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Today's Top Headlines/Must Reads:
- This Bull Market Is Just Getting Started, Traders Bet
- Why Economies Haven't Slowed More Since Central Banks Hit the Brakes
- Never Underestimate Central-Bank Groupthink
- Tesla Leads Surge in Battered Clean-Energy Stocks
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Opening Call:
Stock futures edged lower on Monday as global investors brushed off this weekend's events in Russia.
With a conflict between Vladimir Putin and the Wagner paramilitary group owner Yevgeny Prigozhin avoided for now, investors were focusing on more conventional market drivers: inflation and growth prospects.
Global central bankers will be meeting in Portugal this week for the European Central Bank's annual forum, and investors will be watching closely for clues on the possible path for interest rates around the world.
Global stocks edged down. Europe's Stoxx 600 fell 0.2% and the U.K.'s FTSE 100 lost 0.4%. In Asia, Hong Kong's Hang Seng index slipped 0.2% while the Shanghai Composite fell 1.5%.
Pre-Market Movers
Alphabet declined 1.7% in premarket trading after being downgraded to Neutral from Buy by UBS. The target price was raised to $132 from $123.
IBM is close to a deal to acquire software company Apptio for about $5 billion, The Wall Street Journal reported, citing people familiar with the matter. IBM shares were down 0.3% in premarket trading.
Lucid was rising 6.6% after it reached a supply agreement with Aston Martin to build ultra-luxury high-performance electric vehicles. Aston Martin will issue 28.4 million new ordinary shares to Lucid, making it a shareholder of about 3.7%.
Tesla was declining 2.1% in premarket trading. Shares have risen more than 108% this year, and about 33% over the past one month. Goldman Sachs downgraded the stock to Neutral from Buy following the stock's rally. They raised their price target, however, to $248 from $185, the Fly reported.
Wolfspeed's expansion in the U.S. will be supported with as much as $2 billion from a group of lenders led by Apollo Global Management, Bloomberg reported, citing a statement it has seen. Shares fell 0.4% in premarket trading.
Market Insight
Global commodity prices are about 30% lower on year, at levels last seen two years ago, which are likely a harbinger of sustained weakness in demand, DBS Group Research said.
The commodity demand downturn may not be surprising given the high-interest-rate environment, but it is striking that energy and food supply dynamics remain subject to geopolitical and climate risks, DBS said.
It noted potential disruptions from the Ukraine conflict and looming global warming-related harvest failures.
With China's recovery proving to be underwhelming and the U.S. and Europe heading toward zero growth, "we find it hard to see substantial upside to commodities for the time being, regardless of lingering concerns about supply-side conditions."
Forex:
The dollar edged lower down as markets calmed after last week's bouts of risk aversion amid concerns about rising interest rates, high inflation and weak growth. However, analysts expect these factors will limit any dollar falls.
"Weak PMI data last Friday in Europe has reinforced the expectations that global growth is set to remain fragile and this in turn is likely to help provide the dollar with ongoing support over the near-term," MUFG said.
The events in Russia over the weekend haven't had much market impact so far, but if they lead to elevated uncertainty, this could also reinforce dollar strength, MUFG said.
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The euro fell after a key survey showed German business sentiment weakened by more than expected in June. Read more here .
"The slump in the German Ifo, together with the drop in the [purchasing managers' index survey], released on Friday, suggests that German gross domestic product probably contracted for the third quarter in a row in the second quarter," Capital Economics said.
"We expect the economy to remain in recession throughout 2023."
Bonds:
For the time being, the bond markets have neatly absorbed central banks' concentrated load of "hawkish" signals, LBBW said.
"Admittedly, the yields on 10-year U.S. Treasurys and 10-year Bunds at times hit three-month highs," it said.
However, long-term yields bounced off the upper edge of their trading ranges, at 2.55% in the case of 10-year Bunds, LBBW said.
The prospect of continued monetary tightening is fueling concerns about the economy, and this entails rising demand for the safety of government bonds, especially in the longer-maturity segment.
"The less favorable the economic outlook, the more investors are betting on a turnaround in monetary policy in the medium term," the bank added.
Energy:
Oil prices edged higher in Europe after the aborted mutiny in Russia added to geopolitical risks.
Brent crude oil jumped in early trading but pared most of its gains through the morning session.
