European stocks were flat on Friday ahead of the closely watched
July jobs report, which will give investors their latest view of
the health of the U.S. economy as tighter monetary policy from the
Fed risks causing a slowdown.
The jobs report, which the U.S. Department of Labor is set to
publish Friday at 14:30 p.m. GMT, is likely to show that jobs
growth decelerated last month, reflecting the impact of inflation,
higher interest rates, and a slowing economy.
Economists expect that the U.S. added 258,000 jobs last month,
with the employment rate steady at 3.6%.
Earnings season remains in sharp focus. Deutsche Post climbed
after the German freight-and-logistics group posted increased
earnings for the second quarter, beating expectations, and
confirmed its earnings target for the year. German insurer Allianz
lost ground on a slump in second-quarter net profit as market
turbulence hit its asset-management activities.
Stocks to Watch:
Luxury-goods players can look forward to improvements in China
and peak tourist season in Europe, though macroeconomic pressures
may offset these boons, Equita Sim said. Second-quarter results
were encouraging for the sector even in the face of lockdowns in
China, the investment bank said, noting strong demand in other
With China improving from June onward, the third quarter looks
to be strong too, with European tourism seasonality also helping,
Equita Sim said. However, the worsening macro situation in Europe
and the U.S. leave visibility low in those markets in 2H and into
next year, it warned.
BASF's non-European operations will become increasingly
important in the medium term as the German chemicals giant faces a
cracking cost disadvantage in Europe and is exposed to the risk of
production outages due to natural gas supply, Jefferies said,
cutting the company's target price to EUR47 from EUR60.
Naphtha-based chemical cracking--a chemical process to break
down complex organic molecules into simpler compounds--in Europe is
now more expensive than Chinese coal-based cracking, contributing
to a deterioration of the company's position on the global cracking
cost curve, the bank said.
Eurozone economic growth was surprisingly strong in the first
half of 2022, coming in at 1.2%, which is around 2% stronger than
the U.S. economy, J. Safra Sarasin said. In the third quarter, some
southern European countries will benefit from the revival of
tourism, but the overall trend is clearly pointing down, the asset
management firm said.
"A recession in the winter half looks increasingly likely,"
according to J. Safra Sarasin. Germany, the eurozone's largest
economy, will be particularly hard-hit and might be in a recession
already, it said.
U.S. stock futures wavered as investor attention is focused on
the July jobs report.
"Welcome to another payrolls Friday which after a week of better
U.S. data on balance, probably isn't set up with the market as
worried as it could have been," said Jim Reid, a strategist at
"It's fair to say the market is probably going into today's
print less worried about it than it was at the start of the
Nevertheless, the health of the economy is a crucial indicator
for markets at the moment amid expectations that the Fed will
continue to tighten monetary policy in a bid to tame red-hot
inflation, which is at its highest in four decades.
The Fed has already raised rates four times this year, including
two mega-size, 75 basis-point rate increases in June and July--the
biggest since 1994--and is expected to keep raising rates this year
before cooling off in 2023.
The risk is that denting economic demand, while it should bring
inflation under control, could cause a recession. Signs that the
economy is weakening, such as a deterioration of the labor market,
could stem the pace of the Fed's tightening.
DraftKings is due to report quarterly earnings ahead of the
The DXY dollar index was steady ahead of the much-awaited
employment report. The jobs report could fall short of expectations
for employment growth of 250,000 in July, but this is unlikely to
have much impact on the dollar, ING said.
"We doubt a softish headline jobs number will do too much damage
to the dollar, given that average earnings should stay firm and
next week should see another near 9% year-on-year U.S. consumer
price index print, " the Dutch bank said.
It seems too early to conclude the Fed's battle against
inflation is over, ING said.
Sterling should weaken further against the dollar as the Bank of
England's latest policy decision has encouraged markets to price in
more interest-rate cuts for next year and beyond, MUFG Bank
The BOE on Thursday lifted its key rate by 50 basis points to
1.75% but it forecast a recession from the fourth quarter and
expects inflation to undershoot its target by a larger amount in
three years' time.
"It sends a strong dovish signal that lower rates will be needed
once upside inflation risks have passed in the near-term," MUFG
said, expecting GBP/USD to fall to 1.1790 by the end of the third
The Ukraine war and its impact on the eurozone's terms of trade
has damaged the euro's equilibrium fair value, ING said.
