MARKET WRAPS
Watch For:
EU industrial production; France CPI; UK GDP, trade, index of production, index of services; trading updates from Entain, Just Eat https://urldefense.com/v3/__http://Takeaway.com__;!!F0Stn7g!A1GoQzkQ3f2PqFAof22QA5i_8UlXpl-Gn_HQngnM4xN-9Ct3mkXkx5aQhpDYomhzW5vAQ3tIW37AmYZecu-z4b4726BmCb9QS2Mtoowd_Xc$ , Deliveroo
Opening Call:
European shares may edge higher at Thursday's open amid hopes that the Fed is nearing the end of its tightening cycle. In Asia, stock benchmarks advanced; the dollar weakened; Treasury yields fell; while oil and gold futures rose.
Equities:
Stock futures rose slightly early Thursday after European indexes closed higher Wednesday following softer-than-expected U.S. consumer-inflation data. That raised hopes that the Federal Reserve will soon end its monetary-tightening cycle.
The markets have been receiving the U.S. consumer-price index print "pretty well," said Brian Katz, chief investment officer at the Colony Group.
The lower-than-expected CPI data is likely to "prolong the uptrend [in stocks] that we've been experiencing this year," Katz said. "As long as we are in this environment where disinflation continues and we have reasonable growth, it is a good environment for risk assets," Katz said.
"The Fed will embrace this report as validation that their policies are having the desired effect -- inflation has fallen while growth has not yet stalled. But it most likely won't change their mind to raise interest rates later this month," said George Mateyo, chief investment officer at Key Private Bank.
However, Phillip Toews, chief investment officer of Toews Asset Management, said one thing that people aren't necessarily considering is the "potential circuitous pathway" that inflation can follow. Good CPI readings will potentially allow interest rates to stabilize later this year, making the housing and labor market stronger, but that will again have impact on inflation, said Toews.
"Watch out for waves; watch out for multiple spikes," Toews said.
"The risk may be more of a demand-pull situation, which is that you have a lot of strong labor and lot of wealth, and that could be one of the primary things that drives inflation back up again. That's a real risk here that we're now full risk-on again, and there's a possibility that it could change in the next three or six months -- we see inflation re-emerge."
Forex:
The dollar was slightly lower in Asia. A combination of continued deceleration in U.S. underlying inflation and a resilient labor market is what the FOMC has been seeking, said Joseph Capurso, head of international and sustainable economics at CBA.
This combination is an environment for heightened risk appetite, a small fall in the Fed funds rate in 2024 and a weaker USD, Capurso said.
Read: U.S. dollar falls to over one-year low after CPI data shows inflation slowing again in June
Bonds:
Treasury yields extended declines early Thursday after dropping by the most in more than six weeks on Wednesday after U.S. CPI data.
"There is nothing not to like in the [CPI] report," said Ronald Temple, chief market strategist at Lazard. "Better-than-expected data increases the likelihood that a Fed rate increase on July 26 will be the last of this cycle."
"It's too early to pop the champagne, but it's not too early to start chilling the bottle," Temple said.
Energy:
Oil futures edged higher early Thursday, buoyed by U.S. CPI data overnight.
Oil prices have been understandably boosted by the figures, as anything that might enable a soft landing for the U.S. economy is good for oil, said Oanda.
Metals:
Gold futures rose slightly in Asia and may extend gains, bolstered by cooler-than-expected U.S. inflation data.
The precious metal has breached the 20-, 50- and 100-day exponential moving averages, which has been accompanied by the relative strength index's break of its bearish trendline and above the 50 level to show positive momentum, said Matt Simpson, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!A1GoQzkQ3f2PqFAof22QA5i_8UlXpl-Gn_HQngnM4xN-9Ct3mkXkx5aQhpDYomhzW5vAQ3tIW37AmYZecu-z4b4726BmCb9QS2MtO5yS7ag$ .
