MARKET WRAPS
Watch For:
Employment Report for June; Canada Labour Force Survey for June
Today's Headlines/Must Reads
- Yellen Says U.S. Doesn't Seek 'Winner Take All' Fight With China
- Read the Ingredients Before Buying This $25 Billion ETF
- A Trillion-Dollar Opportunity: China's Pivot to the Middle East Set to Fuel Investment Boom
Follow WSJ markets coverage here .
Opening Call:
Stock futures slipped on Friday as investors continued to react to signs of labor-market strength registered in ADP's private-sector payrolls report, as well strong services sector sentiment and the hawkishness revealed in the Fed's minutes.
The yield on the 2-year Treasury was just under 5%, while the yield on the 10-year remained above 4% on Friday.
Economists at Vanguard said they're still expecting nonfarm payrolls to show a rise of 225,000, as they noted seasonal adjustment methodology may have put an upward bias on the ADP surprise showing 497,000 private-sector jobs created last month.
Economists polled by The Wall Street Journal expect payrolls growth in June to slow to 240,000 from 339,000, with the unemployment rate easing to 3.6% and hourly wages growing 0.3%.
Overseas stocks fell. The Stoxx Europe 600 was off 0.4% and the U.K.'s FTSE 100 declined 0.6%. In Asia, Hong Kong's Hang Seng index fell 0.9% and Japan's Nikkei 225 index fell 1.2%.
Premarket Movers:
Same-store sales at Costco in June declined by 1.4%. The warehouse retailer estimated that a drop in gasoline prices dragged down total-store comparable sales by 4 percentage points. The stock fell 0.8%.
Levi Strauss cut its revenue outlook for the fiscal year and the stock fell more than 8% in premarket trading.
Other Stocks to Watch
Leqembi, the Alzheimer's treatment developed by Biogen and partner Eisai, was granted full approval from the FDA. Read more.
Economic Insight
The major central banks are expected to converge to a pause in the second half of the year, Citi said.
"This seems uncontroversial, except for the [Bank of England] where the market prices 88% chance of a 25 basis point hike in December," Citi said.
The European Central Bank raised interest rates by 25bps in mid-June, promising another for the July meeting, the Federal Reserve skipped and the BOE jumped back to a 50bp rise, it added.
"The different speeds [and divergent pricing in the forwards for the coming months] feel like a significant moment following the largely synchronized cycle to date. This may be a false sense of divergence, however."
Forex:
The dollar was steady in Europe as traders awaited the jobs report and UniCredit Research said softer-than-expected data might spark some short-covering against the greenback. A strong reading would push it higher, however.
Read Ringgit May Remain Under Pressure Vs. USD
Energy:
Crude futures made solid gains, with supply cuts from Saudi Arabia and Russia at the start of the week starting to have an impact on prices.
"The fundamentals look increasingly bullish for Q3, with OPEC+ cutbacks and seasonally strong demand set to tighten the market and draw down on inventories," BMI said. "We hold to our current forecast for Brent crude to average $80 a barrel in 2023."
Read Oil & Gas Recovery Playing out Unevenly Across Sectors
Metals:
A strong dollar was keeping metal prices in check, with weak demand and uncertain economic outlook adding further headwinds, said BMI.
"The twin headwinds of a still strong dollar and downbeat PMI data from Mainland China in June continue to pressure metal prices," BMI said.
However, it added that low inventories of base metals and stimulus in the Chinese property sector should eventually help lift prices during the second half of the year
TODAY'S TOP HEADLINES
Shell to Book Up to $3 Bln of 2Q Impairments, Upstream Production Fell on Quarter
Shell said Friday that it expects to book after-tax impairments of up to $3 billion for the second quarter of 2023, and that upstream production declined from the first three months of the year.
The energy major said it expects to pay post-tax impairments of up to $3 billion, largely due to a 1% increase in the discount rate used for impairment testing.
Day After Threads Launches, Twitter Accuses Meta of Using Its Trade Secrets
Let the battle begin.
Facebook parent Meta Platforms on Wednesday launched Threads, a stand-alone microblogging app that takes direct aim at Twitter as user unrest on that platform has grown since Elon Musk took the company over in October.
The AI Boom Isn't Breaking the Memory-Chip Slump-Yet
SEOUL-The current artificial-intelligence frenzy is expected to drive significant growth in memory chips. But that time isn't now.
