European stocks extended their recent rebound on Thursday as
investors absorbed the Fed's minutes from its June meeting and even
as recession fears on the continent continued to mount.
Since the Fed's last meeting,a growing body of economic
indicators have raised fears of a recession, while the prices of
commodities have slid. First-quarter U.S. GDP growth was slightly
revised lower last week to a contraction of 1.6% and yield curve
Markets may be 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
In the U.K., the benchmark FTSE 100 held solid gains despite
news that Boris Johnson will resign as prime minister later
Thursday, according to officials, after a full-scale mutiny in his
Johnson will remain in office until his replacement is found,
these people said, a process that could take several months.
Read more here .
Gas flows from Russia to Europe are widely expected to decrease
further, pointing to downside risks for growth, according to
Gas flows through Nord Stream 1 are expected to remain subdued
at 40% of capacity after the July maintenance period, driving up
gas prices and decreasing industrial demand, the bank said.
In this context, the eurozone economy is expected to grow by a
marginal 0.1% in 3Q and to stagnate in 4Q, GS said. "We thus see
the eurozone on the edge of recession in 2H, and expect a technical
recession in Germany and Italy," it said, adding that the eurozone
would fall into a recession if gas flows through NS1 halt
May's small rise in industrial production in Germany wasn't big
enough to change Capital Economics's view that output in the sector
is likely to have declined in the second quarter.
Demand appears to be weakening, it said. Industrial orders fell
7% from February to May and the timelier surveys suggest that
conditions in industry as a whole worsened in June, the economic
research firm added.
Furthermore, manufacturers' expectations are consistent with
steep declines in production, it said. Capital Economics expects
German industry to continue to struggle over the rest of the year,
with the possibility of further sustained disruption to gas flows
from Russia presenting a downside risk.
Stock futures ticked higher with the focus turning to labor
market data, which traders will be watching for clues on how rising
interest rates and high inflation are impacting hiring.
Data later Thursday are expected to show the number of new
applications for U.S. unemployment benefits edged slightly lower in
the week ended July 2 to 230,000.
That comes ahead of Friday's jobs report. Economists polled by
The Wall Street Journal expect employers to have added 250,000 jobs
in June, down from a rate of 390,000 in May.
Recent data on the job market have suggested it is cooling but
remains unusually tight.
In premarket trading, GameStop shares jumped 9.8% after the
retailer on Wednesday declared a 4-for-1 stock split.
Sterling extended its gains after reports that U.K. Prime
Minister Boris Johnson will step down following a raft of
resignations from his government in an unprecedented revolt over
The reports followed a series of scandals under Johnson's
leadership that prompted more than 50 members of parliament to
resign from his government.
There is no doubt he has failed the public on many occasions,
"However, political uncertainty has increased as a large number
of political cards will come into play where the new prime minister
may try to persuade public by adopting more loose fiscal policy,
which could make the Bank of England's job even more difficult [in
bringing down inflation],"
The dollar lost ground after rising strongly in the previous
session as investors digest the minutes from the Fed's June
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, Swissquote said.
Market chatter suggests market pricing has "room to get more
dovish rather than more hawkish," which could slow the dollar
rally, it said.
Eurozone government bonds fell in early trading, causing yields
to rise, but the 1% level for the 10-year Bund yield remains in
sight, according to analysts.
"Bunds are still relatively supported despite stabilizing risk
sentiment and weaker U.S. Treasurys," Commerzbank said.
Volatility in bond markets is set to remain extremely high, it
said, adding that with recession fears remaining in focus, the
10-year Bund yield could test the 1% level before long. The rise in
eurozone government bond yields was led by Spain which conducts a
bond auction Thursday.
Eurozone peripheral bond spreads might have turbulent weeks
ahead, with the bias tilted towards wider spreads, according to
The accounts of the European Central Bank's June meeting, due
for release later on Thursday, might be one of those opportunities
where market participants might get a more precise picture of the
continuing debate in the ECB about the anti-fragmentation tool, it
said. "We believe that there is a decent probability for the market
to feel underwhelmed on any proposed tool (or lack of thereof),"
The green premium, known as "greenium," in German Bunds has been
under pressure for the past three months, perhaps driven by supply,
Citi said. Germany's green government bond supply has been the
highest among the eurozone's 11 largest issuers in the year to
date, it said.
However, Italy's April 2045 green BTP and France's June 2039
green OAT have seen the best performance with no supply in these
bonds year to date, according to Citi. Greenium on eurozone
government bonds currently ranges between two and 12 basis points,
Eurozone green government bond issuance totaled EUR25 billion in
1H, lower than expected, though it should pick up with EUR35
billion of issuance in 2H, according to Citi's strategists
Oil prices wavered along the flatline, with the hawkish Fed
minutes not helping the macro mood, according to Peak Trading
Fitch said oil is 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," Fitch 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.
