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Texas Manufacturing Outlook Survey for July

Opening Call:

Stock futures edged higher on Monday as traders were keeping their powder dry, apparently reluctant to build bold positions before a big batch of corporate earnings that could shape market sentiment in the short term.

For the new week there will be 175 S&P 500 companies reporting, including Apple, Alphabet, Microsoft and Amazon, though the action doesn't pick up again until Tuesday.

The S&P 500 is down 16.9% for the year to date but has climbed 8% from its 52-week low hit in mid-June, with sentiment underpinned of late by a corporate reporting season that has proved better than some had feared.

The looming Federal Reserve rate decision on Wednesday provided another reason for caution. The central bank is expected to raise borrowing costs by 75 basis points to a range of 2.25% to 2.50%, but investors will be keen to hear about how the Fed sees the pace of future hikes.

Asian and European markets were softer on Monday after taking the lead from Wall Street's Friday pullback.

Forex:

With the Fed expected to raise rates by 75 basis points this week, the dollar will stay strong but it won't experience the "fireworks" the euro did after last week's ECB hike, said ING.

"We don't think Fed week will be as tumultuous as ECB week, as the scope for surprises in Washington appears much lower and markets have made a strong conviction call on a 75bp hike."

ING expects the DXY Dollar Index will trade around 107.00 ahead of Wednesday's Fed meeting and possible rise above 108.00 afterward.

CBA said the dollar is likely to consolidate this week, though it could trade in a wide range. It expects the FOMC to increase the Funds rate target range by 75 basis points, which is priced in by financial markets but the risk is tilted to a 100bps increase and a jump in the buck.

If U.S. GDP data confirm a recession, and it is seen as a prelude to recession elsewhere, the dollar could jump as the preeminent safe-haven currency, CBA said.

Energy:

Oil futures fell more than 1% in Europe as Libyan exports resumed while the Fed's meeting this week was in focus.

Libya oil production and exports have resumed after restrictions were lifted. Production has risen above 700,000 barrels a day and is expected to rise to 1.2 million barrels a day in a week, said SPI Asset Management.

Meanwhile, the FOMC meeting will be a key focus for oil markets. The Fed is expected to raise rates by another 75 basis points, which will add to fears about slowing economic growth.

Metals:

Metals were mixed in early London trading as demand signals diverged in China and Western economies.

"Industrial activity in China is improving, in a positive sign for industrial metals," said ANZ Research. Lower inventories are helping to support prices too, it said. But, rising Covid-19 cases are still "raising uncertainty over the demand recovery."

In western economies, the "deteriorating macro backdrop and aggressive monetary tightening are weighing on commodities demand."


TODAY'S TOP HEADLINES


Elon Musk's Friendship With Sergey Brin Ruptured by Alleged Affair

Elon Musk engaged in a brief affair last fall with the wife of Sergey Brin, prompting the Google co-founder to file for divorce earlier this year and ending the tech billionaires' long friendship, according to people familiar with the matter.

Their falling out is one of a string of personal issues Mr. Musk has faced even as he juggles business challenges, including manufacturing disruptions at Tesla Inc. and a court fight over his desire to withdraw his $44 billion bid for Twitter Inc.


Tesla Looks to Open Its EV-Charging Network

Tesla Inc. is trying to tap into public funding to build electric-vehicle chargers, as it moves to open some of its U.S. Supercharger network to EVs made by other manufacturers.

The EV-market leader is bidding for a portion of billions in federal and state dollars that are up for grabs in coming years as the Biden administration, auto makers and many states try to accelerate a fast-charger build-out along highways to reassure drivers that they can travel without fear of losing power.


Disney Shows First R-Rated Movies on Disney+

Walt Disney Co. on Friday began streaming R-rated movies on its flagship Disney+ streaming service for the first time, as the company pushes ever further into adult-focused entertainment to pursue new streaming subscribers.

Disney+ will now carry "Deadpool," "Deadpool 2" and "Logan"-three R-rated superhero movies with stories that originated as comic books published by Marvel Comics and that were acquired as part of Disney's 2019 $72 billion purchase of most of 21st Century Fox's entertainment assets.


After Ukraine, Even Sexy Startups Aren't Ashamed of Military Ties

Even venture capitalists may learn to stop worrying and love the bomb.

