly Natural Gas Storage Report; EIA Weekly Petroleum Status Report; Monthly U.S. Retail Chain Store Sales Index; Federal Reserve Bank of St. Louis President James Bullard speaks at Little Rock Regional Chamber; Federal Reserve Board Governor Christopher Waller speaks at NABE Monetary Policy and Inflation Webinar Series; Foreign Central Bank Holdings; Federal Discount Window Borrowings.

Opening Call:

Stocks futures pointed to modest gains on Thursday as investors continued to digest the Federal Reserve's minutes from its June meeting.

Markets in Europe and Asia mostly rallied, possibly reflecting the belief that if growth and hiring slow quickly, the Fed won't need to approve as many interest-rate hikes as traders and the FOMC expected at the time of last month's meeting.

Thursday morning brings new data on imports, exports and the trade gap. The trade deficit is expected to be $84.7 billion in May, according to a survey of 27 economists by The Wall Street Journal, shrinking slightly from April's deficit of $87.1 billion.

Initial unemployment claims for the week ending July 2 also come out at 8:30 a.m. Economists surveyed by the WSJ expect the labor market to remain tight, forecasting 230,000 new applications for unemployment benefits, essentially flat with the prior week's total of 231,000.

Market Insight:

It is more imperative than ever to avoid mixing trading and investment activities, as the risk of confusion is particularly high in the current circumstances, Julius Baer said.

"The decision criteria, the frequency of decisions and the time horizon of trading obviously have nothing in common with those of investing," the bank said.

Julius Baer is of the view that the current decline is more likely to bottom out in the second half of this year than in 2023. Risk reduction at this stage is a matter of trading, while those who want to invest and not to trade, should look beyond the next few weeks, it said.

Bonds:

The rally in 10-year Treasury yields is a sign investors are increasingly betting that a slowdown or a recession will push the Fed to avoid excessive tightening, Yieldstreet said.

With summer ahead, a period usually characterized by lower liquidity, Yieldstreet expects market volatility to continue.

"The next few inflation readings are likely to be instrumental to give investors clarity on the potential for stagflation, which at this point represents a tail risk," it said.

Forex:

The dollar pulled back ground in Europe after its stellar rise on Wednesday.

Swissquote said many market participants think developments since the Fed's decision last month are so dramatic that the minutes are no longer relevant while recession fears and morose market sentiment could prompt the central bank to lift interest rates 50 basis points at its July 26-27 meeting instead of the 75 bps that is largely priced in.

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Sterling was taking political uncertainty in its stride following reports U.K. Prime Minister Boris Johnson will resign, as the decision avoids the prospect of a more difficult process to force him out, said Ebury.

"Markets were already fully expecting him to go, but news of an imminent resignation, and the avoidance of a likely messy and potentially ugly removal from office, has given the pound a modest leg up," said Ebury.

Potential policy implications remain unclear as there is no clear candidate to replace Johnson. However, any policy changes will have a limited impact on sterling, which is likely to be driven by U.K. recession concerns and Bank of England policy.

Energy:

Oil futures wavered along the flatline in early European action, with the hawkish Fed minutes not helping the macro mood, according to Peak Trading Research.

Fitch said prices are likely to remain elevated as supply-side risks mount, revising its 2022 average Brent price forecast to $105/bbl from $100/bbl previously.

"Russian exports will come under increasing pressure over the second half of the year, as the EU approaches its partial import ban on Russian crude oil, effective December 5," the ratings agency said. Also, OPEC+ continues to fall far short of its production targets, and rising political instability in Libya has triggered renewed production outages, it said.

Metals:

Spot gold was slightly firmer but UOB said the precious metal may break below support at $1,720/oz, as its weekly downward momentum on the technical charts remains strong.

The precious metal has fallen this week and dipped below the December 2021 low of $1,753/oz on Wednesday.

A break below $1,720/oz would shift the market's focus to the major, critical support zone of $1,676/oz-$1,684/oz, said UOB, noting that these levels were tested a few times in March and August last year.

