MARKET WRAPS
Watch For:
EU long-term interest rate statistics, ECB economic bulletin; Italy CPI; UK mortgage data; trading updates from Allianz, Munich Re, Hapag Lloyd, Siemens, RWE, ThyssenKrupp, Deutsche Telekom, Zurich Insurance Group, Henkel, Deliveroo, Antofagasta, Entain, Novo Nordisk, Sasol
Opening Call:
European shares may push higher Thursday as investors await U.S. inflation data. In Asia, stock benchmarks were mixed; the dollar edged lower; Treasury yields steadied; oil futures fell; while gold futures were little changed.
Equities:
Stock futures point to gains in European markets on Thursday, ahead of the highly anticipated U.S. consumer-inflation data due later today.
Investors will watch the July consumer-price index data due Thursday and the producer-price index on Friday for clues on whether the Federal Reserve is finally ready to call it quits on its most aggressive inflation fight in four decades.
Kathryn Rooney Vera, chief market strategist at StoneX, said she doesn't think the CPI data would be a "big market mover." However, "what the market is focused on is soft landing, being if the Fed is able to get the economy to decelerate in terms of inflation pressures towards the 2% target without eliciting any form of economic contraction," said Rooney Vera.
But market expectations for a soft landing are "unlikely to be challenged by inflation data this week," said Veronica Clark and Andrew Hollenhorst, economists at Citigroup.
"With markets pricing just around 8 basis points more of Fed hikes this year, but still-strong activity data implying that near-term cuts are also unlikely, a 0.1% increase in core CPI could have a somewhat more limited impact than an upside surprise," they said. "The chance of additional hikes from the Fed would be further priced out, but softer inflation could be less surprising given already-rising expectations for a soft landing."
Also weighing on the sentiment is news of falling consumer prices in China, dovetailing with the country's weak trade data released this week and raising concerns that growth is faltering in the world's second-biggest economy.
"China is now witnessing the actual cost of goods both in stores and at the factory gate falling. It is indicative of a significant slowdown in the Chinese economy, which is beset by high levels of indebtedness," said Steve Clayton, head of equity funds, Hargreaves Lansdown.
However, traders also note that deflationary pressures emanating from China may help further reduce goods inflation in the U.S. and elsewhere, thereby helping central banks to soon stop raising borrowing costs.
Forex:
The dollar fell slightly in Asia ahead of U.S. CPI data due later. The greenback could garner some support if both U.S. headline and core inflation come in stronger than consensus estimates, said CBA.
However, an outcome in line or softer than consensus risks pulling USD down sharply should this boost expectations for Fed rate cuts, CBA added.
Bonds:
Treasury yields were little changed as investors assessed signs of deflation in China and its impact on the U.S. economy. Treasury yields held mostly steady overnight as traders waited for U.S. CPI data.
"We're still pretty convinced about inflation in the U.S. continuing to ease, led by a disinflation in shelter prices - which is 35% of the headline CPI index," Macquarie said.
"For many months, it's been the decline in inflation in 'asking rents' or rents in new listings (mainly, from third-party sources, such as Apartment List, and Zillow) that has strengthened our resolve in the prospect that disinflation will be also seen in the BLS's CPI measure."
Energy:
Oil futures edged lower early Thursday, retreating after WTI crude-oil futures finished overnight at the highest closing level since November.
With WTI crude having breached April's high of $83.50/bbl, this means market participants who had been bearish or skeptical of the OPEC+ group's efforts have been proven wrong, said Fawad Razaqzada, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!Ghpo-9H0Hh4G53yRQuMey1YHWNPMRgTHzXtksxCPx8BJkhDACicIUO8aKhpru4Z4O7mRDkmWcJ_WSiQrwFYnb71gsZllRargjZ3Ar3Tpis0$ .
As more bearish speculators now step aside, oil prices should continue trending higher for as long as there are no major demand concerns, he added.
Metals:
Gold was steady in Asian trade. The precious metal has been broadly pulling back in recent months as investors remain cautious over the Fed's tightening trajectory.
Galaxy Futures said investors are likely to stay on the sidelines for now as the market awaits U.S. CPI data due later today. Technical analysis also suggests likely rangebound trading for the commodity in the near term, Galaxy Futures added.