The latest reminder came Friday, when Samsung Electronics, the world's largest maker of memory chips, forecast a 96% drop in its operating profit for its second quarter-a sign that even the South Korean semiconductor giant isn't able to capitalize on the moment.
Tech Stocks Have Recovered, But That Hasn't Helped Startups
Renewed vitality among large technology firms has yet to re-energize tech startups and their investors, who in recent months continued to put funding deals on hold and push back public-market debuts, according to the latest market data.
Over the past year, venture-capital investors, company founders and analysts said the prolonged slump across the startup world would start to ease once public tech companies regained their footing, putting behind the market declines, budget cuts and layoffs of 2022.
Mallinckrodt in Talks to Cut Opioid Settlement by Up to $1 Billion
Mallinckrodt, the financially troubled pharmaceutical company, is in discussions with a compensation trust for opioid victims as it seeks to potentially reduce the amount of settlement payments by as much as $1 billion, according to people familiar with the matter.
The generic drugmaker exited bankruptcy in 2022 with a $1.7 billion settlement agreement with state and local governments and private plaintiffs who alleged the company played a role in fueling the opioid crisis. It paid $450 million upon emergence from chapter 11, and still owes roughly $1.2 billion.
Elon Musk's SpaceX Now Has a 'De Facto' Monopoly on Rocket Launches
Satellite operators and government agencies doing business in space are increasingly dependent on one company to help them reach orbit: Elon Musk's SpaceX.
SpaceX has cornered much of the rocket-launch market, with a proven fleet of reusable rockets that can fly at a pace that rivals can't match-and at lower prices. The company's rockets powered 66% of customer flights from American launch sites in 2022, and handled 88% in the first six months of this year, according to launch data compiled by Jonathan McDowell, an astrophysicist who tracks space activity.
Jobs Report Will Show Whether Hot Hiring Cooled in June
Friday's jobs report will show whether the labor market remained a sturdy source of economic strength last month.
Economists surveyed by The Wall Street Journal estimate U.S. employers added 240,000 jobs in June, down from May's gain of 339,000, but still capping a solid first half of 2023 for the labor market.
U.S. Oil Boom Blunts OPEC's Pricing Power
U.S. petroleum production is on pace for a record-breaking year, helping to keep energy prices stable despite the efforts of Saudi Arabia and other major oil exporters to drive them higher.
German Industrial Production Dipped Unexpectedly in May
Industrial production in Germany fell unexpectedly in May, a sign that the country's key manufacturing base could be struggling as global demand slows.
Industrial output-comprising production in manufacturing, energy and construction-dipped 0.2% in May compared with the previous month on a price, seasonally and calendar-adjusted basis, from a 0.3% rise in April, data from the German statistics office Destatis showed Friday.
Consumers to Face New Limits on Private Short-Term Health Insurance
The Biden administration plans to limit short-term health policies that are typically less comprehensive than Affordable Care Act plans, in part because of concerns the products undercut the Obama-era health law.
The plans are sold by private insurers such as Allstate Insurance, UnitedHealth Group's UnitedHealthcare, Healthcare.com's Pivot Health and Everest Health Insurance. There is scant data on how many people are enrolled in short-term plans because the insurance companies aren't required to report enrollment data. Estimates by the Congressional Budget Office put that number in the low millions. The plans provide temporary medical coverage but don't have to comply with ACA requirements such as covering certain benefits.
John Roberts and Brett Kavanaugh Are Now the Supreme Court's Swing Votes
WASHINGTON-The Supreme Court completed its annual term last week with resounding conservative victories, ending a half-century of affirmative action in college admissions, curbing gay rights when they clashed with religious objectors and canceling President Biden's plan to forgive student debt owed by 40 million Americans.
Yet, Chief Justice John Roberts, concluding his 17th term in charge, sought to signal that his wasn't purely a partisan court.
U.S. to Send Cluster Munitions to Bolster Ukraine's Fight Against Dug-In Russians
WASHINGTON-The Biden administration plans to send cluster munitions, which strew small bomblets over a wide area, to Ukraine to strengthen its hand in a high-stakes offensive against Russian forces, senior U.S. officials said.
The White House has agreed to grant a waiver under the U.S. arms export laws to send the weapons, formally known as dual-purpose improved conventional munitions, or DPICM.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
None scheduled
Economic Calendar (ET):
0830 Jun Labour Force Survey
1000 Jun Ivey Purchasing Managers Index
Stocks to Watch:
(MORE TO FOLLOW) Dow Jones Newswires
07-07-23 0604ET
