EU Industrial Production; France ILO Unemployment, CPI; Italy
Foreign Trade EU; UK First Quarterly Estimate of GDP, Index of
Services, Monthly GDP Estimates, Index of Production, Trade,
Business Investment in the UK, NIESR Monthly GDP Tracker; updates
from Flutter Entertainment, Sasol, Pandora
Europe is poised for a subdued open after U.S. stocks ended
mixed on Thursday, as the recent rally tied to cooler inflation
data takes a breather. In Asia, major stock benchmarks struggled
for direction, with the exception of a strong rally in Japan; the
dollar was firmer; while Treasury yields, oil and gold all
European shares are likely to struggle for momentum at Friday's
open, after Wall Street's rally faded despite additional data
suggesting that U.S. inflation might be peaking.
U.S stocks slumped into the closing bell, reversing an early
morning surge that pushed the major indexes to their highest levels
since early May, after the July producer-price index fell 0.5%,
compared with expectations for a 0.2% rise.
Some analysts are urging caution as rising housing costs could
keep core inflation elevated, even as a drop in oil prices and
other commodities has helped to reduce inflation expectations.
"Our view is that this is a rally that really deserves a lot of
scrutiny because when we think about what has happened since the
mid-June low, the market outlook hasn't really changed," said BNY
Mellon Investment Management.
"Historically, the Fed delivers more hikes than the market
anticipates. And this is clearly a hiking cycle that is far from
U.S. Economic Insight:
Markets are rallying on hopes the Fed will pivot away from steep
rate increases, but a more dovish approach could lead to higher
inflation and "potentially [to] a more significant recession in
2023," Guild Investment Management said.
Guild sees inflation sticking at 5% to 6%, which is higher than
the Fed's target. It sees discrepancies in labor data indicating
the economy isn't as strong as July payrolls indicated. Guild said
that "company estimates for second-half and 2023 earnings need to
decline further, and...as that happens, the current rally will be
The U.S. economy "is experiencing a healthy deceleration, not a
recession," Goldman Sachs said, after looking into historical
patterns of revisions of data used to guide monetary policy.
"We find that the initial estimates of payrolls, household
employment, and consumption growth at the start of recessions tend
to be revised down. Even if current employment and consumption
figures were revised down by the average amount at the start of
recessions, most indicators that are used to determine whether the
economy is in a recession would still suggest that economic
activity is expanding."
The dollar was slightly higher in Asia against a basket of
currencies but may weaken again as "Fed pivot" bets grow, analysts
If the Fed meets market expectations to raise rates by only 50
basis points in September, this will likely mark the peak of its
aggressive rate-increase cycle, according to CMC Markets.
However, other central banks may keep pace on tightening,
especially the European Central Bank which appears to have just
begun its aggressive rate-increase cycle and which may cause
further dollar weakness.
TD Securities said the euro could fall to parity against the
dollar again over the coming month after receiving a boost from
Wednesday's lower-than-forecast U.S. CPI data.
U.S. inflation may have peaked but TD said risk assets aren't
"out of the woods yet, suggesting it could be a bit more time to
expect a persistent, positive boost in growth expectations and
financial conditions." The dollar's safe-haven status means it may
benefit from the weak global growth outlook.
TD has advised selling EUR/USD, targeting 1.0000 and placing a
stop loss at 1.0550.
Treasurys gained in Asia, reversing some of Thursday's steep
losses, as investors continue to weigh the latest signs of easing
Investors are now back to pricing in a softer, 50-basis point
interest rate increase by the Fed next month.
However, Deutsche Bank economists said that, despite the "batch
of goldilocks data" Fed officials could still turn out more hawkish
than markets expect.
Markets are pricing in a 59.5% probability that the Fed will
raise interest rates by another 50 basis points to a range between
2.75% and 3% at its Sept. 20-21 meeting. The central bank is mostly
expected to lift borrowing costs to at least a range of 3.5% to
3.75% by March, according to fed funds futures traders.
Oil eased lower having settled at more than 2% on Thursday.
OANDA said prices are likely to remain supported above the
$90.00/bbl level as demand is expected to remain strong on easing
"WTI is back above $90 but that could change if we see progress
on the Iran nuclear deal. It's seen plenty of support around $87-88
over the last month though as the tight market continues to keep
the price very elevated," OANDA said.
Read: EU Proposes Significant Concession to Iran to Revive
Gold futures extended their recent retreat but have managed to
hold above $1,800.
Goldman Sachs expects trading to remain rangebound as investors
continue to weigh worries over economic growth, while watching for
shifts in the Fed's rate policy.
