MARKET WRAPS
Watch For:
ECB rate decision; no major trading updates expected
Opening Call:
European stock futures rose slightly early Thursday as focus turned to the ECB meeting later today. In Asia, stock benchmarks mostly advanced; the dollar weakened slightly; Treasury yields fell; while oil futures rose and gold dropped slightly.
Equities:
Stock futures point to gains in European equities at the open, as attention turns to the European Central Bank's rate decision later today.
The ECB has raised interest rates by 4.25 percentage points over roughly the past year with nine consecutive hikes. Economists surveyed by FactSet predicted earlier this week that policy makers will now step back and assess what to do next as they leave rates unchanged this month.
However, a report by Reuters saying that ECB staff see inflation staying above target next year prompted a last-minute re-assessment of the odds. Markets started to price in a quarter-point hike.
The ECB will update its forecasts for growth and inflation at this meeting. The European Commission, the executive arm of the European Union, earlier this week lowered predictions for economic expansion and said inflation will still average more than 3% in 2024.
European stocks had closed lower Wednesday amid caution ahead of the ECB decision. Meanwhile, U.S. stock indexes closed mostly higher, as investors largely liked what they saw in the CPI report, solidifying their bets that the Federal Reserve will hold interest rates steady at the end of next week's policy meeting.
Traders appeared to breathe a sigh of relief that the report didn't come in hotter than expected. Stock futures initially pulled back, and bond yields inched up, in the minutes following the report, but markets quickly settled.
"The market is starting to focus on growth again as opposed to higher rates," said Chris Marangi, co-chief investment officer of value at Gabelli Funds. "That's a positive."
Further out, the outlook for interest rates is less certain. Traders in the derivatives market see a 97% chance that the Fed leaves its policy rate unchanged at its Sept. 20 meeting, but they are pricing in a 40% chance of a quarter-point rate increase at the central bank's November meeting, according to CME Group.
"There is no evidence the Fed can become complacent as they consider an overall economy which appears to be accelerating in the third quarter of 2023," said Steve Wyett, chief investment strategist at BOK Financial. "Inflation is not overly hot, but it might be the easy improvements are behind us."
Read: Cash on the Sidelines Is Dwindling. It's at the Stock Market's Expense.
Forex:
The dollar edged lower early Thursday in Asia. The greenback is at risk of a mild weakening after tonight's August retail sales, said CBA.
Although headline retail sales will probably be supported by a strong increase in spending on petrol because of higher oil prices, there could be a decrease if petrol sales are excluded, CBA added.
Bonds:
Treasury yields extended declines as U.S. CPI inflation mostly met expectations, supporting forecasts that the Fed will keep rates unchanged this month with chances of a hike in November.
"We think the market will quickly return to focusing on incoming activity data," BNP Paribas said. It added that the recent stretch of strong data is likely to weaken going forward, which "is ultimately necessary...to support any sort of material front end-led rally."
Energy:
Oil futures rose in Asia, supported by market forecasts for supply tightness ahead. The International Energy Agency on Wednesday projected a significant supply shortfall for the rest of this year following Saudi Arabia and Russia's production cuts.
"Even if the two producers were to relax their curbs in early 2024, it will leave oil inventories severely depleted," ANZ said.
Metals:
Gold edged lower early Thursday. In focus is the latest U.S. inflation data, which showed that consumer prices in August rose at the quickest pace in over a year. The figures suggest the Fed could stay on course to hold rates steady next week.
DailyFx said that though the inflation print showed "signs of stickiness, " the clarity investors were hoping for failed to materialize and the data will likely spark more speculation on the Fed's next move.
Gold got some support from the Chinese central bank's recent purchases of the metal. ANZ noted that in China, gold is trading at a record premium to international prices "as Beijing escalates the defense of its currency."
Read: Here's what the gold-silver price ratio tells us about silver
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Copper edged lower amid possible position adjustments. Shanghai-based traders appear to be taking advantage of the recent rally in copper prices to further unwind their long positions, said TD Securities.
Copper prices seem to be stabilizing following this week's rally as significant buying by commodity trading advisors reaches "exhaustion" levels, TD added.
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Iron ore futures were flat amid mixed cues. Home sales in China's major cities are losing steam after a short rebound on recent stimulus measures, ANZ said.
However, better-than-expected August credit data released earlier this week boosted investor sentiment and propped up the market, Huatai Futures said.
In the near term, iron ore prices are likely to be driven by demand for steel during the peak season, the implementation of steel industry policies and the recovery of scrap supply, Huatai added.
TODAY'S TOP HEADLINES
Fuel Prices Are Soaring. Who Is Feeling the Pinch?
Rising diesel prices are inflating the bills Brett McMahon is getting from the companies that truck in the plywood, rebar and other supplies his concrete-contracting business needs. Asking his clients to renegotiate contracts to ease that pain, he said, has been "hit or miss."
"In the private construction world, you're not going to get a terribly sympathetic ear for that," said McMahon, chief executive of Bethesda, Md.-based Miller & Long. "It's, 'Hey, you knew the risks when you signed the deal.'"
ECB May Hike Rates Again Thursday. But It's a Close Call.
The European Central Bank may raise interest rates for a 10th consecutive meeting on Thursday. But it's a close call.
Like the Federal Reserve, the ECB has rapidly increased borrowing costs to squeeze inflation out of the economy. But unlike in the U.S., where the economy has remained resilient, the outlook for growth is darker in Europe-and the inflation rate is considerably higher.
U.S. Resumes Counterterrorism Drone Operations From Niger
The U.S. has quietly resumed flying drones for its Niger counterterrorism mission, which was suspended following the military coup in July, a U.S. Air Force commander said Wednesday.
The military coup in Niger had spurred fears that the U.S. strategy for taking on Islamic militants in the region had been upended.
Arm Sets IPO Price at $51 a Share
Arm set a price of $51 a share as the British chip designer lays the groundwork for the biggest U.S. public offering of the year.
The price was decided on after meetings Wednesday afternoon between underwriters and company executives, according to people familiar with the matter. Initially, the company was eyeing a price of $52 a share, but later settled on $51.
Google to lay off hundreds of recruiting staffers
Google plans to cut back on roles in its recruiting department, a spokesperson confirmed Wednesday.
The company, which is part of Alphabet Inc. GOOG GOOGL, continues "to invest in top engineering and technical talent while also meaningfully slowing the pace of our overall hiring," the spokesperson said in an email to MarketWatch. "In line with this, the volume of requests for our recruiters has gone down."
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Expected Major Events for Thursday
05:00/FIN: Aug CPI
06:00/SWE: Aug CPI
06:30/SWI: Aug Import Price Index
06:30/SWI: Aug PPI
07:00/SVK: Aug CPI
07:00/SVK: Aug Core & net inflation development
09:00/LUX: 2Q GDP
10:00/FRA: 2Q OECD Quarterly National Accounts G20 GDP growth
12:15/EU: ECB interest rate announcement
15:59/UKR: Jul Trade
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
09-14-23 0016ET
