MARKET WRAPS
Watch For:
EU summer interim economic forecast; Italy industrial production; UK Manpower UK employment outlook survey; no major trading updates expected
Opening Call:
European stock futures are little changed at the start of the week. In Asia, stock benchmarks traded mixed; the dollar weakened; Treasury yields were mixed; while oil futures fell and gold futures edged higher.
Equities:
Stock futures point to a cautious open in Europe after a mixed morning for Asian equities, as traders look ahead to U.S. inflation data and the ECB meeting later this week.
The market lately wants to see the U.S. economy doing "good but not great," because if it's too strong, the Federal Reserve may have to become more aggressive raising interest rates to bring down inflation, said Scott Wren, senior global market strategist, Wells Fargo Investment Institute. The Fed has wanted the economy to slow to "put some downward pressure on core inflation," he said.
Several Fed officials on Thursday made it clear there's unlikely to be a rate hike in September, though some, like Dallas Fed President Lorie Logan after the market close, suggested further increases may need to come later.
"In recent conversations with institutional investors, it is clear to us that investors are incrementally nervous. Foremost is their concern that economic momentum has been improving at a pace that might warrant the Fed to have to increase the path of hikes," said Tom Lee, head of research at Fundstrat.
The stock market weakness that began in August comes after a strong run for equities and is in line with seasonal patterns.
"It feels to me like this is a pretty predictable pattern of just churning. You've got this weak seasonal period, you've got this lack of data. I think this is probably pretty healthy, pretty predictable," said Mark Hackett, chief of investment research at Nationwide.
Historically, a strong run into August sets the market up for gains into the end of the year, Hackett said, a pattern he sees as likely to hold true given the continued strength of the consumer.
Forex:
The U.S. dollar weakened early Monday. ANZ Bank noted that correlations across G-10 currencies remain high, as markets debate whether the ECB's next hike will be its last, and as markets await this week's U.S. CPI data, which is the last major piece of data before next week's Fed meeting.
Read: A rising U.S. dollar is ringing alarm bells overseas. Should stock-market investors worry?
Bonds:
Treasury yields were mixed as focus turns to U.S. CPI data this week.
Several Fed officials spoke Thursday, leaving little doubt that the central bank won't raise interest rates again in September. However, differences emerged on whether the central bank will still have to take rates higher in November.
"The trajectory of U.S. rates has been hotly debated as it presently appears that Powell has managed to engineer a soft landing and the probability of an economic recession has waned," said BMO Capital Markets strategists Ian Lyngen and Ben Jeffery.
"It's tempting to assume that the next stage in the Treasury market will be repricing to a new paradigm in which a balanced labor market and well-managed consumer price inflation will define the outlook - we're certainly sympathetic to such an interpretation of the likely path of the real economy in the coming quarters."
"Ultimately however, there remains sufficient evidence that the weight of the cumulative rate hikes is quickly catching up to the U.S. economy and optimism won't be able to outrun the realities of a significantly tighter policy stance - both domestically and abroad," they said.
Energy:
Oil futures retreated early Monday, as concerns over China's economic growth affected sentiment toward all commodities.
China's underwhelming economic recovery has weighed on the outlook for global petroleum demand, Phillip Nova said. However, the easing dollar could limit the downside for oil prices. Despite worries over the global economy, Phillip Nova believes oil-producer cartels would keep oil markets tightly supplied.
Read: Why crude-oil rally can't be ignored by investors -- or the Fed
Metals:
Gold futures rose slightly in Asia, supported by a weaker dollar, as investors await fresh economic data this week for signs of the Fed's interest rate plans.
Prices may come under pressure in the days to come, with "recent robust U.S. economic data [reinforcing] the case for the Fed to keep rates elevated, tarnishing the precious metal's allure," ANZ said.
Gold traders will be looking to see if the U.S. CPI report adds to the picture that the U.S. economy "isn't struggling with rates at these levels, and that inflation is responding to monetary policy," said David Russell, chief executive officer of GoldCore.
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Copper futures advanced after Chinese inflation returned in August.
Consumer prices in China rose 0.1% on year in August after falling 0.3% in July, data showed Saturday.
However, a stronger U.S. dollar and lingering concerns about China's economic outlook keep investor appetite low, ANZ said.
