MARKET WRAPS
Watch For:
Housing Starts for August; Canada CPI for August; Federal Open Market Committee meeting
Opening Call:
Equity futures rose modestly Tuesday morning and Treasury yields rose to fresh multiyear highs on expectations of tighter Federal Reserve policy.
All eyes are on the Fed, which is due to begin its two-day policy meeting later Tuesday. The central bank is likely to raise its key interest rate by three-quarters of a percentage point, as it continues acting forcefully to curb inflation.
Read the WSJ preview here.
Stocks to Watch:
Apple will hike prices on apps and in-app purchases in Europe and a number of other countries next month, the company said late Monday.
The company said app prices and in-app purchases will increase in all countries using the euro currency as well as Chile, Egypt, Japan, Malaysia, Pakistan, Poland, South Korea, Sweden, Vietnam.
Read more here.
Economic Insight:
Hot data has put a 100 basis point interest rate increase on the table at the Fed's upcoming meeting, but a "hawkishly delivered" 75bp rise is more likely, BNP Paribas Markets 360 said.
"The exceptionally strong August CPI print diminished hopes of an imminent downshift in inflation and raised the risk of high inflation becoming even more entrenched," BNP Paribas said.
It expects the updated Summary of Economic Projections to show a higher projected terminal fed funds rates against higher inflation and lower growth.
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nordIX said a 75bp rise on Wednesday is already fully priced in but a 100bp hike isn't in line with its own expectations.
NordIX said Jerome Powell is expected to continue emphasizing that the central bank is in the driver's seat in clear and comprehensible communication toward the markets.
Forex:
The dollar, down 0.2% in Europe, should remain very strong this week ahead of an expected 75bp rate hike from the Fed. with ING seeing no reason for the central bank to soften its post-Jackson Hole hawkishness.
Central banks in the U.K., Switzerland and Norway are expected to raise rates this week and tighter monetary policy around the world will also "increase the headwinds for risk assets" and increase haven demand for the dollar, ING added.
Bonds:
The yield on the benchmark 10-year Treasury note continued to rise on Tuesday, having notched its highest close in a decade.
Robeco said government bond yields have gone up in the past year, now being way above the 10-year average, but still below the 4% level where they should be on the long-run.
The fact that yields have risen above the 10-year average "indicates that bonds have become more attractively valued as they were extremely expensive," Robeco said.
"They have become a lot less expensive, especially in the U.S., but they are still below the 4% that we think on the long-run government bonds should be."
Energy:
Crude futures edged higher in Europe, as a slight weakening in the dollar outweighed demand concerns ahead of what's expected to be another aggressive interest-rate increase from the Fed.
BNP Paribas said the Fed is likely to have a big impact on risk assets like oil while also potentially presenting a driver for the dollar, indirectly influencing oil prices.
Metals:
Base metals ticked higher on the LME after China eased lockdown measures in the megacity of Chengdu over the weekend, allowing millions of people to return to normal activities.
Hong Kong officials also agreed to end mandatory quarantines for arrivals, according to the South China Morning Post. Lockdowns in China have threatened to slow China's economy and undermine demand for raw materials like metals, weighing on prices.
TODAY'S TOP HEADLINES
Ford Warns Parts Shortages, Higher Supplier Costs Are Expected to Affect Earnings
Ford Motor Co. on Monday warned third-quarter earnings would be affected by about $1 billion in higher-than-anticipated supplier costs and parts shortages that have led to unfinished vehicles it couldn't sell during the period.
The Dearborn, Mich., auto maker reaffirmed its year-end guidance for 2022, projecting adjusted operating results for the third quarter would fall between $1.4 billion and $1.7 billion.
Judges Probe J&J Talc Bankruptcy in High-Stakes Appeal
A federal appeals panel, while scrutinizing Johnson & Johnson's strategy for moving talc injury lawsuits against the company to chapter 11, questioned how consumers who sued the consumer goods giant would be affected if it rejected J&J's bankruptcy tactic.
A three-judge panel on the Third U.S. Circuit Court of Appeals raised the question during a three-hour hearing examining J&J's decision to put a newly formed talc subsidiary into bankruptcy. Injury claimants are seeking to have the bankruptcy case dismissed so they can pursue lawsuits against J&J claiming that its talc-based products caused cancer. Those lawsuits have been paused by the chapter 11.
