MARKET WRAPS

Stocks:

European stocks mostly inched lower on Tuesday as investors looked ahead to U.S. consumer-price data this week which could set expectations for how the Federal Reserve will approach monetary policy at its coming meetings.

In recent weeks, better-than-expected corporate earnings and strong labor market data have dispelled concerns about an imminent U.S. recession, helping stock markets rebound from their lows.

That has lifted hopes that the Fed may temper its aggressive cycle of interest-rate rises. But with inflation running at a multidecade high, investors say Wednesday's CPI print will be key to the outlook for rates and the direction of the market.

"Corporate earnings are holding up OK and consumers are still spending, that is the bottom line," said Brian O'Reilly, head of market strategy at Mediolanum International Funds. Recent economic data "takes any talk of an immediate recession off the table for now," he added.

Stocks to Watch:

Sanofi has hit some stumbling blocks in key pipeline programs, and growth is expected to decrease despite a 2022 guidance raise, said UBS.

The pharma major is expected to see a low-single-digit EPS growth and flat sales growth next year, as it will head into patent expiry for its multiple-sclerosis treatment Aubagio, UBS said.

Costs related to R&D are also expected to rise, and litigation around heartburn drug Zantac in early 2023 could also become an overhang, according to UBS which has downgraded the stock to neutral from buy,. UBS has a price target of EUR103 on the stock.

U.S. Markets:

Stock futures inched higher as investors monitored earnings reports and economic data ahead of this week's key inflation figures.

Earnings season is winding down, though some major companies are still set to report figures. Warner Music Group, TPG and Emerson Electric are among the companies set to report ahead of the opening bell. Roblox and Wynn Resorts will release figures after markets close.

Ahead of the opening bell, Novavax slumped almost 30% after cutting its sales forecasts due to poor uptake of its Covid-19 vaccine. Clover Health Investments fell 10% after delivering a mixed earnings report and saying its chief executive was stepping down.

Data on U.S. labor productivity due Tuesday are expected to show a decline for a second straight quarter.

Forex:

The euro may continue to trade sideways against the dollar even after upcoming U.S. inflation data, said Commerzbank, adding that it can't think of any good reasons why EUR/USD should break out of its current 1.00-1.04 range at present.

Friday's U.S. nonfarm payrolls data failed to do that and U.S. inflation data on Wednesday probably won't succeed either as everyone knows inflation will remain high and the Fed will continue raising interest rates decisively.

The European Central Bank is unlikely to change its view either for now, Commerzbank said.

The dollar edged lower still on signs U.S. inflation may have peaked last month after a Fed survey showed consumers lowered expectations of future inflation, said Swissquote.

A survey by the Federal Reserve Bank of New York showed a median expectation in July for annual inflation of 6.2% in one year, down from 6.8% in June.

"Investors are confident that inflation in the U.S. may have peaked last month. For economists, inflation expectations are more important than the actual data." However, Wednesday's CPI print "will say the last word, " said Swissquote.

Bonds:

The recovery in German Bunds from Friday's falls has come in thin volumes, leaving them vulnerable to sharp moves, said Commerzbank.

"Yesterday's recovery has yet to be backed by volumes," with only 364,000 contracts traded in the Bund future on Monday, around 200,000 less than the 10-day moving average.

"Although this might still be in line with the current stage of the summer season, thin trading liquidity renders markets vulnerable to sudden shifts in positioning," said Commerzbank.

Energy:

Oil futures were down around 1%, with the prospect of Iranian exports returning to global markets following the latest talks between Washington and Tehran.

"The U.S. and Iran have weeks to decide whether they will revive the 2015 nuclear accord, which would open the door for Iran to resume oil exports," said Commonwealth Bank.

"The deal rests on Iran eliminating their stockpiles of enriched uranium first before the U.S. lifts economic sanctions," with European Union diplomats presenting the two countries with the final draft of the accord.

Metals:

Base metals were higher in early trading, with macro sentiment improving on lower risk drivers.

"The macro mood feels better this morning," said Peak Trading Research. There was "a mild risk recovery" after Nancy Pelosi's visit to Taiwan with agricultural commodities also being boosted by the improved sentiment.

Peak said most investors are looking to Wednesday's consumer inflation data release.

"Investors and the Fed want to see a lower inflation print, which would help reinforce the 'worst Fed hikes are behind us' narrative."

DOW JONES NEWSPLUS

EMEA HEADLINES

Munich Re Cuts Guidance on Investment Returns Amid Economic Slowdown, Rising Rates

Muenchener Rueckversicherungs-Gesellschaft AG said Tuesday that it was cutting its full-year guidance for return on investment on a cooling economy and higher rates, though profit and premiums beat second-quarter expectations as it overcame bigger losses.

The German reinsurer downgraded part of its full-year guidance after its investment result tumbled to 971 million euros ($990 million) in the second quarter from EUR1.93 billion in the same period last year, which it blamed on impairment losses on equities, triggered by falling equity markets.

Carlsberg Raises Full-Year Guidance on Europe, Asia Performance

Carlsberg AS late Monday upgraded its full-year guidance after a strong performance in Europe and Asia.

The Copenhagen-based brewer said it now expects to post organic growth in operating profit in a high single-digit-percentage this year, up from previous guidance of minus 5% to plus 2%, or minus 1% to plus 7%, when fully excluding the Ukrainian business in 2021 and 2022.

InterContinental Hotels 1H Recovery Continued Amid Eased Restrictions; To Launch $500 Mln Buyback

InterContinental Hotels Group PLC said Tuesday that its first-half performance continued to recover as the easing of travel restrictions supported a rise in travel demand, and said it was launching a share buyback program of up to $500 million.