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Base metals rose as Asian buyers looked to secure materials despite rising Covid-19 cases in Shanghai and macroeconomic concerns in the U.S. and Europe.

"Onshore [traders] do not seem to be bearish with various brokers even recommending a buy," Marex said.

"Despite all the negative news such as Shanghai Covid-19 cases doubling, mass testing in place, and various other cities and provinces also reporting fresh cases, the market doesn't seem to be perturbed."

TODAY'S TOP HEADLINES

Merck Is in Advanced Talks to Buy Seagen for Roughly $40 Billion or More

Merck & Co. is in advanced talks to acquire Seagen Inc. and is aiming to agree on a purchase of the cancer biotech in the next few weeks, according to people familiar with the matter, in a deal that could be worth roughly $40 billion or more.

The companies are discussing a price for Seagen above $200 a share and are seeking to seal a deal on or before the announcement of Merck's quarterly earnings, set for July 28, the people said. Seagen's stock closed at $175.13 on Wednesday.

Shell Upgrades Asset Values on Energy-Price Rise

Shell PLC said Thursday that it would reverse previous impairments of up to $4.5 billion to its upstream and integrated gas assets in the second quarter after it raised its energy-prices outlook.

The oil major said it had raised its mid- and long-term oil and gas commodity prices outlook in the second quarter to reflect the current macroeconomic environment as well as updated energy-market demand and supply fundamentals.

Samsung Electronics' Run of Record Results Stalls as Global Tech Boom Fades

SEOUL-Samsung Electronics Co.'s string of record results is expected to end, as the global tech boom slows amid rising inflation and economic uncertainties.

On Thursday, the South Korean tech giant-which had reported record revenues in the past three straight quarters-forecast a 11.4% rise in second-quarter operating profit from the prior year. Revenue for the April-June period is expected to increase year-over-year by 20.9%.

GameStop Shares Rise After Board Declares 4-for-1 Stock Split

GameStop Corp. declared a 4-for-1 stock split Wednesday, sending shares of the videogame retailer higher in after-hours trading.

The Grapevine, Texas-based company proposed a stock split in March, although it didn't set the split ratio at that time because it needed shareholders to increase the number of authorized shares. Shareholders approved the increase last month.

American Airlines to Pay Pilots Triple to Work Flights Dropped in Computer Glitch

American Airlines Group Inc. will pay pilots triple their normal wages to work flights that were mistakenly dropped because of a computer glitch, the union that represents American's pilots said.

The Allied Pilots Association union said Wednesday that its board ratified an agreement with the airline that includes the extra pay for trips affected by an issue with an airline scheduling platform over the weekend. The system had mistakenly allowed pilots to drop thousands of future trips early Saturday morning, leaving as many as 12,075 July flights without a captain or first officer, or both, the union had said.

J&J Talc Judge Weighs Expert Help to Value Cancer Claims

A bankruptcy judge said he would consider appointing an independent expert to assist in evaluating the mass claims linking Johnson & Johnson's talc-based baby powder to cancer.

Judge Michael Kaplan of the U.S. Bankruptcy Court in New Jersey on Wednesday floated the idea of appointing an outside expert to help him wade through legal, financial and scientific questions around allegations that J&J's talc products contained asbestos and caused ovarian cancer.

TPC Creditors Cerberus, Bayside Lose Debt Priority Dispute

Two creditors of TPC Group Inc. lost a bankruptcy court ruling on Wednesday, with a judge saying that the chemical business didn't act improperly when loan documents were amended to change the pecking order of creditors.

Judge Craig Goldblatt of the U.S. Bankruptcy Court in Wilmington, Del., said TPC didn't violate the rights of Cerberus Capital Management LP and Bayside Capital Inc., who combined own about 10% of TPC's $930 million senior secured notes issued in 2019.