The next target range is around $1,985/oz-$2,000/oz, with any pullback toward $1,940/oz likely to be welcomed by bullish dip buyers, Simpson added.
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Copper was steady, supported by easing U.S. inflationary pressures that increase the likelihood for an end to the Fed's tightening cycle.
Prospects of the Fed finishing its rate increases cast a much brighter light on the economic outlook, ANZ said, noting U.S. CPI data helped lift base metals across the board.
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Chinese iron ore futures extended gains, buoyed by optimism over Beijing's latest supportive measures for the property sector.
But some analysts say the price increases are unlikely to last long. Iron ore supply has risen seasonally, while end-market demand has declined and steel mills' high output levels aren't sustainable, Nanhua Futures said.
TODAY'S TOP HEADLINES
Fed's Neel Kashkari Ponders 'High-Inflation Stress Test' for Banks
The president of the Federal Reserve Bank of Minneapolis floated the idea of a new "high-inflation stress test" for banks and suggested that regulators could force weakened banks to cut stock dividends to make them more sound.
"The outlook for some regional banks largely depends on what happens with inflation," Neel Kashkari said Wednesday at an economics conference in Cambridge, Mass.
Fed's Beige Book points to continued slow economic growth
The Federal Reserve's business contacts across the U.S. reported that economic activity increased only slightly in late May and June and the slow growth was expected to continue, according to the central bank's latest Beige Book survey released Wednesday.
The report, basically a collection of anecdotes from business contacts, is prepared for policymakers ahead of the central bank's upcoming meeting in two weeks to consider interest-rate policy.
U.S. Takes Third Shot at Shoring Up Money-Market Funds
WASHINGTON-U.S. regulators rewrote the rules for money-market funds for the third time in 15 years in hopes of preventing bailouts in times of turmoil, as investors pour money into the funds this year.
The Securities and Exchange Commission voted 3-2 Wednesday to change the rules governing money-market funds, which the Federal Reserve had to backstop with emergency lending facilities in 2008 and 2020. Two previous overhauls by the SEC failed to stop investors from fleeing certain funds en masse when markets faced extreme stress.
Microsoft's Court Win Puts U.K. Regulator in Challenging Spot Over Activision Deal
LONDON-The U.K.'s competition regulator said Wednesday that it would need to conduct a fresh investigation into any changes made to Microsoft's $75 billion Activision acquisition aimed at winning approval for the deal.
Britain's Competition and Markets Authority didn't say how long such an investigation would take, but any probe could make it difficult for Microsoft to complete its acquisition of Activision ahead of the companies' self-imposed July 18 deadline.
Elon Musk Launches xAI, His New Artificial-Intelligence Company
Elon Musk has launched his new artificial-intelligence business, xAI, as the tech industry races to develop new AI initiatives.
"Announcing formation of @xAI to understand reality," Musk said Wednesday on Twitter, the social-media platform he owns. Musk had incorporated the AI company in Nevada in March.
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Expected Major Events for Thursday
05:00/FIN: May Balance of Payments
05:00/FIN: May Retail sales
06:00/ROM: Jun CPI
06:00/UK: May Index of production
06:00/UK: May UK trade
06:00/UK: May Index of services
06:00/UK: May Monthly GDP estimates
06:00/ROM: May Industrial production
06:45/FRA: Jun CPI
07:00/SVK: May Employment and average monthly wage in selected branches
07:00/SVK: May Turnover in selected branches of economy, incl Industry & Construction
07:00/CZE: Jun CPI
07:00/CZE: May Import & export price indices
08:00/FRA: Jul IEA Oil Market Report
08:30/UK: 2Q Bank of England Credit Conditions Survey
08:30/UK: 2Q Bank of England's Bank Liabilities Survey
09:00/EU: May Industrial Production
11:30/UK: Jun NIESR Monthly GDP Tracker
16:59/AUT: Jul OPEC Monthly Oil Market Report
16:59/GER: May Balance of Payments
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(END) Dow Jones Newswires
07-13-23 0015ET
