MARKET WRAPS

Watch For:

Weekly Jobless Claims

Opening Call:

Stock futures inched lower on Thursday as traders reflected on several volatile sessions and eyed looming jobs data.

The prospect of the Federal Reserve adopting a less restrictive monetary stance in the wake of some soft data and recent market turmoil--most notably in U.K. bonds--had been a catalyst for a sharp equity rebound, according to Henry Allen, strategist at Deutsche Bank.

"But over the last 24 hours, solid U.S. data releases have created a pushback against that narrative, since they were seen as giving the Fed more space to keep hiking rates over the coming months," Allen added.

Indeed, Fed speakers, such as Raphael Bostic, have continued to affirm the need for more rate hikes. On Thursday, Loretta Mester is due to speak at 8:50 a.m. and again at 6:30 p.m. In between, at 1 p.m., Fed governor Lisa Cook will deliver her first speech in her new role.

One crucial factor impacting Fed thinking is the health of the jobs market. Consequently, the looming nonfarm payrolls report, due on Friday, may be encouraging a period of cautious reflection among investors after the latest rally, said analysts.

The market had been arguably excessively bearish at the end of last week, with the S&P 500 at its lowest since November 2020, and the benchmark's 14-day relative strength index, a momentum gauge, at 28, where a number below 30 is considered in oversold territory. The subsequent recovery, up 5.5% since Friday's close, leaves the RSI at 46.

"There is nothing to suggest that the market will move out of range trade mentality ahead of Friday's major risk event, [the] NFP," said Stephen Innes, managing partner at SPI Asset Management.

"However, the fly in the ointment could be higher [oil] prices, as the knock-on inflation throughput, especially if $100 a barrel is tested, could keep the Fed higher for longer if energy inflation picks up again, " Innes added.

Forex:

The dollar has recovered some ground after recent falls and is likely to continue to do so ahead of the weekend, potentially around Friday's jobs report in particular, ING said.

"As we had expected, the dollar downtrend has started to prove unsustainable," ING said, adding that markets probably aren't yet ready to bet heavily on the Fed slowing the pace of interest-rate rises.

The jobs data has the potential to lift the DXY to around 112-113, ING said.

Bonds:

Government bond yields face opposing pressures from hawkish central banks and weak economic growth, Amundi said, maintaining an active and tactical approach.

Amundi is slightly cautious on duration--a measure of the sensitivity of bonds to changes in interest rates--mainly through Treasurys and core Europe, but it is positive on China and neutral on the U.K. amid the recent sharp movements, it said.

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Gilt yields rose after Fitch cut its outlook on the U.K. to negative from stable, following on from S&P's recent decision to reduce the country's outlook to negative.

Fitch said the reduction in the outlook reflected the "large and unfunded fiscal package announced as part of the new government's growth plan," which could "lead to a significant increase in fiscal deficits over the medium term."

Fitch affirmed the U.K. credit rating at AA-.

Energy:

Oil prices held modest gains post-OPEC, with SPI Asset Management saying the market is already tight and is expected to tighten further when an EU embargo on Russian oil comes into force later this year.

Other News: Shell warned that a steep fall in refining margins will have a negative impact of between $1 billion and $1.4 billion on its third-quarter adjusted earnings, while it also expects lower results from its Integrated Gas business.

Read more here.

Metals:

Metals prices rose across the board as traders once again pivot to risk assets on tepid signs of a macroeconomic recovery.

"The macro environment is on the bullish side of the ledger for the first time in four weeks," Peak Trading Research said.

   
 
 
   
 
 

TODAY'S TOP HEADLINES

 
 

Shell Braces for Profit Hit From Volatile Natural-Gas Prices, Rising Costs

Shell PLC said it expects its third-quarter earnings to be hit by "significantly lower" profit from trading gas because of market volatility as well as higher costs for delivering fuel amid a global scramble for energy supplies.

The London-based company said Thursday that the pricing and cost swings from shortfalls of liquefied natural gas will likely cut into profit from its huge gas business, typically its biggest cash generator. But Shell said its overall marketing profits from trading oil and other products were higher in the third quarter compared with the previous quarter. The comments came in a preview of Shell's full third-quarter earnings, scheduled for later this month.

   
 
 

Brookfield Bets $2 Billion on Music in Deal With Primary Wave

Brookfield Asset Management Inc. is joining with independent publisher Primary Wave Music in a $2 billion deal to invest in music copyrights, the companies said.

The asset manager, which hasn't previously invested in music catalogs, will take a significant minority interest in Primary Wave, and commit $1.7 billion to fund a permanent capital vehicle focused on acquiring music rights from top acts.

   
 
 

Elon Musk and Twitter at Odds Over Terms of Agreement to Close Deal

Representatives of Elon Musk and Twitter Inc. are still grappling with terms of an agreement that would enable his purchase of the social-media company to proceed, continuing a monthslong drama surrounding the fate of the blockbuster deal.

