Germany WPI; updates from Henkel, Pandora
Europe should open higher, with traders likely to take heart from Wall Street's hefty gains on Friday, buoyed by signs of easing inflation and improving consumer sentiment. In Asia, major stock benchmarks were mixed; the dollar strengthened further; while Treasury yields, oil and metals all edged lower.
European stocks should add to recent gains on Monday despite the energy crisis and worries over the ongoing supply chain challenges.
"The resilience of U.S. markets may be helping here, as receding inflation is tempering expectations that the Federal Reserve will be as aggressive as originally supposed when it comes to raising rates," wrote Michael Hewson, Chief Market Analyst at CMC Markets UK.
Shares in Asia were mixed early Monday, but with losses limited, after China's PBOC unexpectedly cut two key policy rates. The positive move was counterbalanced by disappointing data that showed China's economic growth slowed in July.
The dollar gathered strength in Asia but gains were capped by divergent developments.
IG highlighted the PBOC's rate cut, which could give more support to China's cooling economy and a boost to risk sentiment; while tensions between the U.S. and China were in focus, with another visit to Taiwan by a delegation of U.S. lawmakers led by Sen. Ed Markey.
The dollar made solid gains on Friday on hopes U.S. inflation had peaked.
Bank of America said investors seemed to think so, perhaps building on their increasingly bearish commodity outlook.
The bank cited its own survey of investors, with 57% of respondents saying their biggest macro concern was that inflation had probably peaked but a persistently tight Fed policy would still be required for it to decline towards the central bank's target.
BoA added that dollar positioning had been adjusted lower from last month's seven-year high, "in line with price action since mid-July, but at odds with sentiment suggesting perhaps some reluctance in the change."
The yuan weakened against the dollar in offshore and onshore markets, following the PBOC's rate cut and softer-than-expected China economic data.
The PBOC's cut of its one-year medium-term lending facility had been unexpected, and China's July activity readings have also been a downside surprise, Maybank analysts said.
Also, lower rates may only offer some relief amid headwinds from China's zero-Covid policies and property-market malaise and a potential global growth slowdown. Yuan sentiment might lean a tad cautious in the interim, Maybank added.
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Treasury yields edged lower in Asia with inflation still the dominant theme.
Improving inflation figures have boosted some hopes the Fed would not need to raise interest rates as aggressively as feared, potentially leaving room for policy makers to rein in still red-hot inflation without sending the economy into recession. That buttressed the view that policy makers might have an opening to engineer a soft landing.
Odds of a 50-basis point Fed hike in September have reached 57.5%, versus 42.5% for a 75bp, according to the CME FedWatch tool.
"We still expect a further small rise in the 10-year Treasury yield by the end of the year...which could put renewed downward pressure on the prices of commodities, and particularly gold, in the coming months," said Capital Economics.
Oil futures were down almost 1% in Asia, extending Friday's losses, after news reports indicated supply disruptions in the Gulf of Mexico were likely to be short lived.
A Louisiana official said a damaged oil-pipeline component was due to be replaced by the end of the day, Reuters reported. The damaged flange had disrupted flows from offshore platforms in the Gulf.
Phillip Securities said fears of a recession may also cloud the demand outlook for crude for now.
FxPro said the oil price rally last week fitted into a "corrective rebound picture," warning that if bulls "do not find a new fundamental reason to buy at current levels near $94 for WTI in the next few days, we should expect a bear market recovery."
Gold futures were slightly lower, after clinching a fourth straight week of gains on Friday.
Commerzbank said though prices have embarked on an upward trajectory, it may still be too early to expect the precious metal to make any real comeback.
"Furthermore, we are confident the dollar will appreciate again, especially vis-à-vis the euro...which is likely to weigh on the gold price in the medium term."
Copper prices were also lower, and a higher Fed funds rate and a stronger dollar could mean that the metal faces headwinds in the short term, CBA said.
"Combined with concerns over Europe's copper demand, it's hard to see prices lifting from here, particularly at the pace over the last month."
Iron-ore futures weakened around 1.7% on signs of rising stockpiles.
Inventories at Chinese ports rose by 1.3% last week, bringing their increase since mid-July to nearly 7%, ANZ Research said.
Also, market sentiment hasn't been helped by Japan equipment manufacturer Komatsu recently reporting that Chinese demand for its excavators fell sharply in July. Heavy equipment machinery such as excavators are often used in iron ore mines.
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China's Central Bank Cuts Key Policy Rates
China's central bank on Monday cut key policy interest rates, a move that could provide more support to the cooling economy.
The People's Bank of China said it lowered interest rates of both one-year medium-term lending facility and seven-day reverse repurchase agreements by 10 basis points, while injecting liquidity via the two instruments.
Chinese Economy Slows Unexpectedly as Rebound Sputters
China's economic growth unexpectedly slowed in July after a blip of accelerated recovery in June, official data showed on Monday.
Industrial production rose 3.8% from a year earlier, down slightly from the 3.9% increase in June, according to data released by the National Bureau of Statistics. That fell short of the 4.5% growth expected by economists polled by The Wall Street Journal.
China New-Home Prices Post Biggest Fall in Over Six Years
BEIJING--New-home prices in China in July fell the most in over six years as home buyers lost confidence in the property market after a year-long slide in sales, stalled projects and mounting debt defaults by real-estate developers.
Average new-home prices in 70 major cities in July fell 1.67%, compared with the same period a year earlier, after falling 1.29% in June, according to Wall Street Journal calculations based on data released Monday by China's National Bureau of Statistics.
Japanese Economy Recovers Prepandemic Size With 2.2% Growth
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Ukraine's Food Exports Slowly Pick Up Under Grain-Corridor Agreement
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On Saturday, the grain initiative passed a key milestone when the first inbound ship to arrive in Ukraine under the agreement safely departed Odessa after loading 12,000 tons of corn bound for Turkey. Before the ship's departure, all of the other outbound ships leaving Odessa had been vessels that were stranded in Ukraine when Russia attacked in February.
Saudi Aramco Posts 90% Jump in Profit, Generating Billions for Kingdom
DUBAI-Saudi Arabia's national oil company on Sunday posted a 90% jump in quarterly profit on the back of high oil prices, generating billions of dollars in cash that is infusing fresh momentum into the kingdom's ambitious economic makeover and strengthening its geopolitical power.
Aramco, officially named Saudi Arabian Oil Co., said its net income amounted to $48.4 billion in the three months ending in June, up from $25.5 billion in the same period a year earlier, because of higher crude-oil prices and stronger refining profit. It is the highest quarterly net income Aramco has posted since it started trading its shares on the Saudi stock exchange in 2019. The company is one of the most valuable globally, briefly taking the top spot in May.
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