Eurozone Foreign Trade, New Passenger Car Registrations; Italy Foreign Trade EU; U.K. Card Spending; updates from Air France-KLM, Gazprom, Ashtead, Johnson Matthey, Ryanair
Doubts over the pace of the global economic rebound will continue to weigh on European stocks. In Asia, most major benchmarks were lower, along with the dollar, Treasury yields and gold, while oil futures extended their rally.
European shares may struggle higher in another cautious opening session on Thursday, despite a strong finish on Wall Street, as investors try to gauge the strength of the economic recovery.
U.S. stock indexes finished on higher ground, helped by surging energy stocks and positive economic data, even as investors remain fixated on next week's Federal Reserve meeting.
Stocks closed near session highs, despite expectations that a choppy market likely will be the new normal until next week's FOMC policy meeting.
"It's very hard [for the market to rise] in advance of the FOMC meeting, " Kristina Hooper, chief global market strategist at Invesco, said in a Wednesday phone interview. "These are stomach churning days and we think it's going to be very hard to gain any type of substantial positive momentum," Hooper said.
Asian stock markets dipped as some disappointing Japanese export data and worries over China's slowing growth dimmed sentiment.
The dollar drifted in Asian trading after the currency had lost ground on Wednesday.
DBS said the currency market has been seesawing, with the mood caught between stock-market bears looking for a correction in September-October and bond-market bears who see the Fed tapering asset purchases before year-end. This deadlock is expected to continue into next week's FOMC meeting, DBS added.
GBP/USD softened slightly in Asia after its recent gains, as investors continue to weigh the prospect of interest rates rising in the U.K.
Nomura said the Bank of England could delay tightening monetary policy as long as inflation expectations remain contained.
George Buckley, Chief UK & Euro Area Economist sees risks to the BOE's view that it may raise interest rates for the first time in February 2023; the risk of another wave of the virus and associated restrictions could still mean the near 40 basis points of tightening assumed by the market over the next year is too aggressive.
The 10-year Treasury yield dipped back below 1.300% in a choppy Asian session.
The market has largely held steady after yields declined on Tuesday following the U.S. CPI data.
The inflation data doesn't change anything regarding the timing of the Fed's tapering decision, "as suggested by the negligible movement in UST real yields," UniCredit analysts wrote in a note. "Investors will now turn to scrutinizing economic data, and most importantly labor market data, which will be crucial in determining the timing of tapering and the performance of UST real yields going forward."
Credit Suisse said it's unlikely to get much new in terms of taper timing from the FOMC next week. "What we will get is a new dot plot and in that new dot plot is where the intrigue lies."
U.K. government bond yields look low in relation to the risk of rising inflation and the prospect of interest rates rising earlier than anticipated, Mizuho said.
"The GBP curve is still generally flatter than we can justify, which we think is premised on a very low neutral Bank rate," analysts at Mizuho said. After official data showed the annual U.K. CPI inflation rate rose 3.2% in August, they see a much greater probability of the BOE "not only hiking rates, but also actively selling gilts into the market, than the forwards [rates] currently price."
Oil futures have made further gains in Asia, having climbed on Wednesday to their highest settlement since late July, boosted by U.S. government data that showed a more than six million-barrel weekly drop in domestic crude supplies.
"For another week, stymied production and subdued refinery runs have offset each other - with both barely ticking higher in the last week as the Gulf Coast struggles to recover from the impact of Hurricane Ida," said Matt Smith, lead oil analyst, Americas, at Kpler.
"Imports remained broadly on par with the prior week's pace, while ongoing strength in crude exports from ports which were unaffected by the hurricane have helped crude inventories to a solid draw in this latest report."
ANZ said near-term sentiment may be supported by OPEC's latest outlook, in which the cartel raised its 2022 demand forecast, a more optimistic view on Chinese demand and positive economic developments in Europe.
Gold prices edged lower in Asia after they posted their first loss in three sessions on Wednesday.
"Subdued inflation expectations have been a headwind, with our gold valuation model still suggesting it is undervalued, driven by expectations that the spike in inflation will transitory," ANZ said.
Oanda thinks support for gold remains at $1,780 but if that level is breached, deeper losses to $1,750 can be expected.