The discussions are the latest the two sides have held as a courtroom clash draws nearer. They quietly held unsuccessful talks about a possible cut to the price of $44 billion for the social-media platform before Mr. Musk reversed course Monday and said he would return to the original agreement's terms, people familiar with the matter said.

   
 
 

Ford's Electric F-150 Lightning Truck Gets Higher Starting Price-Again

Ford Motor Co. is raising the starting price of its all-electric truck for the second time in recent months.

The new price tag for the 2023 F-150 Lightning Pro is $51,974, the company said. The increase is expected to affect only the Pro, its most affordable trim level.

   
 
 

U.S. Looks to Ease Venezuela Sanctions, Enabling Chevron to Pump Oil

The Biden administration is preparing to scale down sanctions on Venezuela's authoritarian regime to allow Chevron Corp. to resume pumping oil there, paving the way for a potential reopening of U.S. and European markets to oil exports from Venezuela, according to people familiar with the proposal.

In exchange for the significant sanctions relief, the government of Venezuelan President Nicolás Maduro would resume long-suspended talks with the country's opposition to discuss conditions needed to hold free and fair presidential elections in 2024, the people said. The U.S., Venezuela's government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country's battered electricity grid and municipal water systems.

   
 
 

Credit Suisse's Woes Don't Make for a Lehman Moment -- Analysis

European banks aren't at risk of facing a Lehman-style crash.

That's according to multiple analysts reacting to the stream of negative stories and market turmoil hitting Swiss banking giant Credit Suisse Group AG.

   
 
 

Talking Markets: China Likely Needs More Than October Meetings to Exit Zero-Covid

Some China watchers are hoping that political meetings this month will signal an end to strict anti-Covid-19 policies that have cast a gloomy spell on the world's second-largest economy. They are likely to be disappointed and left waiting well into next year, analysts say.

Chinese businesses have slowed investments and consumers have cut spending amid citywide lockdowns, mass testing and years of border closures stemming from Beijing's pandemic controls. These factors played a role in slower-than-expected GDP growth in the second quarter, as well as in several equity market selloffs. Both the CSI 300 and the Shanghai Composite Index have fallen to multimonth lows, while the MSCI China Index has hit a six-year low.

   
 
 

German Factory Orders Fell Sharply in August

New orders in Germany's manufacturing sector fell sharply in August, more than forecast, reflecting weakening demand for goods in a context of rising input costs and high energy prices.

Factory orders decreased 2.4% on month, data from the German statistics office Destatis showed Thursday. The decrease is much larger than forecast by economists polled by The Wall Street Journal, who expected orders to fall by 0.5%.

   
 
 

Bank of Japan Maintains View on Most of Japan's Regional Economies

The Bank of Japan on Thursday maintained its view that most of Japan's local economies were growing moderately, citing improvements in supply shortages

The bank's assessment for eight of the nine local economies was unchanged, and it raised its assessment for one region in the western part of the nation's main island.

   
 
 

Saudi Sovereign-Wealth Fund Joins 100-Year Bond Club

Saudi Arabia braved turbulent markets to join the small club of issuers that have borrowed for 100 years from investors, with its sovereign-wealth fund selling the ultralong debt as part of a $3 billion bond-market debut.

The three-part sale of green bonds tapped global investors for funds that will help support projects at the heart of Crown Prince Mohammed bin Salman's national economic transformation.

   
 
 

Europe Has the Strength to Sail Through a Recession

Europe has had a punishing year. The fallout from the war in Ukraine has caused food and fuel costs to spike, forcing central bankers to move aggressively to curb inflation. Yet, tighter monetary policy is colliding with looser fiscal policy, as governments seek to mitigate the impact of rising costs on household budgets.

The result is a macroeconomic mess, which has pressured stock markets from London and Paris to Berlin and Rome. The FTSE 100, in Britain, is down 4% year to date and down 6% since mid-August; the Stoxx Europe 600, a pan-European index, is off 18%, versus the 21% loss in the S&P 500.

   
 
 

Russian Missiles Hit Civilian Targets in Southeastern Ukraine

KYIV, Ukraine-Russian missiles struck the city center of the southeastern Ukrainian city of Zaporizhzhia, killing at least two people early on Thursday while Ukraine's forces reclaimed more territory from Moscow, according to senior Ukrainian officials.

At least seven missiles struck the city in an attack that hit a series of apartment buildings, according to Kirill Timoshenko, a Ukrainian presidential adviser. At least six people were also wounded in the strike, he said. Zaporizhzhia and the surrounding area have been a focal point of Russian attacks in recent months after Russia seized control of the nearby nuclear power plant with the same name.

   
 
 

North Korea Test-Fires Two Short-Range Ballistic Missiles Off Its East Coast

SEOUL-North Korea test-fired two short-range ballistic missiles off its east coast on Thursday, shortly after the U.S. said at the United Nations that Pyongyang is feeling emboldened.

The Thursday test marked the Kim Jong Un regime's sixth weapons launch in 12 days, adding to what is already a historic year of missile tests.