Spot gold was slightly firmer early Thursday 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 beneath 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, UOB said,
noting that these levels were tested a few times in March and
August of last year.
Base metals rose as Asian buyers look 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
DOW JONES NEWSPLUS
U.K.'s Boris Johnson to Resign After Scandals Grow Too Great to
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.
Shell Says Fuel-Refining Margins Could Add $1 Billion to
LONDON-Shell PLC said it expects strong second-quarter profit
from higher fuel-refining margins that could add more than $1
billion to earnings, while forecasts for sustained high energy
prices boosted the value of its oil and gas holdings.
The London-based oil major said Thursday that it expects the
outlook for energy prices will allow the company to reverse between
$3.5 billion to $4.5 billion in impairments it took early in the
pandemic, when sagging demand had a big impact on energy-price
forecasts. Demand has since come roaring back amid a resurgence in
travel and other activities curtailed by Covid-19.
Telecom Italia Outlines Plan to Separate Fixed Network
Infrastructure Assets From Services
Telecom Italia SpA on Thursday outlined the details of a plan to
separate its fixed-network infrastructure assets from services as
it aims to improve its financial position.
The Italian telecommunications company said the fixed-network
assets, or NetCo, will cover both the domestic and international
wholesale businesses and be focused on further accelerating the
fibre network deployment.
Persimmon 1H Revenue Fell on Lower Completions; Sees Profit
Persimmon PLC said Thursday that revenue for the first half fell
on lower house completions, but it expects profit to beat
expectations and its forward sales position rose.
The U.K. house builder said that first-half revenue was 1.69
billion pounds ($2.02 billion) for the period compared with GBP1.84
billion a year prior.
Entain Downgrades 2022 Online Net Gaming Revenue, Backs 2023
Positive Ebitda Views
Entain PLC said Thursday that it expects online net gaming
revenue to be flat year-on-year given that the macroeconomic
environment is moderating customers' spending.
The betting-and-gambling group previously expected a 2022 online
net gaming revenue growth of mid-to-high single digit.
British Airways Slashes More Than 10,000 Flights Amid Industry
British Airways is scrapping another 10,300 flights from its
summer schedule as airlines contend with a resurgence in travel
demand that has overwhelmed operators.
The airline's cancellations have been mounting, starting with an
initial 8,000 return flights scrapped at the start of the summer
season. On Tuesday British Airways said it was canceling more than
1,000 more. Including the 10,300 announced on Wednesday, the
carrier has now reduced its flying schedule by about 30,000
flights, representing some 13% of its originally planned
France's Macron Confronts Divided Parliament With Plan to Raise
PARIS-The government of French President Emmanuel Macron struck
a defiant tone Wednesday, saying it planned to press ahead with a
contentious overhaul of the country's pension system despite
recently losing its majority in parliament.
Mr. Macron's newly appointed prime minister, Élisabeth Borne,
began her first address before France's highly polarized National
Assembly with conciliatory notes and an appeal for unity.
Russian and Ukrainian Forces Prepare for Next Phase of Battle
Russia's invading army shelled the positions of Ukrainian
defenders along the front line as both sides girded for the next
battles for control of Ukraine's east.
After capturing the city of Lysychansk over the weekend, Russian
forces are turning their sights to parts of the Donetsk region that
remain under Ukrainian control, including the cities of Slovyansk
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
Inflation Fears Drove Larger Fed Rate Increase in June
WASHINGTON-Federal Reserve officials agreed at their meeting
last month they would have to raise interest rates faster and to
levels high enough to slow economic growth because of the worsening
Officials voted to raise their benchmark rate by 0.75 percentage
point in June, the largest increase since 1994, and several
officials have indicated since then that they are prepared to
support another such increase at their meeting later this
Heads of FBI, MI5 Issue Joint Warning on Chinese Spying
LONDON-The heads of the FBI and Britain's domestic security
service issued sharply worded warnings to business leaders about
the threats posed by Chinese espionage, especially spying aimed at
stealing Western technology companies' intellectual property.
In a rare joint appearance on Wednesday at the headquarters of
MI5, Christopher Wray, director of the Federal Bureau of
Investigation, and Ken McCallum, director-general of MI5, urged
executives not to underestimate the scale and sophistication of
China Escalates Efforts to Influence U.S. State and Local
Leaders, Officials Warn
WASHINGTON-U.S. counterintelligence officials are stepping up a
campaign to warn state and local government leaders and business
executives about what they see as China's increasing use of overt
and covert means to influence policy-making.
A notice released Wednesday by the U.S. National
Counterintelligence and Security Center cites an aggressive,
escalated campaign by China to lobby and otherwise influence state,
local, tribal and business leaders as tensions with Washington
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(END) Dow Jones Newswires
July 07, 2022 05:46 ET (09:46 GMT)
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