Blackstone Invests $400 Million in Environmental Commodity Exchange Xpansiv

Blackstone Inc. will invest $400 million in Xpansiv Ltd., a platform that lets investors trade assets tied to the energy transition such as carbon offsets and renewable-energy credits, company officials said.

Xpansiv is an exchange that lets investors swap offsets linked to green projects such as preserving trees, credits companies receive for buying clean power and oil and gas contracts that account for the carbon footprint of fossil fuels. The company's software provides the underlying project data backing up these assets.

U.K.'s Boris Johnson to Resign After Scandals Grow Too Great to Handle

LONDON-Boris Johnson will resign as British prime minister later Thursday, officials said, after a full scale mutiny in his party. Mr. Johnson will remain in office until his replacement is found, these people said, a process that could take several months. It caps an astonishing fall from grace for a politician who until recently looked poised to dominate U.K. politics for years.

Following a string of scandals, two senior ministers and a wave of more-junior members of government quit over the past week, saying they no longer had confidence in the British leader. Mr. Johnson attempted to cling to power amid frenetic plotting by rebels to unseat him and a push by a group of cabinet members to have him resign. Until recently he had spoken of his intention to stay in office until the 2030s. But as his authority withered, and with the growing threat that the party would change its internal rules to hold a vote to oust him, he agreed to step aside.

India's Central Bank Takes Steps to Stem Rupee's Slide

India's central bank has relaxed debt-market rules for foreign portfolio investors and allowed commercial banks to raise interest rates on nonresidents' foreign-currency deposits in a bid to support the rupee and boost forex reserves.

"The Reserve Bank [of India] has been closely and continuously monitoring the liquidity conditions in the forex market and has stepped in as needed in all its segments to alleviate [U.S.] dollar tightness with the objective of ensuring orderly market functioning," it said late Wednesday.

Australia Posts Record Trade Surplus for May

SYDNEY-Australia's seasonally adjusted trade surplus rose to a record 15.97 billion Australian dollars (US$10.83 billion) in May, supported by a big jump in the value of exports over the month.

The value of exports jumped 9.5% on month to A$58.40 billion, driven by higher prices for coal, coke and briquettes, and other mineral fuels, the Australian Bureau of Statistics said Thursday.

Uvalde Police Officer Had School Shooter in Sight but Didn't Shoot, Report Finds

A police officer had the Uvalde school shooter in his rifle sight before the gunman entered Robb Elementary School but didn't fire because he believed he needed permission to take the shot, a report found.

The report, released by the Texas State University's Advanced Law Enforcement Rapid Response Training (ALERRT) Center on Wednesday, highlighted new details about the troubled response to the May mass shooting that left 19 children and two teachers dead.

After Highland Park Shooting, Illinois Officials Call for More Use of Red-Flag Law

Illinois lawmakers are discussing measures to give the state more authority to stop people who threaten violence from buying guns after the deadly shooting this week at a July Fourth parade in Highland Park.

Suspected gunman Robert Crimo III, who has been charged with seven counts of murder, obtained a permit required in Illinois to buy guns after encounters with police in 2019 in which he attempted suicide and threatened to kill his family.

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

Earnings:

Aritzia 1Q

Richelieu Hardware 2Q

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Economic Indicators (ET):

0830 May International merchandise trade

1000 Jun Ivey Purchasing Managers Index

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Stocks to Watch:

Dye & Durham Makes Revised A$4.70 Per Shr Acquisition Proposal to Link Group; Dye & Durham: Believes That This Second Revised Proposal Will Give Greater Certainty to Link Group Hldrs Regarding Transaction and Will Lead to Its Successful Completion

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Advantage Energy: Due to Outperformance at Glacier, Wembley and Valhalla, 2Q Production Increased to Average Approximately 60,000 Boe/d; Advantage Energy: Lending Syndicate Removes Fixed Limits on Shr Buybacks and Replaces Them With a Liquidity-Based Limit