Judge Rejects Antitrust Challenge to UnitedHealth Acquisition
WASHINGTON-A federal judge Monday ruled against a Justice Department antitrust challenge to UnitedHealth Group Inc.'s $13 billion acquisition of health-technology firm Change Healthcare Inc., rejecting government claims that the deal would unlawfully suppress competition and limit innovation in health-insurance markets.
U.S. District Judge Carl Nichols ruled for the companies in an opinion that he kept under seal for now because he said it "may contain competitively sensitive information." The judge said he would release a redacted public version of the ruling in the coming days. In a one-page public order, he denied the Justice Department's request to block the companies from completing the deal.
Mining Giant Fortescue to Spend Billions in Bid to Eliminate Fossil Fuels by 2030
Fortescue Metals Group Ltd. will spend more than $6 billion on renewable energy and stop using fossil fuels by 2030, a pledge that the Australian iron-ore giant says will lower energy costs and mark a key step toward producing low-carbon steel.
Fortescue is committing to use a combination of wind and solar power, battery storage and hydrogen produced from renewable energy to generate the electricity and fuel needed to extract iron ore, company officials said. Buyers in the steel supply chain could then turn that "green iron ore" into steel.
Apple to Hike App Store Prices in Europe and Asia
Apple will hike prices on apps and in-app purchases in Europe and a number of other countries next month, the company said late Monday.
The tech giant said app prices and in-app purchases will increase in all countries using the euro currency as well as Chile, Egypt, Japan, Malaysia, Pakistan, Poland, South Korea, Sweden, Vietnam.
Nikola CEO Tells Jurors He Worried About Exaggerations by Company Founder Trevor Milton
Nikola Corp. CEO Mark Russell told a New York federal jury Monday that he had concerns about joining the electric-truck company because he believed its founder, Trevor Milton, "was prone to exaggeration in public statements."
Testifying in Mr. Milton's securities-fraud trial, Mr. Russell said that before coming on board in 2019 as president of Nikola, he and Mr. Milton reached an agreement that Mr. Russell would become the chief executive officer if Nikola became a publicly traded company. Mr. Russell said he sought the arrangement because as head of a public company, statements from the CEO needed to be accurate.
China Keeps One-Year Loan Prime Rate Unchanged at 3.65%
China's central bank on Tuesday kept its benchmark lending rates unchanged, in line with market expectations as Beijing held off on monetary easing to avoid increasing downside pressure on its currency.
The People's Bank of China said it held the one-year loan prime rate steady at 3.65% and the five-year rate at 4.30%, according to a statement published on its website.
Riksbank Lifts Policy Rate to 1.75% from 0.75% as Inflation Continues to Surge
Sweden's central bank on Tuesday lifted its key policy rate to 1.75% from 0.75%, raised its rate path and signalled an end to asset purchases at the end of the year as it fights a continued surge in inflation.
Economists polled by The Wall Street Journal before the decision had all expected a 75 basis points hike to 1.50%.
German Producer Prices in August Posted Highest Increase on Record
Germany's producer prices rose strongly in August from a year earlier, driven by higher energy prices, posting the biggest increase ever recorded, the German statistics office Destatis said.
Producer prices rose 45.8% on year last month, Destatis said Tuesday. This followed a 37.2% increase in July and a 32.7% rise in June.
Lack of Global Collaboration Risks COP26 Goals, IEA Report Says
A lack of global collaboration in rolling out sustainable technologies is hampering efforts to meet key targets set at last year's COP26 climate conference, according to an independent report commissioned by nations that attended the landmark conference hailed as a critical turning point in tackling climate change.
U.S. Treasury Seeks Comment on Crypto's Illicit Finance Risks
The U.S. Treasury Department is seeking public comment on the possible illicit finance and national security risks posed by the use of digital assets, as part of the agency's mandate under President Biden's March executive order to study the development of cryptocurrency.
The request for comment, issued Monday, also asks the public for suggestions to mitigate these risks by the deadline of Nov. 3.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Aurora Cannabis 4Q
Economic Indicators (ET):
0830 Aug CPI
Stocks to Watch:
Alkaline Fuel Cell Power Teams Up With Green-Tech Co for Clean Hydrogen JV; JV With Progressus Clean Technologies Aims to Extract Hydrogen From Natural Gas Grid, Use It to Produce Zero-Emission Powe; JV Pilot Project a Key Step in Goal of Making Zero-Emission Fuel Cells Widely Available
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09-20-22 0552ET