   
 
 

U.S. Believes Ukraine Was Behind Assassination of Putin Ally's Daughter

WASHINGTON-U.S. intelligence agencies have concluded that Ukraine was responsible for the August assassination outside Moscow of the daughter of a prominent far-right wing Russian ideologue, a U.S. official said.

The U.S. wasn't aware beforehand of the operation that killed Daria Dugina, the official said, and Washington has formally complained about it to Ukraine's government.

   
 
 

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

Richelieu Hardware 3Q

Economic Indicators (ET):

1000 Sep Ivey Purchasing Managers Index

1150 Bank of Canada Governor Tiff Macklem speech to the Halifax Chamber of Commerce

Stocks to Watch:

Great Panther Mining: British Columbia Court Pronounces an Initial Order Converting Restructuring Proceedings Under the Bankruptcy and Insolvency Act to CCAA; Initial Order Prevents Creditors From Enforcing Against Company Up to and Including Oct. 14, When It Will Return to Court to Seek, Among Other Things, an Extension to the Stay; Order Also Approves Agreement for Asahi Refining Canada Ltd. to Continue to Provide Refining Services

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Suncor to Sell Wind and Solar Assets to ATCO's Canadian Utilities Ltd. for C$730M; Sale Includes Magrath, Chin Chute and Adelaide Wind Farms, as Well as Forty Mile Wind Farm Expected to Be Operating by Year-End and Development Stage Renewable Power Assets; Suncor Expects Sale to Close in 1Q

ATCO: In Contract Discussions With 'Credit Worthy Counterparties' on Forty Mile Project; Expects Deal to Add to Earnings and Cash Flow in 2023

   
 
 

Expected Major Events for Thursday

02:00/JPN: Sep Imported Vehicle Sales

06:00/GER: Aug Manufacturing orders

06:00/GER: Aug Manufacturing turnover

08:30/UK: Sep S&P Global / CIPS UK Construction PMI

11:30/US: Sep Challenger Job-Cut Report

12:30/US: 10/1 Unemployment Insurance Weekly Claims Report - Initial Claims

12:30/US: U.S. Weekly Export Sales

13:00/RUS: Weekly International Reserves

14:00/CAN: Sep Ivey Purchasing Managers Index

14:30/US: 09/30 EIA Weekly Natural Gas Storage Report

16:00/US: Sep Monthly U.S. Retail Chain Store Sales Index

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

23:01/UK: Sep BRC-Sensormatic IQ Footfall Monitor

23:30/JPN: Aug Household Spending

23:50/JPN: Sep International Reserves / Foreign Currency

23:50/JPN: Sep Provisional Trade Statistics for 1st 20 days of Month

All times in GMT. Powered by Onclusive and Dow Jones.

   
 
 

Expected Earnings for Thursday

Accolade Inc (ACCD) is expected to report for 2Q.

Aehr Test Systems (AEHR) is expected to report for 1Q.

AngioDynamics (ANGO) is expected to report $-0.17 for 1Q.

Buckle Inc (BKE) is expected to report.

Conagra Brands Inc (CAG) is expected to report $0.52 for 1Q.

Constellation Brands (STZ,STZB) is expected to report $2.81 for 2Q.

Educational Development Corp (EDUC) is expected to report for 2Q.

Goodfellow (GDL.T) is expected to report for 3Q.

IDT Corp (IDT) is expected to report for 4Q.

Levi Strauss & Co (LEVI) is expected to report $0.37 for 3Q.

McCormick & Co (MKC) is expected to report $0.70 for 3Q.

Park Aerospace Corp (PKE) is expected to report for 2Q.

Radiant Logistics (RLGT) is expected to report $0.32 for 4Q.

Richelieu Hardware (RCH.T) is expected to report $0.76 for 3Q.

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ANALYST RATINGS ACTIONS

Avantor Raised to Buy From Neutral by Citigroup

Charles Schwab Raised to Buy From Hold by Erste Group

Chemours Cut to Hold From Buy by Argus Research

Church & Dwight Raised to Buy From Hold by Deutsche Bank

ConocoPhillips Raised to Buy From Hold by Erste Group

Cross Country Healthcare Cut to Hold From Buy by Truist Securities

Farmers National Banc Cut to Neutral From Overweight by Piper Sandler

Ford Motor Raised to Overweight From Equal-Weight by Morgan Stanley

Goldman Sachs Cut to Underweight From Neutral by Atlantic Equities

Laredo Petroleum Cut to Neutral From Overweight by Piper Sandler

Lumen Technologies Cut to Equal-Weight From Overweight by Wells Fargo

Medallion Financial Cut to Market Perform From Outperform by Northland Capital Markets

Morgan Stanley Cut to Neutral From Overweight by Atlantic Equities

Penumbra Cut to Neutral From Buy by Citigroup

Poshmark Cut to Equal-Weight From Overweight by Barclays

Sotera Health Cut to Neutral From Buy by Citigroup

SVB Financial Cut to Equal-Weight From Overweight by Morgan Stanley

Walmart Raised to Buy From Hold by Erste Group

This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

October 06, 2022 05:28 ET (09:28 GMT)

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