Meanwhile, copper faces headwinds from rising inventories driven by increases in Europe and the U.S., ANZ added.
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Iron ore prices rose amid China's latest property measures.
"With the recent continuous relaxation of real estate policies, real estate consumption in first-tier cities has begun to show results," Huatai Futures said.
But in the absence of a significant improvement in housing demand, the entire steel industry chain isn't willing to hold inventory, Huatai said.
The upcoming peak season for the property sector should show the real demand for steel, the brokerage said.
TODAY'S TOP HEADLINES
Earnings Estimates Are Rising, a Welcome Sign for 2023 Market Rally
Wall Street expects corporate earnings to rebound after three quarters of year-over-year declines, a development that could put the stock market's faltering rally on firmer footing.
When the next reporting season kicks off in earnest in October, analysts estimate that companies in the S&P 500 will show that profits inched up 0.5%, helping deliver a 1.2% increase for 2023, according to FactSet.
An Important Shift in Fed Officials' Rate Stance Is Under Way
For more than a year, Federal Reserve policy makers were unanimous that they would rather raise interest rates too much than too little-that is how serious they considered the threat of persistently high inflation.
That is changing.
Chinese Consumer Inflation Returns in Reprieve for Economy
SINGAPORE-Chinese inflation returned last month after consumer prices slipped earlier in the summer, a hopeful sign for Beijing that a damaging spell of declines can be avoided.
Still, economists said China isn't out of the deflationary woods just yet, with consumer-price inflation only barely nudging past zero and producer prices falling for an 11th consecutive month, albeit at a slower pace than previously.
Trade Slump Reshuffles World's Economic Cards in Favor of U.S.
FRANKFURT-The U.S. economy is chugging along while the rest of the world falls behind. Driving the division among the world's most powerful economies: a slowdown in trade that is hurting some much more than others.
The waning of global trade flows is consolidating a growth gap among members of the Group of 20 largest world economies, whose leaders are meeting this weekend in India, resetting the global balance of economic power.
U.S., Saudi Arabia in Talks to Secure Metals for EVs
The U.S. and Saudi Arabia are in talks to secure metals in Africa needed for both countries' energy transitions, as the White House tries to curb China's dominance in the electric-vehicle supply chain and the kingdom looks to buy $15 billion in global mining stakes, said people with knowledge of the talks.
Any agreement could entail Saudi Arabia giving the U.S. a boost in its attempt to play catch-up with China in the global race for cobalt, lithium and other metals that are processed into rechargeable lithium-ion batteries to power electric cars, laptops and smartphones. Chinese companies refine three-quarters of the world's cobalt supply and produce about 70% of the world's lithium-ion batteries, raising concerns in the West about reliance on Beijing.
Swiss Bank Doubled Down on EV Stock Rivian and Won Big
The central bank of Switzerland recently made major changes in its investments in technology and automakers.
The Swiss National Bank nearly doubled investments in electric-vehicle makers Rivian Automotive (ticker: RIVN) and Lucid Group (LCID) in the second quarter, and one of those bets has already paid off. The bank also sold Apple (AAPL) and General Motors stock (GM) in that quarter, and disclosed the stock trades, among others, in a form it filed with the Securities and Exchange Commission.
Morocco Earthquake Help Arrives Slowly in Remote Areas
MOULAY BRAHIM, Morocco-As white sheets of cloth were laid over coffins bearing her mother and brother on Sunday, Amal Baaziz fell to the ground at a hillside cemetery in this mountain village. She was traveling when an earthquake flattened her home, killing her last living family members.
"Stay with me," Baaziz cried as women gathered around to support her. "Stay with me."
Putin Wants His Hit Man Back
BERLIN-Russian assassin Vadim Krasikov, riding a bicycle, followed his target to a crowded children's playground at lunchtime, a popular summer spot in a central-city park filled with families and workers.
As the man entered Tiergarten park, Krasikov pedaled close behind. Not far from the swings, he pulled a pistol from a rucksack and shot him in the back, leaving his victim, a former Chechen insurgent leader, slumped on the ground. Krasikov got off his bike and calmly fired twice into the man's head, watched by children and parents, witnesses said during a court trial that ended in his conviction.
Ukraine Expects to Fly F-16s in Combat This Winter
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09-11-23 0016ET
