MARKET WRAPS
Watch For:
Housing Starts for September; Federal Reserve Beige Book; EIA Weekly Petroleum Status Report; earnings from Morgan Stanley, Netflix, Procter & Gamble, Tesla
Today's Headlines/Must Reads
- Nvidia, Foxconn to Develop New Class of Data Centers Focused on AI
- Why One Fed Official Is Ready to Stop Raising Rates
- Wall Street's Latest Obsession Is an Unknowable Number
- China's Economy Gets Boost From Stimulus, but Headwinds Grow
Follow WSJ markets coverage here .
Opening Call:
Stock futures fell on Wednesday as benchmark bond yields touched fresh 16-year highs and geopolitical angst hit global sentiment.
The third quarter earnings season continues to absorb investors, with P&G, Morgan Stanley and U.S. Bancorp among those presenting their numbers before the opening bell, while Netflix, Tesla and Lam Research will feature after the close.
However, investor sentiment has been soured after reports hundreds had died following an explosion at a Gazan hospital raised fears that the Israel/Hamas war would draw in other forces in the region.
Recent hopes that a trip by Joe Biden to the Middle East might boost diplomacy have been damped after Jordan cancelled a summit at which Biden was to meet the Jordanian and Egyptian leaders, as well as Mahmoud Abbas, President of the Palestinian Authority.
"Overnight we've seen a fresh risk-off tone because of the geopolitical situation, and ...that has led to a clear reaction in markets, Deutsche Bank said.
The 10-year Treasury yield on Wednesday touched its highest level since 2007, around 4.87%, as traders continued to express concern about sticky inflation following news released the day before showing retail sales growing more than expected in September.
"The blistering update on spending could be viewed as a hawkish development and contributed to bearish sentiment in the bond market," SPI Asset Management said.
The chances of the Federal Reserve hiking interest rates by another 25 basis points after its December monetary policy meeting have risen to 38% from 26% a week ago, according to CME Group's FedWatch Tool.
Overseas
Data out of China were mixed, with a slowdown in economic growth last quarter , but stronger-than-expected retail sales in September. The Shanghai Composite Index lost ground after the data was released.
Premarket Movers
ASML reported better-than-expected third-quarter earnings but said it expects revenue in 2024 similar to 2023 as "customers continue to be uncertain about the shape of the demand recovery in the industry." Its U.S. traded shares declined 2.1%.
Interactive Brokers declined 3.3%. It posted third-quarter adjusted earnings and revenue that beat estimates and said customer accounts rose 21% to 2.43 million.
United Airlines reported third-quarter earnings that beat Wall Street's expectations but shares were down 4.8% after the carrier issued a gloomier fourth-quarter outlook, citing higher fuel costs and interruptions in service to Israel that will hit its results.
Forex:
The dollar was slightly lower, shrugging off higher Treasury yields and stronger-than-expected retail sales, and it could continue to drop as this weaker trend gains momentum, MUFG said.
A weaker dollar is difficult to explain but could be due to position liquidation in anticipation of stronger Chinese data on Wednesday or to concerns about U.S. "political gridlock" and risks of a government shutdown next month, it added.
"Whatever the reasons for the failure of the dollar to strengthen, it could well encourage further selling as momentum traders liquidate long positions."
Sterling edged higher after data showed annual U.K. CPI inflation was higher than expected , remaining at 6.7% in September, against forecasts for a 6.6% rise in a WSJ poll.
This could raise concerns among Bank of England policymakers but won't necessarily boost the case for another rate hike, St. James's Place said.
After Tuesday's data showing further wage moderation, this "isn't the significant upside surprise that might make the BOE reconsider staying on hold at its next meeting in November," it added.
Energy:
Oil prices moved close to 2% higher, with worries over the conflict in Gaza intensifying late on Tuesday.
The bombing of a hospital in Gaza reportedly killed 500 people, hours before Joe Biden was due in Israel. Both Israeli and Palestinian officials blamed each other for the bombing.
"Either way, this does little to contain the conflict. Jordan was scheduled to host a summit with Arab leaders and President Joe Biden today, however, this has been canceled following the bombing," ING said.
Metals:
Base metals made modest gains as data from China showed the economy grew 4.9% in the third quarter, putting the country on track to expand 5% this year, the government's official goal.
Meanwhile, safe-haven demand was keeping gold prices higher.
TODAY'S TOP HEADLINES
China's Country Garden Was Given a Second Chance to Make a Bond Payment. It Failed.