Kitco.com said "bulls' next upside price objective is to produce
a close above solid resistance at $1,850," while also pegging the
"next near-term downside price objective" at $1,686.30.
Copper also stalled but is likely to be supported by positive
sentiment on signs of a peak in U.S. inflation, while iron-ore
futures were dented by the mild dollar strength.
CMC Markets said metals losses may be limited, however, due to
optimism over China's economic recovery and other factors such as
faded recession fears.
TODAY'S TOP HEADLINES
U.S. Home Prices Jumped to Record High in Second Quarter
Home prices continued to climb across nearly all the U.S. in the
second quarter, when buyer demand started to fade due to higher
mortgage rates but still exceeded the housing market's unusually
The median sales price was higher in the quarter compared with a
year ago for 184 of the 185 metro areas tracked, the National
Association of Realtors said Thursday. The only metro area to post
a decline was Trenton, N.J., where median prices fell 0.7%, NAR
EU Proposes Significant Concession to Iran to Revive Nuclear
BERLIN-European Union diplomats trying to break a deadlock in
talks over an Iran nuclear accord have proposed a significant new
concession to Tehran aimed at speedily ending a U.N. investigation
into the Islamic Republic's past atomic activities.
A key sticking point in 16-month-old talks to revive the 2015
deal, which put limits on Iran's nuclear programs in exchange for
sanctions relief, has been a probe by the International Atomic
Energy Agency into undeclared nuclear material found in Iran in
The Bursting Chinese Housing Bubble Compounds Beijing's Economic
China's deflating property bubble is imperiling the world's
second-largest economy with effects that could ripple for
Home prices are dropping in many cities after a long period of
increases, data from Chinese real-estate developers and official
statistics show. Sales of apartments nationwide by the country's
largest developers have slumped annually for 13 consecutive months,
according to industry-data provider China Real Estate Information
Bill to Speed Energy Infrastructure Faces Resistance
WASHINGTON-Legislation to speed the approval process for energy
infrastructure projects is facing political headwinds, including
from Republicans who are skeptical of assurances it will help the
fossil-fuel industry and don't like how it was tied to the
tax-and-climate bill passed by Senate Democrats.
Sen. Joe Manchin (D., W.Va.) negotiated the deal as companion
legislation to the climate bill, dubbed the Inflation Reduction
Act, saying it would include measures to reduce yearslong delays
common in permitting both clean-energy and fossil-fuel
infrastructure, especially pipelines.
Deutsche Telekom Nearing Majority Ownership of T-Mobile
German telecommunications giant Deutsche Telekom AG reiterated
plans to build its stake in T-Mobile US Inc. and said it is nearing
majority ownership of the U.S.'s second-largest wireless carrier by
Deutsche Telekom has been looking to retake a majority stake in
T-Mobile since the unit's 2020 merger with Sprint, which SoftBank
Group Corp. previously controlled. The German company already has
majority voting power in the U.S. wireless carrier.
Shell Working to Fix Leak That Halted Gulf of Mexico Oil
Shell said Thursday it halted activity at several of its
offshore oil production platforms in the Gulf of Mexico due to
leaky pipelines, but said it expects to have the pipelines fixed by
"Shell can confirm that the Mars and Amberjack Pipelines have
been shut-in due to a flange leak at the Fourchon booster station,"
it said in an emailed statement, noting about two barrels of oil
leaked, and they have been contained. The Fourchon station is on
land along the Louisiana coast.
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Expected Major Events for Friday
05:00/FIN: Jun Balance of Payments
05:30/FRA: 2Q ILO Unemployment and Labour Market-related
06:00/UK: Jun Index of Production
06:00/UK: Jun UK trade
06:00/UK: Jun Index of services
06:00/ROM: Jun Industrial production
06:00/UK: 2Q First quarterly estimate of GDP
06:00/UK: Jun Monthly GDP estimates
06:00/SWE: Jul CPI
06:45/FRA: Jul CPI
07:00/TUR: Jun Industrial Production Index
07:00/SPN: Jul CPI
08:00/ITA: Jun Foreign Trade EU
08:00/CZE: Jun Monthly Balance of Payments
08:00/POL: Jul CPI
08:30/UK: 2Q Business investment in the UK: provisional
09:00/EU: Jun Industrial Production
11:30/UK: Jul NIESR Monthly GDP Tracker
12:00/POL: Jun Balance of payments
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(END) Dow Jones Newswires
August 12, 2022 00:19 ET (04:19 GMT)
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