Friday marked the end of the 2022 Farnborough International Airshow, where the global aviation industry gathered in full for the first time since the onset of the pandemic. Apart from a decent amount of orders for Boeing's once-troubled 737 MAX and a lot of mulling over supply-chain delays, the event was notable for a subtle shift: Aerospace startups no longer feel the need to whisper when talking about their military potential.


Tesla Is Set for Settlement Talks Over Musk Tweets About Taking Company Private

Tesla Inc. is scheduled for court-ordered settlement talks in a shareholder lawsuit over Chief Executive Officer Elon Musk's 2018 tweets suggesting he had funding to take the company private.

In a court filing Friday, a federal judge ordered the settlement conference via Zoom on Oct. 3, adding to an already busy month for Mr. Musk. He also faces a five-day October trial in Twitter Inc.'s lawsuit seeking to compel him to complete his $44 billion purchase of the social-media company, and a trial over his compensation package at Tesla.


Retailers Need to Ace their Back-to-School Season

After a brutal reckoning in their first quarter, retailers could really use a good back-to-school shopping season.

Retail stocks, which rode high last year, took a battering in May after earnings results from sector giants such as Walmart and Target showed that demand was slowing for discretionary goods. A basket of retail stocks in the S&P 500 is down 29.4% year to date, 12.5 percentage points behind the broader index.


Philips 2Q Hurt by China Lockdowns, Inflation, Ukraine War

Royal Philips NV on Monday reported a swing to a net loss for the second quarter, which it blamed on a number of issues including pandemic-related lockdowns in China, inflationary pressures and the Russia-Ukraine war.

The Dutch health-technology company has cut its full-year comparable sales guidance to 1% to 3% from a previous forecast of 3% to 5%.


Orange, Masmovil Agree to Combine Spanish Operations

French telecommunications company Orange and Spanish peer Masmovil Ibercom SA have agreed to combine their businesses in Spain, creating a company with an enterprise value of 18.6 billion euros ($19 billion).

The deal is based on an enterprise value of EUR7.8 billion for Orange Spain and EUR10.9 billion for Masmovil, Orange said on Saturday.


U.S. Risks Deeper Downturn If Fed Has to Fight Inflation Alone

After the 2008 financial crisis, the U.S. relied heavily on the Federal Reserve to stimulate growth, leading to a frequent quip that monetary policy had become the "only game in town."

Now, high inflation is fanning fears this is true again but in the opposite direction: Washington risks relying excessively on the Fed to lower inflation by reducing demand rather than have other policy makers work to increase the economy's capacity to supply more goods and services or workers.


Congress Looks to Move Forward on Chip-Shortage, Drug-Cost Bills Before August Break

WASHINGTON-Congress nears the close of a packed legislative session this week, aiming to pass legislation providing about $54 billion to boost U.S. semiconductor manufacturing while also juggling a raft of other bills ahead of the monthlong August recess.

Along with the bipartisan bill subsidizing chips, Democrats are hoping to salvage a piece of President Biden's once-ambitious domestic agenda, looking to advance a measure aimed at lowering some drug and healthcare costs. The party is also weighing whether to hold votes related to social issues and guns that could help rally the party's base.


German Business Sentiment Deteriorates Significantly in July

Business confidence in Germany worsened sharply in July as firms turned more pessimistic due to rising energy costs and the threat of gas shortages.

The Ifo business-climate index declined to 88.6 points in July from a revised figure of 92.2 points in June, data from the Ifo Institute showed Monday. This is the lowest value since June 2020. Economists polled by The Wall Street Journal expected the index to come in at 90.5.


China Bets Big on Basic Chips in Self-Sufficiency Push

China is leading the world in building new chip factories, a step toward achieving more self-sufficiency in semiconductors that could eventually make some buyers reliant on China for many of the basic chips now in short supply.

As chip makers race worldwide to boost production and ease supply shortages, no country is expanding faster than China, which is slated to build 31 major semiconductor factories, known as fabs, during the four years through 2024, according to the chip-industry group SEMI.


Weak Earnings Reports Aren't Fazing Investors After Brutal Year for Stocks

Investors appear to be taking disappointing earnings reports in stride.

After a punishing start to the year, the S&P 500 has climbed nearly 5% in July, including last week's 2.5% rise. Even some companies that have posted sharply lower quarterly results have seen their shares rally in the following days.


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07-25-22 0526ET