Chinese property giant Country Garden has missed a final deadline to pay interest on a dollar bond, capping a remarkable fall from grace for a company that was once considered among the safest developers in the country.
The company hasn't made a $15.4 million interest payment on an outstanding dollar bond, according to two investors who hold the bond. That could lead to a wave of cross-defaults on its other international debt. Country Garden had around $15.2 billion of international bonds and loans outstanding at the end of June, according to its public disclosures.
X Is Testing $1 Annual Fee in New Zealand, Philippines to Fight Spam
X will start charging some new users a minimum annual fee to interact with the platform, a move that owner Elon Musk said will combat fake and spam accounts.
The platform formerly known as Twitter started testing the new subscription model, called Not A Bot, on Tuesday for users creating new accounts on the web in New Zealand and the Philippines, according to a blog post from the company. New accounts will have to verify their phone number and pay $1 annually to post content, like posts, reply or do other key functions.
Chevron Australia LNG Workers Back Labor Deal, Suspend Industrial Action
Workers at two natural-gas facilities operated by Chevron in Australia have called off plans to restart industrial action after endorsing draft deals on pay and conditions.
The labor dispute between Chevron and workers at its Gorgon and Wheatstone liquefied-natural-gas facilities in Australia has rattled global energy markets. The operations account for roughly 7% of global supply.
China Stabilizes, in the Shadow of Country Garden and Evergrande
China's economy no longer resembles a newly paved parking lot: Things are moving again and green shoots are creeping up through the cracks. But sustaining that could be tough if major property developers keep cracking apart too.
Official data released Wednesday showed the Chinese economy grew 4.9% year-over-year in the third quarter and 1.3% quarter-over-quarter. The latter figure was nearly twice as fast as the second quarter's 0.8% increase.
Biden Lands in Tel Aviv to Meet Israeli Leaders Amid Hamas War
WASHINGTON-President Biden landed in Israel on Wednesday to reaffirm U.S. support for its longtime ally in the war with Hamas, one day after a deadly blast at a hospital in Gaza demonstrated the volatility of the conflict and heightened fears of escalation.
The U.S. president arrived in Tel Aviv for a high-stakes visit that had begun to splinter before he even left Washington. Arab leaders pulled out of a planned summit with Biden in Jordan due to the explosion at Al-Ahli Arab Hospital, and Israeli and Palestinian authorities were at odds over who was responsible.
Biden's Trip to Israel Carries Risks for U.S. Policy-and His Own Legacy
WASHINGTON-President Biden arrived in Israel on Wednesday to show his support for the beleaguered country, hours after an explosion at a hospital in Gaza killed hundreds, further inflaming the region and prompting cancellation of a summit with Arab leaders.
Hamas blamed the explosion at the Al-Ahli Arab Hospital on an Israeli airstrike. The Israeli military said it was caused by a rocket fired by Palestinian Islamic Jihad, another militant group based in Gaza, which the group denied.
China's Leaders Are Directing Jet-Fighter Harassment of U.S. Aircraft, Pentagon Says
Chinese jet fighters have performed reckless maneuvers close to American and other military aircraft almost 300 times in the past two years under a centrally directed campaign of coercion, the Pentagon said.
Offering new video footage and photos, the U.S. gave the most detailed account yet of dangerous encounters involving Chinese jet fighters and leveled its most direct accusation that the incidents are orchestrated by senior Chinese leaders.
China's Xi Doubles Down on Belt and Road as Path to New World Order
BEIJING-With one war raging in Ukraine and another unfolding in the Middle East, Chinese leader Xi Jinping is promoting his signature foreign-policy project as a force for unity, cooperation and prosperity around the globe.
At a summit convened here to celebrate the Belt and Road Initiative, the picture looked more fractured.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Nothing scheduled
Economic Calendar:
Nothing scheduled
Expected Major Events for Wednesday
06:00/UK: Sep UK producer prices
06:00/UK: Sep CPI
08:00/ITA: Aug Foreign Trade EU
08:30/UK: Aug UK House Price Index
11:00/US: 10/13 MBA Weekly Mortgage Applications Survey
12:15/CAN: Sep Housing Starts
12:30/US: Sep New Residential Construction - Housing Starts and Building Permits
14:30/US: 10/13 EIA Weekly Petroleum Status Report
18:00/US: Sep Monthly Treasury Statement of Receipts and Outlays of the U.S. Government
18:00/US: U.S. Federal Reserve Beige Book
(MORE TO FOLLOW) Dow Jones Newswires
10-18-23 0611ET