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Copper prices were flat. Investors are now betting on further stimulus measures from Beijing to boost copper demand after China's consumer and producer prices both declined on year in July, ANZ said.
"This raised expectations that Beijing will initiate measures to support the economy," ANZ said. Although Beijing has pledged to bolster support for the real estate sector, there have been little details so far, ANZ added.
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Iron-ore futures rose in Chinese trading, extending a rally.
However, analysts expect the commodity's prices to drop over the longer term. Pressure over production restrictions at steel mills will likely reduce iron-ore consumption, Huatai Futures said.
TODAY'S TOP HEADLINES
What to Watch in July's CPI Report: Why an Uptick in Annual Inflation Might Not Worry the Fed
Economists estimate that the annual U.S. inflation rate ticked up in July from June but monthly price increases remained modest, which could possibly deter the Federal Reserve from raising interest rates in September.
Fed officials have lifted interest rates to a 22-year high to lower inflation by cooling the economy. They are watching inflation and other economic readings as they weigh whether to raise rates again when they meet in mid-September. Those include the Labor Department's coming report on its consumer-price index, one of the most widely followed measures of goods and services prices across the economy.
China's Economy Isn't Ailing-It's 'Evolving': IPO Lawyers Told to Watch Their Language
Regulators in China have become uncomfortable with how some companies are describing the country's risks to international investors.
Last month officials from the country's securities regulator told a group of domestic law firms to soften the wording of China-specific risk disclosures in overseas stock-listing documents, according to people familiar with the meeting. The officials suggested alternative descriptions of certain risks and said some should be dropped entirely.
Biden Restricts U.S. Investment in China
The U.S. will prohibit Americans from investing in some Chinese companies developing advanced semiconductors and quantum computers starting next year, escalating Washington's efforts to prevent Beijing from producing cutting-edge technology for its military.
President Biden on Wednesday issued an executive order creating the rules after months of deliberations. The move could unsettle fragile efforts to rekindle diplomatic relations with China. Officials in Beijing have railed against U.S. policies restricting access to advanced technology, as tensions between the two superpowers have contributed to slowing U.S. direct investment in China.
Corporate Data Transfers to Russia Likely Violate EU Privacy Rules, Regulator Warns
Companies moving personal data from the European Union to Russia are likely violating privacy laws, an EU regulator said after ordering Russia-based ride hailing service Yango to stop transferring customer information there.
Tobias Judin, head of the Norwegian Data Protection Authority's international section, ordered a three-month stop to Yango's personal-data transfers to Russia. The Norwegian data regulator's office worked on the case with its Finnish counterpart, which ordered a temporary ban on Yango's data flows to Russia on Aug. 4. Both offices made the bans public on Monday.
A U.S. Ally Promised to Send Aid to Sudan. It Sent Weapons Instead.
ENTEBBE, Uganda-When a cargo plane landed in Uganda's busiest airport in early June, its flight documents said it was carrying humanitarian aid sent by the United Arab Emirates for Sudanese refugees.
Instead of the food and medical supplies listed on the aircraft's manifest, Ugandan officials said they found dozens of green plastic crates in the plane's cargo hold filled with ammunition, assault rifles and other small arms.
Special Counsel Got Search Warrant for Trump Twitter Account, Court Reveals
WASHINGTON-Special counsel Jack Smith obtained a search warrant earlier this year requiring X, the social-media company formerly known as Twitter, to produce data and records related to Donald Trump's Twitter account, according to a newly unsealed court decision that upheld a fine imposed on the company for its slow response to the warrant.
In a unanimous 3-0 decision made public on Wednesday, the U.S. Court of Appeals for the D.C. Circuit affirmed a lower-court decision that held the social-media company in contempt of court and imposed a $350,000 fine on it.
Meta, Alphabet and Other Tech Firms Face New Data Rules in India
India's Parliament on Wednesday passed a data-protection bill years in the making that the government says is needed to regulate tech companies and protect citizens, but that rights groups say gives New Delhi too much power.
The bill, called the Digital Personal Data Protection Act, says that companies must get consent from users before collecting their personal data and that they must use it for the stated purposes. It allows the government to limit the transfer of data outside India and penalizes companies for breaking the rules.
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08-10-23 0016ET