"Despite the recent weakness in EUR/USD spot, the drop in its
BEER [behavioural equilibrium exchange range] fair value caused by
terms of trade effects was so significant that we estimate the pair
is still around 5% overvalued compared to its medium-term
equilibrium level," the Dutch bank said.
Given the recent reduction in Russian gas supplies to Europe and
concerning European growth prospects this winter, ING cuts its
year-end forecast for EUR/USD to 1.02 from 1.08 previously.
German 10-year Bund yields edged slightly higher after falling
on Thursday alongside U.K. gilt yields on the BOE's pessimism about
the economic outlook even as it raised interest rates.
Thursday's fall in government-bond yields helped lift equities,
Deutsche Bank analysts said. As yields edge back up, equities
traded lower on Friday.
Oil prices moved higher in early trade. "The focus is squarely
on the U.S. nonfarm payrolls," SPI Asset Management said. The
consensus estimates a softening of the labor market in July, SPI
said, noting that crude prices are down nearly 10% this week.
"While lower commodity prices suggest supply-side inflationary
pressures are receding, central banks are increasingly committed to
procyclical monetary policy. However, U.S. rates pricing for 2023
implies that a growth slowdown will drive rate cuts, in contrast to
hawkish Fedspeak this week," SPI said.
Gold wavered after gaining on safe-haven demand in early Asian
trade, driven by global recession risks, analysts said. Central
banks worldwide are acknowledging recession risks, Oanda said. The
Bank of England had a rather gloomy outlook and the Czech central
bank surprised markets by halting its rate-increase cycle, it
Industrial metals prices were up. "Yesterday's data showed that
U.S. initial and continuing jobless claims continued to track
higher but are still low and consistent with a tight labor market,"
the Commonwealth Bank of Australia said.
"The labor market is a lagging indicator of the economy," the
CBA said. "We expect the labor market to remain tight for several
more months at least."
DOW JONES NEWSPLUS
Europe's Green Vision Finds Latest Foe in Dutch Farmers
Trienke Elshof's family has milked cows in the northern
Netherlands for more than three decades, but a policy recently
proposed by the Dutch government to slash agricultural
greenhouse-gas emissions threatens to shut their dairy farm.
Dairy cows are as much a hallmark of the rural Dutch landscape
as windmills and canals. In cities, milk is routinely the beverage
at business lunches, and cheese shops abound.
Deutsche Post Backs 2022 View After Second-Quarter Earnings
Deutsche Post AG said earnings increased in the second quarter,
beating expectations, and confirmed its earnings target for the
The German freight-and-logistics group said Friday that
quarterly net profit rose to 1.46 billion euros ($1.50 billion)
from EUR1.29 billion a year earlier. Analysts had expected EUR1.23
billion, according to consensus estimates provided by the
Allianz Net Profit Slumped as Market Turbulence Hits Asset
Allianz SE said Friday that second-quarter net profit tumbled
but operating profit rose, confirming full-year guidance despite
its asset-management business struggling amid turbulent
The German insurer and asset manager said net income in the
three months to the end of June was 1.71 billion euros ($1.75
billion), down from EUR2.23 billion a year earlier.
London Stock Exchange Group Pretax Profit Rose, Sets Out GBP750
London Stock Exchange Group PLC reported on Friday a significant
rise in pretax profit for the first half of 2022 and said it is
launching a share buyback program with an aggregate value of up to
750 million pounds ($911.9 million).
The stock-exchange and financial-information company posted a
pretax profit of GBP803 million compared with GBP463 million for
the same period a year earlier.
WPP Lifts 2022 Organic Growth Guidance
WPP PLC said Friday that first-half pretax profit rose on broad
growth and that it has raised its organic growth guidance for the
The London-based advertising group said pretax profit was 418.6
million pounds ($509 million) compared with GBP394.4 million a year
Footfall at UK Stores Fell on Record High Temperatures,
Footfall at British retail stores declined in July when compared
with prepandemic levels, according to the latest report by the
British Retail Consortium and Sensormatic Solutions.
"Following four months of steady progress, U.K. footfall stalled
in July as record temperatures and the rising cost-of-living
deterred people from visiting local shops," BRC Chief Executive
Helen Dickinson said.
U.S. to Report on July Employment as Inflation and Fed Rate
Hikes Hit Economy
The U.S. labor market likely cooled again in July, economists
estimate, as the economy faltered under the weight of high
inflation and Federal Reserve interest-rate increases to cool
Employers are estimated to have created 258,000 jobs in July,
with the unemployment rate staying steady at 3.6%, according to
economists surveyed by The Wall Street Journal. That would mark a
significant slowing of payroll growth in the first half of the year
that was faster than during any other post-World War II period when
the economy began contracting.