"While the immediate supply risks have disappeared, the market will likely have to start pricing in a larger risk premium for oil given the growing instability in Russia. How much of a risk premium will really depend on how the aftermath of the failed insurrection is dealt with," ING said.
Read Africa Key for Energy Transition, Ivanhoe Mines Founder Says
Metals:
Base metals were mixed woith gold a touch higher in early London trade, as sentiment about the wider economy remained weary.
ANZ Research highlighted poor manufacturing data in Europe and in particular Germany last week adding pressure to metal markets.
"...manufacturing PMI for Germany fell to 41, the 12th consecutive month of contraction. This offset signs of tightness earlier in the week, with readily available copper stockpiles in LME warehouses sinking to their lowest level since October 2021," ANZ said.
TODAY'S TOP HEADLINES
China's 'Tesla Killer' Stumbles as EV Price War Takes Toll
SINGAPORE-Electric-car startup NIO was dubbed China's "Tesla killer" when it unveiled a sport-utility vehicle in 2017 that offered a sleek design, large-screen panel and voice-command features-all at half the price of a Model X.
One of China's most vaunted EV startups, NIO is now a symbol of the challenges many automakers face amid a cutthroat price war in the world's largest electric-vehicle market. Its sales have slumped in recent months, prompting the carmaker to slash prices, cut back investment and commit to burning more cash.
Pill for Obesity Has Wall Street Salivating
The Ozempic craze has captured the national imagination, along with that of Wall Street.
The financial potential for drugs that lead to significant weight loss isn't hard to grasp. If even a small portion of the 40% of Americans who are obese get on these medications, the companies that offer them could be looking at massive blockbusters.
Oil and Gold Prices Up After Russia Revolt. How Markets Are Reacting.
The aborted rebellion in Russia over the weekend is lifting oil prices and gold, but markets so far aren't seeing big swings after the events.
In times of heightened geopolitical uncertainty, safe-haven assets such as gold and the U.S. dollar tend to rise while riskier assets tend to fall. While there have been some moves in that direction, they have been limited. Russia's Defense Minister Sergei Shoigu was shown in a video on Monday visiting troops, demonstrating that he's still in his post as the regime tries to restore calm.
Junk-Rated Companies Accept Tougher Terms to Borrow
Low-rated companies are learning to live with higher interest rates, finding ways to tap bond markets while minimizing the hit to their borrowing costs.
So far this year, companies such as American Airlines and Six Flags have issued $91 billion of speculative-grade bonds, according to PitchBook LCD, up 35% from the year-earlier period, when rapidly rising rates cut junk-bond issuance to a trickle.
After Weekend of Chaos in Russia, Questions Remain Over Fate of Wagner
A day after Wagner's mutiny showed the unexpected fragility of President Vladimir Putin's regime, all the main players in Russia's worst political crisis in decades stayed out of sight-leaving Russians, and the world, to wonder whether the drama was really over.
Key unanswered questions include the future of Wagner's 25,000 heavily armed troops, of the paramilitary group's owner Yevgeny Prigozhin and of Russia's military leadership, which failed to stop his rapid advance toward Moscow. The details of agreements brokered by Belarusian President Alexander Lukashenko to halt looming bloodshed have yet to be made public.
Wagner Mutiny Revives U.S. Fears Over Control of Russia's Nuclear Weapons
The short-lived mutiny in Russia by the Wagner paramilitary group is confronting the West with a fresh reminder of a long-held fear: chaos in the world's largest nuclear power.
U.S. officials said Sunday that they haven't detected any irregular activity or changes in alert levels with Russia's nuclear forces.
Russia Disarray Creates a Moment of Uncertainty in China
A short-lived mutiny in Russia has brought into relief Beijing's biggest fear surrounding the invasion of Ukraine: that it risked destabilizing its closest partner against the U.S.-led West.
That fear remains even after troops controlled by the Wagner paramilitary group called off a push toward Moscow after earlier seizing control of Russia's southern military headquarters in the city of Rostov. In a television address, Russian President Vladimir Putin called the insurrection a betrayal and vowed to put it down as Russian army troops prepared to defend the capital before a truce averted a broader conflict.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Nothing major scheduled
Economic Calendar (ET):
Quebec provincial holiday - Fête nationale du Québec
observed
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06-26-23 0608ET
