MARKET WRAPS
Watch For:
EU business & consumer surveys; Italy PPI; Germany
provisional CPI, CPI data for Bavaria, Hesse, Baden-Wuerttemberg,
Brandenburg, North Rhine Westphalia and Saxony; trading updates
from Next PLC and H&M
Opening Call:
European shares may open higher Thursday, tracking U.S. equities
that rebounded on the Bank of England's bond-buying action. Asian
stock benchmarks rose; Treasury yields rebounded; the dollar
gained; oil and gold declined.
Equities:
European stocks could open higher, extending overnight gains and
tracking Wall Street's rally.
On Wednesday, U.S. equities recovered from a week's of losses
after the Bank of England said it would begin buying U.K.
government bonds in a bid to stabilize markets.
"For the last several trading days, the pressure on U.S. stocks
has been a reflection of some of the turmoil in the fixed-income
market," UBS said.
"As that turmoil settles down, we're seeing a better tone for
equities," it said.
However, Oanda said Hurricane Ian was another inflationary risk.
Markets were seeing a relief rally, but "the backdrop is still for
inflation to remain ugly and vulnerable to further shocks," Oanda
said.
"Everything about this hurricane is screaming that were going to
have another inflation shock and that will keep inflationary
pressures going, " Oanda said, adding that the economy was still
vulnerable to shocks" including the hurricane, Covid-19 in China
and others worldwide.
Rob Daly, director of fixed income at Glenmede Investment
Management, was also cautious in his outlook. "We've had a rough
road over the past couple of weeks and the market has been looking
for a bit of hope, but I think that hope is a bit misplaced," he
said.
Forex:
The dollar was stronger in Asia following a rebound in Treasury
yields.
With U.S. real rates remaining negative, it is hard for markets
to turn against the dollar without a viable alternative currency,
DBS Group Research said.
Bonds:
Treasury yields recovered in Asia after ending the New York
session on Wednesday with their biggest one-day decline in
years.
"The Treasury market sees the pivot in the U.K. and a possible
pivot by the European Central Bank as starting to add up to a
possible pivot in the U.S., where markets are getting a bit
overdone," said Seaport Global Holdings.
The U.K.'s 30-year government bond yield plummeted to 4.09% on
Wednesday from over 5% before the BOE announcement.
"It doesn't look like the volatility is going to abate any time
soon," UBS said.
The move in gilts has been "unprecedented and smacks of the
sharp jumps in the European debt crisis" a decade ago, said
Rabobank.
"There's speculation that while the U.K. may be an extreme case,
other jurisdictions might opt to operate with easier policy in
response to their own cost-of-living crises." With the exception of
the Bank of Japan, all central banks are "in the process of
committing a policy error of some sort."
Read: Global Bonds Rally After 10-Year Treasury Yield Touches
4%
Energy:
Oil futures declined in Asia, though prices could be supported
in the near term, amid heightened worries that Russia's energy
exports may no longer be reliable following the suspected sabotage
of the Nord Stream pipelines, CBA said.
Focus is now on next week's meeting of OPEC and its allies.
Bullish analysts have argued that supplies remain tight and that
prices could rebound on significant supply concerns.
However, analysts at Sevens Report Research said, "we have to
acknowledge the dominant trend is still lower for the oil market
right now but we do continue to look for the market to stabilize
soon as we do not believe the combination of overcompliance by
OPEC+, tight global physical markets, and the geopolitical
uncertainty surrounding the war in Ukraine can be solely offset by
concerns about the global economy."
--
Natural-gas futures in the U.S. finished higher, giving up early
losses, as traders kept an eye on Hurricane Ian's impact in
Florida.
"Ian is not likely to have a major effect on key gas
infrastructure or market fundamentals," said Emily McClain, vice
president at Rystad Energy.
The "primary, longer-term influence" on natural gas remains the
expected gas shortages and price spikes this winter in Europe, as
it navigates the season without the flow of gas from Russia, said
Tyler Richey, co-editor at Sevens Report Research.
"That leaves the fundamental backdrop still in favor of the
bulls on a longer timeframe," Richey said.
Metals:
Gold prices fell in Asia after its highest finish overnight in
nearly a week.
Gold may maintain a negative outlook for now, as the Fed's
recent guidance has signaled that borrowing costs will rise and
remain high for some time to bring inflation down, DailyFX
strategist Diego Colman said.
"This means that nominal U.S. bond rates will soon resume their
ascent, paving the way for real yields to remain elevated and
continue to weigh on precious metals, as has been the case over the
past few months," he adds.