Stocks' Summer Rally Fueled by Drop in Bond Yields
A sharp decline in longer-term bond yields has powered a rebound
in stocks, as slowing growth gives investors greater confidence
that the postpandemic economy won't be defined by significantly
higher interest rates than the one that preceded it.
The yield on the 10-year U.S. Treasury note, which sets a floor
on mortgage rates and myriad other borrowing costs, settled June 14
at 3.482%, the highest level since 2011 and up from 1.496% at the
end of last year, according to Tradeweb. July, though, marked its
biggest one-month decline since March 2020 and it settled at 2.674%
Why Crypto's Market Cap Never Booms, or Busts, as Much as You
Coverage of the manic booms and busts of cryptocurrency
typically cite a popular statistic: market capitalization.
Familiar to stock investors, market capitalization is simply the
supply of an asset multiplied by its price. But in the Wild West of
crypto, neither the supply nor the price are always as they
Global Food Prices Fell Sharply in July, Led by Vegetable Oil,
Global prices for food fell sharply in July, as prices of
vegetable oil and grains eased, the Food and Agriculture
Organization of the United Nations said Friday.
The FAO's food-price index, a closely watched barometer of
global food prices, averaged 140.9 points in July, down 8.6% from
June. The July decline was the steepest monthly fall in the value
of the index since October 2008, although it still remained 13%
higher than in July 2021.
India's Central Bank Raises Rate to Rein in Inflation
India's central bank raised its policy rate in a bid to tame
Reserve Bank of India Gov. Shaktikanta Das said Friday that the
monetary-policy committee decided to increase its policy repo rate
by 50 basis points to 5.40%.
RBA Cuts GDP, Unemployment Forecasts and Ramps Up Inflation
SYDNEY-The Reserve Bank of Australia has lowered its 2022
unemployment forecast, highlighting the continued momentum of the
resource-rich economy despite rapidly rising interest rates and a
jump in costs for households and businesses.
With the unemployment rate already at a 48-year low of 3.5%, the
RBA now expects the figure to fall to 3.25% by the end of this
year. In May, the central bank had forecast that unemployment would
only fall to 3.75% this year.
Russia Is Open to Talks on Brittney Griner Prisoner Swap,
Kremlin Official Says
A senior Kremlin official said Moscow was ready to discuss a
prisoner swap with Washington that people familiar with the matter
say could see U.S. women's basketball star Brittney Griner and
former Marine Paul Whelan traded for a Russian arms dealer
imprisoned in the U.S.
The comments from Russian Foreign Minister Sergei Lavrov, in a
news conference in Cambodia, came a day after a Russian court
sentenced Ms. Griner to nine years in prison following her guilty
plea and conviction on charges she brought a marijuana product into
the country. The U.S. maintains Ms. Griner has been wrongfully
China Boasts of Ability to Blockade Taiwan as Military Exercises
China touted its military exercises around Taiwan as proof of
its ability to blockade the self-ruled island in the event of a
war, as the operations in response to a visit by U.S. House Speaker
Nancy Pelosi entered a second day.
Chinese warplanes and warships carried out maneuvers off
Taiwan's coast on Friday morning, Taiwan's Ministry of National
Defense said. During the operation, China's military crossed the
median line in the Taiwan Strait, a notional boundary that Taipei
says demarcates areas of de facto control, the ministry said.
Fugitive Chinese Businessman Convicted of Visa Fraud in U.S.
A Florida jury on Thursday convicted a fugitive Chinese
businessman on two counts of fraud related to obtaining visas that
he used to enter the U.S., marking the downfall of a tycoon linked
to both Shanghai financial shenanigans and Hollywood
Shi Jianxiang had been charged last year in U.S. District Court
in the Southern District of Florida with "fraud and misuse of
visas, permits, and other documents" related to entry to the U.S.
Prosecutors say he used a passport in another name to enter the
U.S. at a time he was considered a fugitive from China.
Pelosi Says U.S. Won't Allow China to Isolate Taiwan
TOKYO-House Speaker Nancy Pelosi said Friday that the U.S. would
continue engaging with Taiwan despite criticism from China, as
Beijing encircled the island with rocket and ballistic-missile fire
following her visit there.
"We will not allow them to isolate Taiwan," Mrs. Pelosi said of
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(END) Dow Jones Newswires
August 05, 2022 07:14 ET (11:14 GMT)
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