MARKET WRAPS
Watch For:
GDP for 2Q, 2nd estimate; Weekly Jobless Claims; Toronto-Dominion Bank 3Q earnings; Canad Imp Bank of Comm 3Q earnings.
Opening Call:
Stock futures climbed on Thursday as sentiment was buoyed by an injection of fiscal stimulus in China, while investors awaited the Jackson Hole economic conference which kicks off in the day ahead.
"Equities are broadly trading higher," said Henry Allen, an analyst at Deutsche Bank. "One supportive factor has been a further package of measures from China's State Council that includes 1 trillion yuan focused largely on infrastructure spending."
Beyond fiscal news out of Asia, the Jackson Hole economic conference begins Thursday, with Fed Chairman Jerome Powell's hotly anticipated speech set for Friday.
Investors will closely watch Powell's speech for indications about the central bank's monetary policy path amid shifting expectations on whether the Fed will continue tightening financial conditions or move toward easing in 2023.
"Markets have become increasingly nervous about [Powell's speech] over the past few days, and which has seen bond yields move sharply higher in the expectation he will deliver a hawkish message," said Michael Hewson, an analyst at broker CMC Markets.
Overseas, the pan-European Stoxx 600 climbed and Hong Kong's Hang Seng Index surged, leading Asian stocks higher after economic news out of China.
Economic Insight:
Expectations are high for Fed Chairman Jerome Powell to continue his narrative on fighting inflation, while dissuading markets from the notion that the Fed has made a dovish pivot, TwentyFour Asset Management said.
Powell is set to deliver a keynote speech at the Jackson Hole symposium on Friday. "His core message will revolve around the Fed's resolve to bring inflation under control as its key focus even though such a policy runs the risk of pushing the U.S. economy into recession," the fixed-income specialist said.
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Insight Investment expects the Fed to raise interest rates a bit higher than current market expectations.
The market is currently pricing in about 3.75% as the peak policy rate by mid-2023 and a fairly quick reversal of some of those hikes in the second half of 2023, the asset manager said.
"Our expectation is that the terminal policy rate may be higher than what is implied by the market and likely to be followed by a pause in the hiking cycle rather than a quick reversal," Insight Investment said.
Forex:
The dollar fell following additional stimulus measures from China--which slightly ease global growth concerns--and a decision by the People's Bank of China to set a stronger fixing rate for the renminbi against the dollar.
These measures probably account for a slightly softer dollar and marginally better risk sentiment, although they are "not seen as game-changing," ING said.
The prospect of the Fed continuing to raise interest rates to counter inflation--which is likely to be confirmed by Fed Chairman Jerome Powell's speech at Jackson Hole on Friday--should "keep the dollar supported on dips," the Dutch bank said.
Bonds:
For markets, the return to work from the August holiday is starting to look like a harsh reality check, but "none more so than for bond markets, which have more than retraced their summer gains already," Natixis said.
The prospect of a more lastingly hawkish policy stance by the Fed has replaced hopes of a dovish Fed pivot, with these hopes having faded in recent sessions, the investment bank said.
Energy:
Oil prices ticked higher as concerns over supply tightness remain. Expectations that OPEC+ could cut output have lifted Brent prices to a three-week high.
Meanwhile, negotiations over a revival of the Iran nuclear deal have dragged on without a conclusion, undermining hopes that sanctions on Iran's crude exports could be wound down.
Separately, BP said it had shuttered parts of a 430,000 barrel a day refinery in the U.S. after an electrical fire.
Metals:
Metals prices rebounded as the dollar slipped amid a risk on rally in equity markets. Three-month copper on the LME and aluminum both gained as did gold. Metals got some respite as the ICE Dollar Index--which had climbed to a 20-year high this week--fell.
TODAY'S TOP HEADLINES
Novartis to Spin Off, List Sandoz Business
Novartis AG is planning to spin off its generics-and-biosimilars division Sandoz and list it as a stand-alone company in Switzerland, a move that will enable Novartis to focus on innovative medicines.
The Swiss pharmaceutical company said Thursday that Sandoz would be based in Switzerland and listed on the SIX Swiss Exchange, with an American depositary receipt program in the U.S.
Norwegian Air Shuttle Pretax Profit Falls; Sees Fuel Prices Hurting 2022 Results
Norwegian Air Shuttle ASA said Thursday that profit fell for the second quarter of 2022 and that it expects fuel prices to hit its full-year earnings.