Aluminum was higher as production costs of the industrial metal in both China and the EU rise, Goldman Sachs said.
In China, higher electricity costs, along with mandated blackouts in the province of Yunnan, are crimping aluminum production, while EU smelters are grappling with rallying carbon-credit and power input costs, Goldman Sachs said. Logistical bottlenecks also posed an upside risk.
Citi reckons investors should hedge their bullish aluminum positions by betting against zinc in order to reduce cyclical exposure to China, given some red flags including weakening construction activity measures and the high likelihood of credit tightening.
"Aluminum and zinc have similar demand side exposures to China and similar end use markets both in China and globally and thus zinc may be a good way to reduce some of the cyclical downside on the demand side if China remains weak," Citi said.
TODAY'S TOP HEADLINES
Japan's Exports Rose for Sixth Straight Month in August
Japan's exports climbed by double digits for the sixth straight month in August, driven by strong demand for steel, semiconductor-related products and auto parts in key overseas markets, Ministry of Finance data showed Thursday.
Exports increased 26.2% compared with the same period a year earlier, easing from July's 37% increase. The result was weaker than the 32.2% increase tipped by a FactSet survey of economists.
Uranium Heats Up, and Hedge Funds Score
Uranium prices are rising, enriching a handful of hedge funds that have been betting a market laid low by a nuclear disaster a decade ago would rebound.
The price of uranium hit an eight-year high of $44 a pound this week, according to the price tracker UxC LLC. The surge follows the recent launch of an exchange-traded trust by Sprott Asset Management LP, which has bought large stockpiles of uranium after raising money from shareholders and emerged as a favored trading vehicle in its own right, traders said.
U.K. Prime Minister Boris Johnson Shifts Dominic Raab Aside in Cabinet Reorganization
LONDON-British Prime Minister Boris Johnson Wednesday shuffled a number of top ministerial jobs in a bid to enforce discipline within Conservative Party ranks and move on from the Covid-19 crisis.
The most high-profile change was Foreign Secretary Dominic Raab, who was moved aside to head the justice ministry while also being given the title of deputy prime minister.
U.S. to Share Nuclear Submarine Technology With Australia in New Pact
WASHINGTON-The U.S., the United Kingdom and Australia are creating a new security partnership in the Indo-Pacific, building on the longstanding alliance between the three to share intelligence, deepen cooperation and help Australia to build nuclear-powered submarine capabilities as China's influence grows.
The new agreement, announced Wednesday by leaders of the three countries, was described by administration officials as a way to line up common interests in the Asia Pacific.
Airbus, Air New Zealand to Jointly Study Hydrogen Aircraft Feasibility
WELLINGTON, New Zealand--Airbus SE and Air New Zealand Ltd. have agreed to jointly research the feasibility of operating a hydrogen-fueled aircraft by the end of this decade.
Airbus, which has been exploring three hydrogen-powered aircraft concepts, said the joint study would help it understand the practical challenges of putting an aircraft powered by a renewable energy source into service. Air New Zealand would assess the possible impact that a hydrogen aircraft would have on its network, operations and infrastructure.
Microsoft Plans $60 Billion Share-Buyback Program, Raises Dividend
Microsoft Corp.'s board approved a plan to buy back as much as $60 billion of its stock, extending the tech giant's extensive repurchase program at a time when Congressional Democrats have proposed taxing companies that do buybacks.
Microsoft didn't provide a timetable for the repurchases. It said Tuesday the program doesn't have an expiration date and could be terminated any time.
Canadian Pacific Reaches $27 Billion Deal to Buy Kansas City Southern
Canadian Pacific Railway Ltd. clinched a deal to take over Kansas City Southern, as a rival dropped its pursuit of the highly coveted railroad after a monthslong battle.
The $27 billion agreement, if completed, would be the first major merger in the industry in the U.S. in about two decades and would create the first freight rail network linking Canada, the U.S. and Mexico.
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Expected Major Events for Thursday
04:30/NED: Aug Unemployment
06:00/EU: Aug New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)
07:00/SVK: Jul New orders in industry
07:00/CZE: Aug PPI
08:00/ITA: Jul Foreign Trade EU
08:30/UK: Jun Card Spending statistics
09:00/EU: Jul Foreign trade
10:00/POR: Aug PPI
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