MARKET WRAPS

Stocks:

European stocks traded lower again on Wednesday as investors worried that companies will face rising economic headwinds in China and after the latest U.K. inflation data raised doubts about an August rate cut by the Bank of England.

UBS said China's economic weakness is increasingly a challenge for European companies and the continent's economic recovery from the energy crisis and Covid-19 disruptions.

"China's domestic weakness has been a multi-year drag but was overshadowed by strength in the U.S. Now that both regions appear to be slowing, the nascent European recovery is vulnerable, again, to external forces," UBS said.

ASML shares fell sharply after its upbeat results were overshadowed by a report that the Biden administration was considering new restrictions on the chip maker's China business.

Stocks to Watch

Consensus expectations for how much miners BHP and Glencore will pay out to shareholders this results season seem too high, while estimates for Anglo American look too low, UBS said.

It expects BHP, Rio Tinto, Anglo and Glencore to report combined capital returns of roughly $8 billion alongside their upcoming profit numbers, down from a payout around $9 billion last reporting period.

The second-quarter performance of U.S. banks bodes well for their European peers , Deutsche Bank said. Analysts expect a positive read-across in particular for French banks and partially for Swiss lender UBS.

U.S. Markets:

Index futures traded lower, a day after the Dow industrials and S&P 500 hit new records.

Earnings season rolls on, with results due from J&J, United Airlines and Elevance Health, among others. Also on deck was data on housing starts and industrial production.

Stocks to Watch

In premarket trading, Nvidia fell more than 3% as investors continued to move away from the big tech stocks that have dominated markets this year. Shares of Micron and Advanced Micro Devices also retreated.

Forex:

Sterling extended earlier gains, rising to a one-year high above $1.30 against the dollar and a two-year peak against the euro, after U.K. inflation data threw prospects of an interest-rate cut in August "into yet more doubt," Monex said.

"A cut next month is likely to be a difficult sell having seen overall disinflation progress appear to stall this month."

The dollar could perform well over the summer as bets on Donald Trump winning the election offset prospects of interest-rate cuts, ING said.

Above-forecast retail sales data on Tuesday hasn't dented the chances that the Federal Reserve will cut rates in September, with money markets fully pricing this in, it added.

"The reason why the dollar has been resilient despite the rise in dovish [rate-cut] bets is undoubtedly the emergence of 'hedges' for higher inflation, tariffs, and geopolitical risks ahead of a Trump re-election."

Periods of dollar outperformance this summer are therefore more likely, ING said.

Bonds:

Bonds continued their summer recovery and were shrugging off better-than-expected U.S. economic data, Commerzbank Research said.

"Rate-cut hopes continue to revive with markets now almost fully discounting 25 basis-point cuts at the upcoming European Central Bank 'staff projection' meetings in September, December and March."

For the Fed, 65 basis points of cuts are priced in until the end of the year, despite upbeat retail sales data, Commerzbank said.

Energy:

Oil edged higher, rebounding from earlier losses, as reports that U.S. crude stockpiles fell last week countered concerns over the demand outlook in China.

Prices were also supported by growing expectations that the Federal Reserve will start cutting rates in September, with the latest U.S. retail sales figures also damping fears of a slowdown in the economy.

Metals:

Gold futures reached a new all-time high as rate-cut hopes grew, Treasury yields fell and geopolitical tensions mounted.

Precious metals were gaining momentum as the market became increasingly certain that the end of this quarter will bring the first interest rate cuts from the Fed, Sucden Financial said.

Comex gold futures are likely to extend recent gains to test year-to-date resistance at $2,477/oz, based on the daily chart, RHB Retail Research said.

Rio Tinto/Iron Ore

The final approvals for Rio Tinto's Simandou iron-ore project in Guinea provide confidence it will start producing iron ore there next year as planned, Macquarie said. However, it reckons it will take the company and its partners longer than they say to ramp up the operation.

"We believe the market would gradually price in the additional high-grade, low-costs iron ore supply from West Africa and [it] could weigh on iron ore market sentiment."


