MARKET WRAPS

Watch For:

Trade data for July; EIA Weekly Petroleum Status Report; Canada Trade data for July; Bank of Canada interest rate decision; Apple new iPhone model presentations

Opening Call:

Stock futures were steady early Wednesday, although investor sentiment remained under pressure from multiple macro factors.

Stocks remained vulnerable to what would be the fourth straight week of losses if a turnaround fails by Friday. September has a reputation as the worst month of the year for stocks, and so far post-Labor Day trading has been far from upbeat.

"With different asset classes swinging between gains and losses over the last 24 hours, it's been difficult to point to a single factor behind the various moves," said Jim Reid, a strategist at Deutsche Bank.

"Investors remain cautious about the growing array of risks on the horizon, ranging from the European energy situation to Chinese lockdowns to hawkish central banks."

Adding pressure to investor sentiment Wednesday was poor trade data out of China, raising worries about weakening global demand and a slowdown in the world's second-largest economy. Exports grew 7.1% year over year in August, below the 13% expected and the 18% notched in July. Imports rose just 0.3%, below expectations of 1.1%.

"This morning's latest trade numbers for August merely serve to underscore how weak domestic demand still is, and how far away that end of year GDP target of 5.5% is," said Michael Hewson, an analyst at broker CMC Markets.

"It's further away than ever after today's data and we could be lucky to see half that number at this rate...It's hard to see a scenario for a significant economic pickup much before next year."

Overseas, the pan-European Stoxx 600 fell 0.6% as worries around a regional energy crisis remained salient in the wake of Russia's halt to natural-gas flows in the Nord Stream 1 pipeline. Hong Kong's Hang Seng Index retreated 0.9% in the wake of the weak trade data out of China.

Stocks to Watch:

Coupa Software reported a narrower loss and better-than-expected revenue in the latest quarter. Its shares shot 14% higher off hours.

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UiPath shares plunged 16% off hours after it cut its forecast for the year due to foreign currency headwinds and macroeconomic uncertainty.

Forex:

The dollar touched a fresh 20-year high, with the U.S. Dollar Index hitting 110.69.

"King dollar's scorched-earth ascent to a fresh 20-year peak has clobbered broad swathes of global financial markets," said Han Tan, an analyst at broker Exinity.

"The greenback has clearly fed off the palpable anguish surrounding a Fed that's now persistently ultra-aggressive in its battle against multi-decade high inflation. The risk aversion that's coursing through markets also suggests that global stocks could move much further to the downside over the immediate term."

Swissquote Bank said the dollar is a growing headache for the U.S., referring to the currency's strength starting to weigh on company profits, as seen in second-quarter earnings.

"So, if the dollar continues rising at this speed, it's not only that the countries other than U.S. will continue seeing their energy bills, denominated in U.S. dollars, inflate more than 'necessary,' but the U.S. economy will also hit a wall," Swissquote Bank said.

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Sterling could experience further volatility on Wednesday as details about the plans of new U.K. Prime Minister Liz Truss emerge, ING said.

Potential cost-of-living support measures will reportedly be funded by a bigger deficit, ING said.

"All this matters for sterling not only because it has an impact on the growth outlook and Bank of England policy, but because it may have rather wide implications for the UK's debt position. This is a factor that FX may start to be increasingly sensitive to especially in those instances [like the U.K.] where there is an increasingly negative current account balance."

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Read: Bitcoin Leads Fall in Cryptos as US Rate Hike Bets Dent Sentiment

Energy:

Oil prices were down around 1.4% in Europe, with Brent at a seven-month low, as fears about global demand continued to drag on sentiment.

Chinese import data is adding to a weak picture. The nation's oil imports recovered month-on-month but were down more than 9% on year. "The downside pressure is explained by the growing fear of recession," Swissquote Bank said.

Metals:

Base metals were lower in early London trade, pulled down by weak demand and fears over slowing global growth.

Chinese construction should be a key watchpoint currently in terms of base demand as we are in the usual peak demand season currently, but base demand still remains weak in Asia, Marex said.

"Also, we do have waning demand not just within China but on a global scale, as recession fears continue to be present as analysts everywhere continue to talk about how the economies worldwide are slowing down."

Other News:

Cobalt sulfate prices are likely to remain high over the next two to three years on strong demand from the battery sector, Fitch said, largely due to growth in the electrical vehicle sector.