The London-listed hotel chain said it considered its buyback program appropriate in the current environment and was part of its "disciplined approach to investing in the business to drive future growth, which in 2022 includes significant increases in capital expenditure as well as substantial operating cost investment to deliver our strategic priorities."

EU Presents 'Final Text' to Iran for Reviving Nuclear Deal

U.S. and European officials announced Monday that a text for restoring the 2015 nuclear accord had been completed and that negotiations were finished, saying Iran must now decide whether to take or leave the deal.

A senior European Union official said the bloc's foreign policy chief Josep Borrell will now write to the U.S., Iran and the other negotiating parties, setting out next steps for approving a deal. The official said Iran would have "very, very few weeks" to decide whether to revive the deal.

U.K. Retail Sales Rose as Consumers Faced Record-High Temperatures

U.K. retail sales increased in July as the heat wave boosted sales of hot-weather clothing, picnic treats and electric fans, according to the latest British Retail Consortium and KPMG report.

Retail sales rose 1.6% in July on a like-for-like basis, which compares with an increase of 4.7% in July 2021, the report said.

Ben & Jerry's Tells Court That Unilever Could Undermine Its Social Mission

Ben & Jerry's board members on Monday called for parent company Unilever PLC to be prevented from transferring the ice cream maker's assets to a local licensee in Israel, saying the brand's products could be used to oppose social issues that it supports.

Lawyers representing Ben & Jerry's independent board members made the comments in a court hearing about their request last month to block Unilever's sale of the brand's Israel operations-an unusual case of a brand taking on its corporate owner.

Russia Says it Won't Allow U.S. Inspection for Now of Its Nuclear Weapons

The crisis over Russia's invasion of Ukraine spilled into the realm of arms control on Monday when Moscow said it won't support the resumption of inspections of its nuclear arsenal under the New START nuclear arms treaty because of travel restrictions imposed by the U.S.

The accord, which cuts long-range nuclear arms, is the last major agreement regulating the nuclear competition between Washington and Moscow. Both sides have been observing its limits.

Attacks at Ukraine Nuclear Plant Are Suicidal, U.N. Chief Warns

KYIV, Ukraine-The international crisis over the weekend shelling of Europe's largest nuclear power plant deepened on Monday as Russia and Ukraine traded blame for missile attacks and the United Nations secretary-general warned that an attack on a nuclear facility would be suicidal.

Ukraine's nuclear regulator Energoatom on Monday accused Russia of bombing power lines to sever the Zaporizhzhia plant from the Ukrainian electrical grid and goading Ukrainian forces positioned across the river into attacks. It said the plant's staff were forced to close one of its six reactors over the weekend after an attack that severed a high-voltage power line, damaged three radiation monitors and shattered 800 square meters of window surfaces.

As Many as 80,000 Russian Troops Hurt or Killed in Ukraine, Pentagon Says

WASHINGTON-As many as 80,000 Russian troops have been wounded or killed in less than six months of fighting in Ukraine, the Pentagon said Monday, the first time the U.S. military announced its estimates of the toll of the invasion on Russia.

According to U.S. estimates, Russia has suffered 70,000 to 80,000 casualties, Colin Kahl, the undersecretary of defense for policy, told reporters at a press briefing Monday. In the days leading up to Russia's Feb. 24 invasion, Western officials estimated that Russia had staged roughly 150,000 troops near Ukraine's border.

GLOBAL NEWS

Consumers Lower Their Expectations of Future Inflation

Americans are expecting less inflation in coming years, according to a recent survey by the Federal Reserve Bank of New York.

Respondents' median expectation in July was for an annual inflation rate of 6.2% in one year, down from the 6.8% they expected in June, the regional reserve bank said Monday. They expected inflation in three years to be at 3.2%, down from the 3.6% they expected in June, and inflation in five years to be at 2.3%, down from a previous 2.8%.

Tesla, EV Makers Stand to Get Billions for Factories From Senate Bill

The Senate climate bill passed over the weekend offers billions of dollars for electric-vehicle and battery factories, and includes rules that the auto industry says will make it tougher for some consumers to qualify for EV tax breaks.

The bill, which passed 51-50 on Sunday, sets aside more than $15 billion to retool factories and build new ones, according to industry groups. The measure aims to help traditional auto makers, startups and suppliers as they grow their facilities to collectively roll out dozens of EV models in the next couple of years.

China's Car-Sales Recovery Stays on Track

SINGAPORE-Car sales in China, the world's biggest auto market, continued to recover in July as production ramped up following disruptions from Covid-19 lockdowns and authorities offered incentives to boost consumption.

Last month, China's retail sales of passenger cars rose 20% from a year earlier to 1.81 million vehicles, China Passenger Car Association said Tuesday. Sales dropped 6.5% from June, with July tending to be a slower month for car sales in China as the heat makes customers go out to visit stores less often, according to the association.

FBI Searches Trump's Florida Home Mar-a-Lago in Document Investigation

WASHINGTON-FBI agents searched former President Donald Trump's Mar-a-Lago home in Palm Beach, Fla., on Monday, which people familiar with the matter said was part of an investigation into Mr. Trump's handling of classified information.

The search was made public in a statement released by Mr. Trump, in which he said FBI agents were at his home.

South Korea Suffers Worst Rainfall in Eight Decades

SEOUL-South Korea's heaviest rainfall since World War II submerged cars on the streets, flooded subway stations and left at least eight people dead.

The downpours also hit neighboring North Korea, which added to the chaos by discharging floodwaters near the two countries' border without giving advance notice as required by an inter-Korean accord. Water levels near one border-area bridge rose to nearly 17 feet Monday afternoon, or six times higher than normal, South Korean officials said.

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(END) Dow Jones Newswires

August 09, 2022 05:36 ET (09:36 GMT)

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