MARKET WRAPS
Watch For:
Eurozone July harmonized CPI, June construction output; updates
from Bang & Olufsen, Adyen, Koninklijke BAM Groep, Boskalis
Westminster
Opening Call:
Shares in Europe are expected to open mixed, with the FTSE 100
likely to open flat while the DAX may push higher. In Asia, stocks
were mostly tracked U.S. equities' declines; Treasury yields were
mixed; the dollar, oil and gold posted mild gains.
Equities:
European stocks are poised to open mixed Thursday, after Wall
Street closed lower as investors reviewed another batch of earnings
from retailers and studied the latest signals from the Fed about
future interest-rate moves.
"In a microcosm, today tells you how closely the market is
looking for any indication of the Fed's next step," said Jim Baird,
chief investment officer at Plante Moran Financial Advisors. After
the minutes' release, "everyone came back to the other side of the
boat. That tells you what the market is focused on right now," he
said.
Forex:
The dollar edged higher in Asia after paring gains following the
release of the Fed's most recent meeting minutes saying officials
anticipate ongoing increases for the Fed funds rate.
The minutes also revealed that many officials saw a risk that
the Fed could tighten more than necessary, given the constantly
changing nature of the economic environment and long, variable lags
in monetary policy's impact. Some officials also said the benchmark
fed-funds rate target was still below neutral, or the level which
neither stimulates nor restrains economic growth, even after July's
rate hike.
Investors remain unsure about the future pace of tightening by
the FOMC.
"While the FOMC minutes continue to emphasize the need to
contain inflation, there is also an emerging concern the Fed could
tighten more than necessary," said FHN Financial Chief Economist
Chris Low.
"There is an inkling of improvement on the supply side of the
economy, there is a bit of hope in some product prices moderating,
but there is still a great deal of concern about inflation and
inflation expectations."
"All of this translated into a 75bp rate hike in July, a
decision to keep tightening at future meetings, a decision to soon
moderate the tightening pace and--from some participants--a
reluctance to ease quickly once peak Fed funds is reached," Low
said.
Bonds:
Treasury yields were mixed in Asia after the yield on the 2-year
note reached a two-month high overnight following the release of
the Fed minutes.
Treasury yields remained higher after the Fed minutes revealed
that policy makers saw the need to raise its benchmark interest
rate to a "restrictive" stance given the risk of the public
questioning their resolve to bring down inflation.
Energy:
Oil futures pushed slightly higher after closing higher
overnight on data showing a weekly drop of more than 7 million
barrels in U.S. domestic supplies.
"It was a bullish EIA report as US crude exports rose to a
record as Europe scrambles for alternatives to Russian oil,"
Oanda's Edward Moya said.
Oanda added that the oil market will remain tight, given that
there is limited spare capacity and hopes of a revival of the Iran
nuclear deal appear to be dwindling. "It looks like oil needs to
head higher," Moya said.
Metals:
Gold futures edged higher after weakening overnight on a strong
dollar and rising Treasury yields.
The precious metal will likely trade within a limited range for
now, with markets keeping an eye on next week's Jackson Hole
Symposium, Oanda said.
"Although gold is seen as a hedge against inflation, rising U.S.
interest rates dull non-yielding bullion's appeal," Phillip
Securities said.
--
Aluminum pushed a tad higher amid signs of tighter supply as
Europe's energy crisis persists.
Norsk Hydro said earlier this week that it is closing primary
aluminum operations at its Slovalco plant in Slovakia as high
electricity prices have made operations financially unviable.
Aluminum is sometimes referred to as a solid form of electricity
due to its energy intensive process, ANZ noted.
Meanwhile, traders are also keeping a close watch on Sichuan,
China's aluminum hub, where officials are rationing electricity
amid extreme weather, ANZ added.
--
Iron-ore futures slid in Asia, extending recent declines amid
demand concerns.
Steel-making profitability has weakened again and steel mills
aren't sufficiently motivated to increase output, Huatai Futures
said.
In the medium term, prices of the raw material may lack upward
momentum in part due to a gloomy outlook for the Chinese property
sector, Huatai added.
TODAY'S TOP HEADLINES
Fed Officials See Need for Continued Interest-Rate Increases,
but Less Certainty Over Destination
Federal Reserve officials agreed at their monetary-policy
meeting last month they needed to keep raising interest rates
enough to lower inflation, but signaled greater caution with the
pace of coming increases.
The central bank has raised rates this year at its fastest pace
since the 1980s. Minutes from the Fed's July 26-27 policy meeting,
released Wednesday, showed officials were sensitive to two opposing
risks as they weighed how and when to slow those increases.