The low-cost carrier reported a pre- and posttax profit of 1.25 billion Norwegian kroner ($129 million) compared with a pretax profit of NOK1.59 billion for the second quarter of 2021, hit by the reinstatement of aircraft order prepayments and high fuel prices and positive restructuring events in the comparative quarter.
Texas Blacklists BlackRock, UBS and Other Financial Firms Over Alleged Energy Boycotts
Texas has blacklisted BlackRock Inc., BNP Paribas, UBS Group AG and other financial companies for allegedly boycotting the fossil-fuel industry, a move that could lead state pensions and other public entities to sell their shareholdings in those companies.
Texas Comptroller Glenn Hegar on Wednesday published a list of 10 financial companies and nearly 350 investment funds, an exercise mandated under a state law meant to punish Wall Street banks that have purportedly burnished their green image by turning away from oil and gas.
GameStop Boosts Compensation for Some Store Employees With Shares and Raises
GameStop Corp. plans to reward thousands of employees with stock and pay raises, returning focus to its bricks-and-mortar business as the company looks to become profitable under new leadership.
The videogame retailer, which had pivoted last year to growing online sales, is trying to do more to motivate and retain the employees at its stores, according to a Wednesday memo to employees reviewed by The Wall Street Journal.
China Tourism Group Slips in Hong Kong Market Debut
China Tourism Group Duty Free Corp.'s stock fell in its market debut in Hong Kong, a tepid response from investors to the city's biggest listing this year amid caution about rising interest rates globally and the economic outlook.
CTG Duty Free's stock opened 24% lower at HK$120.00 in Thursday's afternoon trade but quickly bounced to around its offer price of HK$158.00 a share. It was recently 0.2% lower at HK$157.70. Hong Kong's morning trading session was canceled in due to a typhoon alert.
AIA's First-Half Value of New Business Weighed Down by Covid-19
AIA Group's value of new business fell 13% in the first half of the year as the insurer saw its operations continue to be adversely affected by disruptions caused by Covid-19 in China.
New-business value came in at $1.54 billion, and its new-business margin fell 4.1 percentage points to 55.2%, AIA said Thursday.
Qantas Launches A$400 Million Buyback After Halving Annual Loss
SYDNEY-Qantas Airways Ltd. announced a buyback of shares worth 400 million Australian dollars (US$276.4 million) after cutting its annual loss by almost 50% and paying down debt.
Australia's largest carrier on Thursday reported a net loss for the 12 months through June of A$860 million, compared with a restated A$1.69 billion loss a year earlier.
Bed Bath & Beyond's Challenges Linger After Loan Deal
Bed Bath & Beyond Inc. selected asset manager Sixth Street Partners to supply new financing, according to people familiar with the matter, as doubts remain among vendors and some investors about the company's turnaround prospects.
Sixth Street is in exclusive talks with Bed Bath & Beyond and is nearing final terms for a loan of close to $400 million to shore up the troubled retailer's liquidity, according to people familiar with the matter. Negotiations to finalize the loan documents are ongoing, one of the people said.
German Economy Grew in Second-Quarter Beating Expectations
The German economy grew modestly in the second quarter, beating expectations of stagnation amid high inflation and uncertainty stemming from Russia's invasion of Ukraine.
According to a second estimate for the period released Thursday by German statistics office Destatis, Germany's gross domestic product grew by an adjusted 0.1% from the previous period.
Bank of Korea Raises Rate to 2.50%, Lowers GDP Forecast
South Korea's central bank returned to its usual quarter-percentage-point rate increase in August after an outsized increase in the prior month, seeking to curb inflation but avoid hurting the economy.
The Bank of Korea raised the benchmark seven-day repurchase rate by 25 basis points to 2.50% on Thursday, as expected. That marked its fourth consecutive rate increase and the bank is projected to tighten policy further.
Bank of Japan to Patiently Continue Powerful Monetary Easing, Says Board Member
TOKYO--Bank of Japan policy board member Toyoaki Nakamura said Thursday that the central bank would continue its powerful monetary easing because the current inflation triggered by higher energy prices is unlikely to be sustainable.
"Judging from the current situation in which prices of only some items are rising significantly due to higher import costs, it would be more effective to take measures targeting specific items, rather than monetary policy which controls overall demand," Mr. Nakamura said in a speech.
Idaho Must Allow Abortions in Certain Emergencies, Judge Rules
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08-25-22 0524ET