EMEA HEADLINES

HSBC Names Georges Elhedery as Chief Executive

HSBC Holdings named Georges Elhedery as its new chief executive after the bank's current leader unexpectedly announced his retirement earlier this year.

Elhedery, HSBC's chief financial officer, will start his new position on Sept. 2, the bank said Wednesday. The 50-year-old, who was educated in France, has spent almost two decades at the bank and has experience working in Asia, the Middle East and Europe.


Roche Obesity Pill Achieves Positive Results in Early-Stage Trial

Roche Holding said an oral GLP-1 drug candidate for the treatment of people with obesity achieved positive results in an early-stage clinical trial, bolstering the company's efforts to enter the booming market after another drug showed weight-loss efficacy in May.

The Swiss pharmaceutical company is trying to get a slice of the market for drugs to treat obesity and diabetes currently dominated by Novo Nordisk and Eli Lilly. It entered the race through its $3-billion-plus purchase of Carmot Therapeutics, which gave Roche access to both oral and injectable drug candidates.


EssilorLuxottica to Buy Supreme Brand From VF for $1.5 Billion

Ray-Ban maker EssilorLuxottica agreed to buy streetwear brand Supreme from VF Corp. for $1.5 billion in a move aimed at helping it expand further beyond eyewear.

U.S. apparel brand VF, which owns the footwear brand Vans, said the sale follows a portfolio review, which found limited synergies with Supreme. The company paid $2.1 billion for Supreme in 2020.


Allianz to Buy 51% Share in Singapore's Income Insurance for $1.64 Bln

Allianz is buying a 51% stake in Singapore insurance company Income Insurance for 2.2 billion Singapore dollars ($1.64 billion) as it expands in the region.

The German insurer said Wednesday that it is offering to buy each Income Insurance share for S$40.58.


Daimler Truck Writes Down China Joint Venture, Puts Guidance Under Review

Daimler Truck Holding said it took a hit from a write-down of its China joint venture Beijing Foton Daimler Automotive due to a persistently weak market and that its full-year guidance is currently under review.

The German truck and bus maker said late Tuesday that it fully wrote down the book value of its China joint venture BFDA, resulting in a one-time hit of 120 million euros ($130.8 million). The company said the noncash charge will have a negative impact on second-quarter adjusted earnings before interest and taxes of its Asian trucks segment and its industrial business.


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.


Handelsbanken Net Profit Beat Forecasts Despite Falling on Year

Svenska Handelsbanken's second-quarter earnings fell as costs rose faster than income, but net profit still landed ahead of expectations.

The Swedish bank on Wednesday reported net profit of 6.79 billion Swedish kronor ($641.3 million), down from SEK7.1 billion a year earlier but above a FactSet consensus forecast of SEK6.2 billion.


GLOBAL NEWS

The S&P 500 Is the World's Safest Equity Asset. The Trump Shooting Proves It.

Go long America.

Our industrial, technological, and financial innovation inspires the world far more than our dangerous political divisions could damage our role as the world's most important nation.


Asia Economic Growth Outlook Steady But Risks Persist, ADB Says

Asia's economies seem to be on track for a solid year, as growth holds steady and inflation slows, even with risks tilted to the downside, the Asian Development Bank said in its latest report.

Resilient demand at home and strong exports are helping offset risks from trade and geopolitical tensions for Asia's developing economies, the multilateral bank said Wednesday. It nudged up its forecast for the year, projecting gross domestic product growth of 5.0% versus the 4.9% predicted in April. That compares with an expansion of 5.1% last year.


Musk Turbocharges Silicon Valley Support for Trump

Big names in tech are turning Donald Trump's way, a shift likely to be accelerated by excitement over Elon Musk's nine-figure commitment and former venture capitalist JD Vance joining the ticket.

Those two developments have punctuated a brewing cultural change in traditionally liberal Silicon Valley, as investors and executives announce their support for Trump over issues including the Biden administration's stance on artificial-intelligence regulation and crackdowns on acquisitions by big tech. Some say following Biden's poor debate performance and Trump's response to this weekend's assassination attempt, there is more momentum and permission to support the Republican.


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07-17-24 0550ET