Gold prices welcomed the BOE's "dramatic intervention that
avoided an imminent gilts crash and sent global bond yields sharply
lower," Oanda said.
"This was somewhat expected and serves as a reminder that gold
will do just fine once the global bond market selloff is truly
over," Oanda said.
"The fact that major-economy policymakers are trying to stem and
reverse market action shows how worried they are about an
uncontrolled crash," Adrian Ash, director of research at
BullionVault, said. "Gold is finding a decent bid amid all this
uncertainty."
--
Copper edged lower amid USD strength and higher Treasury
yields.
A strong USD and rising global yields were weighing on the
demand side of the market, which was already beginning to
deteriorate because of mounting global growth and Chinese
property-market concerns, TD Securities said.
TODAY'S TOP HEADLINES
Developing Countries Face Stiff Economic Headwinds, World Bank
Chief Says
WASHINGTON-The head of the World Bank warned that developing
nations face an extremely challenging near-term outlook, as the
sharp slowdown in global growth raises the risks of a prolonged
recession.
Speaking Wednesday at Stanford University, David Malpass said
the challenges for the developing world are shaped by higher food,
fertilizer and energy prices caused by the war in Ukraine, as well
as rising interest rates, currency depreciation and capital
outflows, which could result in a shortage of funds needed to
support people's lives and economic activities.
U.K. Market Woes Threaten Economic and Political Crisis
The U.K. continued to try to stave off a financial and economic
crisis on Wednesday as the country's central bank carried out
emergency buying of government bonds to stabilize a spiraling debt
market, adding pressure on the government of new Prime Minister Liz
Truss.
The central bank's surprise move to spend 1 billion pounds
buying U.K. government debt spurred a rally in the bond market, and
helped the embattled pound gain slightly against the U.S. dollar,
though it was still down against the euro. But the intervention-to
stave off an imminent pension crisis-underscored the risks that
continuing market turbulence poses to the U.K. financial system and
economy.
U.K. Markets Turmoil Puts Spotlight on New Chancellor Kwasi
Kwarteng
LONDON-Kwasi Kwarteng was just two weeks into his job as U.K.
chancellor of the exchequer when he unveiled a bold plan to reshape
the British economy by slashing taxes in what he called "a new
approach to a new era."
Skeptical lawmakers in Britain's Parliament now have a different
moniker for the package: the "Kami-kwasi budget."
Amazon Raises Pay for Hourly Employees as It Prepares for
Holidays
Amazon.com Inc. is raising pay for its hourly employees as the
company prepares for the crucial holiday shopping season.
The company on Wednesday said it was increasing average starting
pay for its front-line warehouse employees from $18 to more than
$19 an hour, with many employees earning between $16 and $26 an
hour depending on their location in the U.S. Amazon said the raises
represent a nearly $1 billion investment over the next year.
VW Prices Porsche IPO at Top of Range
Germany's Volkswagen AG said Wednesday it had priced the initial
public offering of Porsche AG at the top end of the targeted range,
putting the IPO on track to become one of Europe's largest in more
than a decade.
The pricing signaled investors' confidence that the iconic
sports-car maker can thrive even as rising interest rates and
rampant inflation rile equity markets.
Write to monica.gupta@dowjones.com
Expected Major Events for Thursday
04:30/NED: Sep Producer confidence survey
06:00/DEN: Sep Business tendency survey
07:00/SVK: Sep Business tendency survey
07:00/SVK: Sep Economic sentiment indicator
07:00/SPN: Sep Flash Estimate CPI
08:00/ITA: Aug PPI
08:00/GER: Sep Brandenburg CPI
08:00/GER: Sep Bavaria CPI
08:00/GER: Sep Hesse CPI
08:00/GER: Sep Baden-Wuerttemberg CPI
08:00/GER: Ifo Joint Economic Forecast of German economic
research institutes
08:30/GER: Sep North Rhine Westphalia CPI
09:00/MLT: Aug PPI
09:00/CYP: Jul Industrial Production Index
09:00/EU: Sep Business & Consumer Surveys - Business Climate
Indicator & Economic Sentiment Indicator
09:00/GER: Sep Saxony CPI
09:30/BEL: Sep CPI
12:00/GER: Sep Provisional CPI
12:30/CZE: Czech interest rate decision
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(END) Dow Jones Newswires
September 29, 2022 00:16 ET (04:16 GMT)
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