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Birthday : 11/30/1966
Place of birth : Francfort - Germany
Biography : Peter Andreas Thiel is an entrepreneur and businessperson who founded 8 companies, which include: Pa

North American Morning Briefing: Stock Futures Head Lower as Recession Fears Loom Large

07/05/2022 | 05:55am EDT

MARKET WRAPS

Watch For:

Manufacturers' Shipments, Inventories & Orders for May; Canada Preliminary estimates of principal field crop areas for June; Canada Building permits for May

Opening Call:

Stock futures gave up early gains to trade lower on Tuesday, as investors continued to assess the odds of a global economic slowdown.

As the Federal Reserve and other central banks pull their interest-rate levers to try to curb inflation-thus, risking recession-analysts and investors are on edge and looking for more insight as to the Fed's plans.

This week, investors are looking ahead to Friday's jobs report for clues on how rising borrowing costs and inflation are affecting the labor market. Economists polled by The Wall Street Journal expect employers to have added 250,000 jobs in June, down from a rate of 390,000 in May.

Nordea Asset Management expects markets to stay under pressure as investors haven't yet fully prepared for a growth slowdown.

"We're pricing in a very shallow recession," it said. "But the odds are it's not going be to shallow. It never is."

Joe Biden is expected to roll back some tariffs on Chinese imports as the administration seeks to rein in inflation. The decision, which could come this week, could pause tariffs on consumer goods such as clothing and school supplies, as well as launching a broad framework to allow importers to request tariff waivers.

Read more here.

Economic Insight:

The U.S. economy is expected to contract 1.9% this year as it falls into a mild recession for the remainder of 2022, according to Yardeni Research.

GDP in the first quarter contracted by an annualized rate of 1.6% even though the underlying performance of the economy was reasonably good, and output is seen contracting again in the second quarter as demand weakens, it said.

The good news is that the recession should be over next year and should slow the rate of inflation in the second half 2022 and 2023, Yardeni Research said. "Next year, we expect growth to resume, with a 2.9% increase projected," it said.

Forex:

Reports that Biden could roll back some tariffs on Chinese imports might improve risk appetite and reduce safe-haven flows to the dollar, but the currency impact will be modest, ING said.

The news is slightly dollar negative but Treasury yields are rising, serving as a reminder that if the Reserve Bank of Australia has cause to raise its key interest rate by 50 basis points to 1.35%, the tightening case is even more compelling for the Fed, ING said.

"On balance, DXY [dollar index] could probably drift back to 104.50 or a little lower, but should hold above 104.00 ahead of tomorrow's [Fed meeting minutes]," ING said.

Energy:

Oil futures were mixed in early European trading, with Brent lower but WTI within touching distance of $110, as economic-growth concerns outweighed positive sentiment from the possible lifting of Chinese import tariffs by Washington.

Despite improved risk sentiment and the possible easing of trade tariffs against China, "oil is still struggling to break out from its current recessionary malaise as the market pivots away from inflation to economic despair," said SPI Asset Management.

Current supply issues from Russia and OPEC+ are taking a "back seat" while consumer and industrial demand concerns influence the broader market, it said.

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Goldman Sachs raised its forecasts for European gas prices on the uncertainty stemming from Russia reducing supply to Europe via Nord Stream 1.

The bank raised its forecast for the third quarter to EUR153 a megawatt hour from EUR104, and EUR121 a megawatt hour from EUR105 for the fourth quarter. It had previously banked on a full restoration of NS1 flows, but no longer sees this as possible, it said.

Goldman recommended long exposure on the Dutch TTF--a trading point for natural gas--on the highly volatile nature of prices, and the "expectation that the ongoing European tightness is not likely resolved in the near-to-medium term."

Metals:

Gold was little changed in early trade. The metal faces pressure from the strength of the dollar, given the pair's inverse relationship.

Still, ANZ thinks gold could get some support from worries about the economic outlook, noting that "the [Fed's] aggressive tightening is creating concerns over a looming downturn, which is likely to see safe-haven demand remain elevated for the precious metal."

---

Base metal prices edged down despite more positive economic news coming out of China.

China's service sector expanded in June, with the Caixin China General Services Purchasing Managers Index coming in at 54.5--a reading above 50 indicates expansion.

"Good Caixin PMI prints and positive news about Trump-era tariffs being potentially lifted didn't attract much buying from Asia this morning," Marex said. "We do seem to be stuck in a sell rally environment."


TODAY'S TOP HEADLINES


New Zealand Treasury Bars Wall Street Journal From Restricted Briefings Until 2025

New Zealand's Treasury will bar The Wall Street Journal from attending restricted briefings for three years for publishing budget information before the scheduled release time in May.

The Treasury said Tuesday that the Journal will be barred from attending restricted briefings on New Zealand's budget, economic and fiscal updates, government financial statements and other meetings until a budget briefing in 2025. It will also bar a reporter from the Journal and Dow Jones Newswires who mistakenly sent a draft of a story before the time stipulated by the Treasury as a condition of attending the restricted briefing.


