MARKET WRAPS
Watch For:
EU CPI; UK CPI, PPI; trading updates from ASML, Antofagasta, Tele2, Assa Abloy, Investor AB
Opening Call:
European stock futures rose as traders eye prospects for rate cuts by the Federal Reserve. Asian stock benchmarks were mixed; the dollar and Treasury yields steadied; while oil futures were little changed and gold gained.
Equities:
Stock futures advanced early Wednesday as bets rose for multiple rate cuts by the Federal Reserve this year. As of Tuesday, fed-funds futures traders were pricing in a more than 50% chance of three quarter-point rate cuts by December.
Fed governor Adriana Kugler said Tuesday that more progress on reducing inflation and signs of growing softness in the U.S. labor market would pave the way for interest-rate reductions later in 2024.
"If economic conditions continue to evolve in this favorable manner with more rapid disinflation, as evidenced in the inflation data of the past three months, and employment softening but remaining resilient as seen in the past few jobs reports, I anticipate that it will be appropriate to begin easing monetary policy later this year," she said.
Inflation prints for the EU and the U.K. due later today will also be in focus.
Forex:
The dollar could weaken as Fed cuts look imminent. Bank of America said "recent developments as well [as] the DXY's overvaluation suggest rising risk of a faster move than our forecasts currently imply."
The greenback could still hold, though, "especially if the Fed does not immediately endorse market pricing of close to 3 rate cuts for 2024." The dollar strength has been linked to the Fed's reluctance to cut rates.
Bonds:
Yields on 2- and 10-year U.S. government debt ended at their lowest levels in four to five months overnight, after U.S. retail sales came in unchanged and as traders continued to price in multiple rate cuts from the Fed by year-end.
"Overall, consumption and economic activity have downshifted significantly so far in 2024," said Rubeela Farooqi, chief U.S. economist for High Frequency Economics.
Energy:
Oil futures were little changed in Asia, as concerns about China's slowing economy grow, said Andreas Thalassinos, senior market analyst at Neotrades.
China's slowdown stems from ongoing challenges in the property market and uncertainties about job security. This is prompting caution among market participants despite potential stimulus measures, Thalassinos said.
"These economic developments raised doubts about future crude oil demand from the world's second-largest economy and largest importer," Thalassinos added.
Metals:
Gold rose in Asia after touching fresh highs overnight. Bullion traders latched on to dovish Fed officials' comments and softer Canadian CPI data, sending spot gold to a record high on Tuesday, said Matt Simpson, market analyst at FOREX.com and City Index.
However, the front-month adjusted gold futures contract hasn't yet broken above its record high set in May, suggesting spot gold could pause a bit before rising further from here, Simpson added.
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Copper rises in Asian trading after falling overnight. Prices may be volatile in the near term, but it may be difficult for copper to rise further as demand isn't recovering significantly, Nanhua Futures said.
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Iron ore fell amid concerns about weak demand from China even as supply increases. Iron-ore exports averaged 1.66 million tons per day in the first 10 days of July in Brazil, up 14% from the full-month pace in July last year, ANZ said, while mining company Rio Tinto reported a 1.5% on-year rise in 2Q shipments of iron ore.
This comes following lackluster Chinese economic data earlier this week, with both the value of home sales and property investment remaining weak in 1H, ANZ said.
TODAY'S TOP HEADLINES
Real-Estate Meltdown Strains Even the Safest Office Bonds
The commercial real-estate meltdown is spilling over into the bond market.
Defaults are mounting in a favorite Wall Street mortgage-bond investment, setting off fresh alarms about the future of offices and malls in cities across the U.S.
Slowing Inflation, Labor Market Open Door for Rate Cuts, Fed's Kugler Says
More progress on reducing inflation and signs of growing softness in the U.S. labor market would pave the way for interest-rate reductions later in 2024, Federal Reserve Gov. Adriana Kugler said on Tuesday.
After a bumpy start to 2024, the rate of inflation has resumed its downward trend in recent months. Kugler attributed the deceleration to the unwinding of pandemic-era supply-chain snarls, while higher interest rates and dwindling excess savings have weighed on consumer demand.
Why gold prices look likely to smash more records
Gold climbed sharply on Tuesday as bets for U.S. interest-rate cuts led prices to fresh record highs and some analysts touted long-term prospects for further gains in the precious metal.
"Like stocks and bonds, gold just wants to go higher - and for the same reason," said Adrian Ash, director of research at BullionVault. The Federal Reserve is "finally preparing to cut rates because it believes it's got inflation beat."
Adidas Raises Full-Year Guidance After Strong Quarter
Adidas upgraded its sales and earnings guidance for the year after posting better-than-expected results for the second quarter as customers bought more products despite less promotional activity.
The German shoe and sportswear company said it now expects currency-neutral revenue to increase at a high single-digit rate this year, compared with a mid-to-high single-digit rate previously. Meanwhile, it said it also expects roughly EUR1 billion ($1.09 billion) in operating profit, up from a previous forecast of around EUR700 million.
JD Vance Is a Big Ukraine Critic. Europe Is Wary of His Addition to the GOP Ticket.
MILWAUKEE-A group of foreign ambassadors and other diplomats gathered here between second and third base at American Family Field, home of the Milwaukee Brewers, for an event focused on luring foreign investments to southeastern Wisconsin.
But on everyone's mind was GOP presidential nominee Donald Trump's selection of JD Vance-a leading critic of U.S. support for Ukraine-as his running mate on the first night of the Republican National Convention.
BHP's Iron Ore, Copper Production Rises
Mining giant BHP Group said it produced more iron ore and copper over the past year thanks to new and acquired mines in Australia, but that it dug up less steelmaking coal amid unexpectedly heavy rains.
The world's No. 1 miner by market value forecast steady iron-ore production for the year ahead, and said it should again produce more copper and less coal.
Musk Says He Will Move X and SpaceX Headquarters Out of California
Elon Musk is fed up with California.
The billionaire entrepreneur said Tuesday he is moving the headquarters of two of his companies, X Corp. and SpaceX, to Texas from California. The moves, announced days after he endorsed Donald Trump for president, further illustrate how Musk has increasingly aligned himself with conservative stances on social issues.
Amazon's Prime Day Is a 'Major Cause of Injuries' for Workers, Senate Probe Finds
Amazon's Prime Day sales event, a shopping bonanza for customers, has been "a major cause of injuries" for warehouse workers, a Senate probe found.
The report, released by Sen. Bernie Sanders, (I., Vt.), found that Amazon's injury rate jumped during Prime Day and the holiday season. The report, which followed a yearlong investigation, cited internal data that the e-commerce company provided from its Prime Day in 2019.
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Expected Major Events for Wednesday
06:00/UK: Jun UK producer prices
06:00/UK: Jun CPI
07:00/SVK: Jun Harmonized CPI
07:00/AUT: Jun CPI
07:00/CZE: Jun PPI
08:30/UK: Apr Card Spending statistics
08:30/UK: May UK House Price Index
09:00/CYP: Jun Harmonised CPI
09:00/EU: Jun Harmonised CPI
09:00/MLT: Jun Harmonised CPI
10:00/POR: Jun PPI
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(END) Dow Jones Newswires
07-17-24 0016ET