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Lundin Gold Reports 2Q Gold Production of 111,890 Ounces, Is on Track to Meet 2022 Guidance

Expected Major Events for Thursday

05:00/JPN: May Indexes of Business Conditions - Preliminary Release

06:00/GER: May Industrial Production Index

06:00/UK: 2Q Halifax House Price Index: UK Regional Breakdown quarterly release

06:00/UK: Jun Halifax House Price Index

11:30/US: Jun Challenger Job-Cut Report

12:15/US: Jun CANCELLED: ADP National Employment Report

12:30/CAN: May International merchandise trade

12:30/US: May U.S. International Trade in Goods & Services

12:30/US: 07/02 Unemployment Insurance Weekly Claims Report - Initial Claims

13:00/RUS: Weekly International Reserves

14:00/CAN: Jun Ivey Purchasing Managers Index

14:30/US: 07/01 EIA Weekly Natural Gas Storage Report

15:00/US: 07/01 EIA Weekly Petroleum Status Report

16:00/US: Jun Monthly U.S. Retail Chain Store Sales Index

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

23:01/UK: Jun BRC-Sensormatic IQ Footfall Monitor

23:30/JPN: May Household Spending

23:50/JPN: Jun Bank Lending

23:50/JPN: Jun International Transactions in Securities

23:50/JPN: 1Q Revised Balance of Payments

23:50/JPN: May Balance of Payments

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Expected Earnings for Thursday

Aritzia Inc (ATZ.T) is expected to report $0.28 for 1Q.

Bank Of South Carolina (BKSC) is expected to report for 2Q.

Buckle Inc (BKE) is expected to report.

Byrna Technologies Inc (BYRN,BYRN-L) is expected to report for 2Q.

Caldwell Partners International Inc (CWL.T) is expected to report for 3Q.

Capstone Green Energy Corp (CGRN) is expected to report for 4Q.

Costco Wholesale Corp (COST) is expected to report.

Goodfellow (GDL.T) is expected to report for 2Q.

Kayne Anderson Energy Infrastructure Fund Inc (KYN) is expected to report for Full year.

Kura Sushi USA Inc (KRUS) is expected to report for 3Q.

Levi Strauss & Co (LEVI) is expected to report $0.23 for 2Q.

National Energy Services Reunited Corp (NESR) is expected to report $0.11 for 1Q.

Nautilus (NLS) is expected to report $-0.72 for 1Q.

Park Aerospace Corp (PKE) is expected to report for 1Q.

Postmedia Network Canada (PNC.A.T,PNC.B.T) is expected to report for 3Q.

Richelieu Hardware (RCH.T) is expected to report $0.71 for 2Q.

Singularity Future Technology Ltd (SGLY) is expected to report for 3Q.

Tilray Inc (TLRY) is expected to report $-0.08 for 4Q.

Universal Security Instruments Inc (UUU) is expected to report for 4Q.

Velan Inc (VLN.T,VLNSF) is expected to report for 1Q.

WD 40 (WDFC) is expected to report $1.30 for 3Q.

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ANALYST RATINGS ACTIONS

D&B Raised to Neutral From Underperform by B of A Securities

Enanta Pharmaceuticals Raised to Outperform From In-Line by Evercore ISI Group

Evolution Petroleum Cut to Neutral From Buy by Roth Capital

Harpoon Therapeutics Coverage Assumed by Canaccord Genuity at Buy

HCA Healthcare Cut to Underperform From Market Perform by BMO Capital

Investor Concerns Over Buyout Prices Reflected in Stock Trading -- Update

Neoleukin Therapeutics Coverage Assumed by Canaccord Genuity at Buy

Olema Pharmaceuticals Coverage Assumed by Canaccord Genuity at Buy

Rocket Cos. Raised to Overweight From Equal-Weight by Wells Fargo

Xencor Coverage Assumed by Canaccord Genuity at Buy

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

(END) Dow Jones Newswires

July 07, 2022 05:39 ET (09:39 GMT)

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