Little-Known Abortion Pill Maker Faces Scrutiny

The overturning of Roe v. Wade has put a spotlight on a small manufacturer of abortion pills, which are emerging as a flashpoint between advocates and opponents of the procedure.

Abortion-rights advocates have for decades lobbied for more access to mifepristone, the abortion medication that Danco Laboratories LLC manufactures under the brand name Mifeprex and sells for about $50 a pill. They want the Food and Drug Administration to remove safety restrictions on the drug, make it available without a prescription or expand its label to approve it for miscarriage, for which it is also sometimes prescribed, off label. An official use for miscarriage would help ensure women experiencing a miscarriage could get the drug. It might also make it more difficult for prosecutors to investigate doctors who dispense the pills in states where abortions are banned, abortion-rights advocates said.


Hard Rock Atlantic City Workers, Casino Operator Reach Labor Agreement

Atlantic City casino workers reached a tentative deal with the Hard Rock Hotel & Casino, averting a strike that could have started during the Fourth of July holiday weekend, according to the union.

Unite Here Local 54 union organizers said their negotiating committee approved the deal on Saturday-details of which weren't disclosed-and soon all unionized workers would be able to vote on it. The roughly 1,500 casino workers were set to go on strike if an agreement hadn't been reached by the July 3 deadline.


European Travel Just Got Harder After SAS Pilots Strike

LONDON-Pilots at Scandinavia's main airline walked out, starting a strike that the carrier said will hobble operations and add to a growing list of air travel woes on both sides of the Atlantic.

About 1,000 pilots at SAS AB, which has hubs in Denmark, Sweden and Norway, started the strike after talks with management fell through earlier on Monday. SAS said it would scrap about half of all scheduled flights each day of the strike, with cancellations already racking up. The airline warned that the financial fallout from the industrial action could jeopardize the company's survival.


SAS Files for Bankruptcy Protection in US to Push Through Restructuring

SAS AB said Tuesday that it has filed for chapter 11 bankruptcy protection in the U.S. as it seeks to push through its comprehensive financial restructuring to cut costs and raise capital under the supervision of the U.S. court system.

Struggling with high debt and a lack of cash, SAS earlier this year launched plans to cut annual costs by 7.5 billion Swedish kronor ($725.2 million), convert around SEK20 billion of debt and hybrid notes into common equity and raise at least SEK9.5 billion in new capital.


AstraZeneca to Buy TeneoTwo for Up to $1.27 Bln

AstraZeneca PLC said Tuesday that it is buying TeneoTwo, Inc. for up to $1.27 billion in a deal that strengthens its haematological cancer pipeline.

The pharmaceutical giant said it will make an upfront payment of $100 million upon closing of the deal. A further payment of up to $805 million will be made dependent upon research-and-development milestones being reached and extra payments of up to $360 million could be payable to TeneoTwo shareholders based upon commercial-related milestones.


Peter Thiel-Backed Crypto Lender Vauld Suspends Withdrawals

A cryptocurrency lender backed by Peter Thiel and Coinbase Global Inc. suspended withdrawals, trading and deposits on its platform, citing volatile market conditions and financial difficulties facing key business partners.

The platform, Vauld, said Monday that it froze the operations after users pulled almost $200 million over the last three weeks. A sharp decline in cryptocurrency prices that began with the collapse of two cryptocurrencies in May has spooked traders and caused knock-on effects in the digital asset world.


Biden Might Soon Ease Chinese Tariffs, in a Decision Fraught With Policy Tensions

WASHINGTON-President Biden is expected to roll back some tariffs on Chinese imports soon, a decision constrained by competing policy aims: addressing inflation and maintaining economic pressure on Beijing.

(MORE TO FOLLOW) Dow Jones Newswires

07-05-22 0554ET

Stocks mentioned in the article
ChangeLast1st jan.
ASTRAZENECA PLC -1.40% 10714 Delayed Quote.23.46%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.24% 0.69703 Delayed Quote.-4.85%
BRITISH POUND / US DOLLAR (GBP/USD) -0.10% 1.20739 Delayed Quote.-10.78%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.10% 0.7765 Delayed Quote.-2.34%
COINBASE GLOBAL, INC. 5.34% 98.02 Delayed Quote.-63.13%
EURO / US DOLLAR (EUR/USD) -0.08% 1.01897 Delayed Quote.-10.48%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.29% 0.012565 Delayed Quote.-6.16%
LONDON BRENT OIL 0.25% 96.46 Delayed Quote.21.13%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.21% 0.6273 Delayed Quote.-8.76%
NORDEA BANK ABP 0.12% 101.14 Delayed Quote.-8.58%
S&P GSCI CRUDE OIL INDEX -0.53% 492.9407 Real-time Quote.18.10%
S&P GSCI NATURAL GAS INDEX 1.03% 358.7321 Real-time Quote.116.12%
SAS AB (PUBL) 5.12% 0.678 Delayed Quote.-49.43%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) 1.01% 61.125 Delayed Quote.-18.87%
WTI 0.32% 90.655 Delayed Quote.17.49%