Sulfate prices are currently around $8,597 a metric ton, down from $19,865 a ton in April, with firms looking to cut cobalt usage within battery cells due to cost, Fitch added.

However, strong Chinese demand should help to negate further falls in the country's new energy vehicle sector. That said, moving past the three year mark, prices are likely to ease as additional supply comes to market, Fitch said.


TODAY'S TOP HEADLINES


Samsung Expects Sharp Downturn in Chip Sales to Extend Into Next Year

PYEONGTAEK, South Korea-Samsung Electronics Co. sees the sharp downturn in chip sales extending into next year, the latest note of pessimism for a semiconductor industry reeling from a dramatic pullback in sales of PCs, smartphones and data servers.

"The second half of this year looks bad, and as of now, next year doesn't really seem to show a clear momentum for much improvement," said Kyung Kye-hyun, who heads Samsung's semiconductors unit and serves as the company's co-CEO, at a Wednesday media briefing.


SEC Warns Chinese Companies About Risks of Auditor Changes

The Securities and Exchange Commission on Tuesday warned Chinese companies not to violate legal and audit requirements as they switch to auditors based in the U.S. to comply with a law that threatens to delist the businesses from American stock exchanges.

More than 200 U.S.-listed Chinese companies are in danger of being booted off U.S. stock exchanges starting in early 2024 under the Holding Foreign Companies Accountable Act of 2020. It prohibits trading in companies whose auditors cannot be inspected by the Public Company Accounting Oversight Board-the U.S. audit watchdog overseen by the SEC-for three consecutive years.


Repsol to Sell 25% Stake in Upstream Business to EIG for $4.8 Bln

Repsol SA will sell a 25% stake in its upstream business to U.S. institutional investor EIG Global Energy Partners for a total consideration of $4.8 billion, the Spanish energy company said Wednesday.

The deal values the business at $19 billion and will allow Repsol to remain a majority shareholder and to consolidate the business within the wider group, the company said.


Anti-ESG Activist Investor Urges Chevron to Increase Oil Production

A conservative activist turned investor who has criticized Wall Street's efforts to address climate change and other issues is publicly urging Chevron Corp. to pump more fossil fuels over the next decade.

Vivek Ramaswamy, who launched an energy-focused exchange-traded fund nearly a month ago, is among the most prominent critics of so-called environmental, social and governance-or ESG-investing. He quickly turned his sights on Chevron, arguing the country's second-biggest fossil-fuel company should slow spending on its energy-transition plan, which he said was partially motivated by pressure from top shareholders such as BlackRock Inc.


Exports, the Engine of China's Slowing Economy, Are Sputtering

HONG KONG-The export boom that has powered China's economy through the pandemic decelerated in August, reflecting the impact from rising inflation and slowing growth elsewhere in the world.

The larger-than-expected slowdown in export growth is raising fears that the engine of the world's second-largest economy is sputtering, as fresh Covid lockdowns in major Chinese cities are further restraining spending and the world economy edges closer to recession.


Ukraine Seeks Corridor to Evacuate Civilians Near Zaporizhzhia Nuclear Plant

Scores of people were trying to evacuate from villages near the Zaporizhzhia nuclear-power plant, Ukrainian officials said, as an explosion cut off access to electricity and water at a nearby town.

Electricity and water supplies in Enerhodar, Ukraine, were stopped after residents reported a powerful explosion Tuesday that shook the town, said Mayor Dmytro Orlov. Ukrainian Deputy Prime Minister Iryna Vereshchuk appealed for Russia to allow civilians from the area-which is controlled by Russian forces-to cross into Ukrainian-held territory.


Chile Adds More Centrists to Cabinet After New Constitution Rejected

Chilean President Gabriel Boric appointed more centrist cabinet ministers Tuesday after voters overwhelmingly rejected a new constitution that would have constrained the country's market-based economy and led to other changes long sought by his political base.

With students angry about the outcome of the referendum on the constitution demonstrating near the doorstep of the presidential palace, Mr. Boric gave a speech in which he said that replacing the cabinet was imperative to reflecting the message that Chilean voters delivered Sunday. In a lopsided vote that polls hadn't predicted, 62% of voters opposed a proposed constitution drafted by a constituent assembly largely made up of leftist activists.


DOJ Considers Next Move After Judge Greenlights Trump's Request for Special Master

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09-07-22 0538ET