U.S., Taiwan to Begin Formal Talks for Trade, Investment Pact
This Fall
WASHINGTON-The U.S. announced Wednesday that it and Taiwan will
start negotiations for a bilateral trade and investment initiative
this fall to deepen ties on a range of issues including technology
and agriculture.
The new pact will also address ways to respond to "distortive
practices of state-owned enterprises and nonmarket policies and
practices," the U.S. Trade Representative's office said, in a clear
reference to China's policies without naming the country.
Iran Renews Demands for U.S. Guarantees in Nuclear Deal
Talks
BERLIN-Iranian demands for guarantees from the U.S. have once
again stalled efforts to revive a 2015 nuclear pact, leaving
Washington and European capitals unsure if a deal is possible.
Tehran on Monday sent a response to the European Union, which
chairs the nuclear talks, neither accepting nor rejecting an EU
draft text of a deal but raising several issues Iran wanted
incorporated into the agreement. The EU had said its draft was the
"final text" of a possible deal when it sent it out, announcing
that negotiations were over.
China to Join Russia Military Exercises as U.S. Rivals Deepen
Ties
The People's Liberation Army of China said it would join
military exercises led by Russia in the latest demonstration of
partnership between the two U.S. rivals.
Building on a "no limits" pact their presidents signed this
year, the Russian and Chinese militaries will drill side-by-side
starting later this month in the Russian Far East, according to
China's Ministry of Defense. The exercises will mark their second
joint show of force in the region this year after bombers from each
country in May conducted a 13-hour drill close enough to Japan and
South Korea that those nations scrambled jet fighters, as President
Biden was visiting Tokyo.
Oil Giants Must Face Climate-Liability Suits in States, Appeals
Court Rules
A federal appeals court ruled that lawsuits by Delaware and
Hoboken, N.J., seeking compensation from oil companies for the
impacts of climate change should be decided in state, not federal
courts.
The decision Wednesday is the latest procedural victory by state
and municipal governments, which have sought to bring
climate-liability cases against companies such as Exxon Mobil
Corp., Chevron Corp. and Shell PLC under state laws, after similar
earlier efforts under federal laws proved unsuccessful.
U.K. Government to Pay Thousands of People Who Were Infected by
Tainted Blood
The United Kingdom will pay thousands of people who were
infected with hepatitis C or HIV through contaminated blood about
$120,000 each, the government said Wednesday.
The government payments follow recommendations from a yearslong
inquiry examining the tainted blood scandal in the U.K. in the
1970s and 1980s. Thousands of people with hemophilia and other
blood disorders were infected with HIV and hepatitis C through
blood treatments from the National Health Service. At least 2,400
people died, according to a 2017 estimate from the government.
Russia Hunts Saboteurs in Crimea After Blasts
DNIPRO, Ukraine-Russia's intelligence services were hunting for
saboteurs in Crimea on Wednesday after an explosion at an
ammunition depot rattled Moscow's grip on the peninsula.
Tuesday's blasts followed an explosion last week at an air base
in Crimea, which was annexed by Moscow in 2014.
Amazon Seeks Top Film Executive Amid Expansion of Entertainment
Arm
Amazon.com Inc. is searching for a senior movie-studio executive
to help lead its growing entertainment division, turning to rivals
for a chance to poach an experienced Hollywood player.
Amazon Studios has held conversations with several Hollywood
leaders about the role, including Netflix Inc.'s film head, Scott
Stuber, one of the streamer's most powerful and visible executives,
according to people familiar with the matter.
Write to hoishan.chan@dowjones.com
Expected Major Events for Thursday
04:30/NED: Jul Unemployment
06:00/SWE: 2Q Industrial inventories
06:00/SWI: Jul Trade Balance
06:00/SWE: 2Q Industrial capacity utilization
06:00/NOR: Jun Monthly GDP
07:00/SPN: Jun Industrial Orders & Turnover
07:00/SVK: Jul Harmonized CPI
07:00/AUT: Jul CPI
07:00/SPN: Jun Trade Balance
08:00/BUL: 2Q Labour force survey
08:00/NOR: Norges Bank monetary policy decision
09:00/CYP: Jul Harmonised CPI
09:00/EU: Jul Harmonised CPI
09:00/MLT: Jul Harmonised CPI
09:00/EU: Jun Construction output
11:00/TUR: Turkish interest rate decision
23:01/UK: Aug UK Consumer Confidence Survey
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(END) Dow Jones Newswires
August 18, 2022 00:44 ET (04:44 GMT)
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