MARKET WRAPS
Watch For:
France Industrial Production; UK BOE/Ipsos Inflation Attitudes Survey; OECD Harmonised Unemployment Rates/Employment Outlook; Eurogroup meeting of eurozone finance ministers; EU energy ministers meeting; no major corporate updates
Opening Call:
Shares are seen little changed in Europe on Friday as investors continue to assess the ECB's historic rate rise and weigh further hawkish comments from the Fed's Powell. In Asia, stocks made broad gains; the dollar eased lower; while Treasury yields, oil and gold all advanced.
Equities:
Stock-index futures suggest a mildly-positive start in Europe on Friday, even after more hawkish comments from Jerome Powell.
During a discussion hosted by the Cato Institute, the Federal Reserve chairman said the central bank remained strongly committed to fighting inflation, and that it wouldn't be deterred by politics or other distractions.
"I can also assure you that we never take into consideration external political considerations," Powell said.
Read more here.
After Thursday's European close, IG said that "overall the mood seems to be much more positive than might have been expected in a week that has seen Russia cut Europe off from gas supplies. The selling of late August and early September seems to have been exhausted for now, although the broader outlook is still less than encouraging."
U.S. stocks finished higher on Thursday with their first back-to-back gains in two weeks, while Asian markets have advanced across the board so far today.
Forex:
The dollar was slightly weaker in Asia with the USD Index hovering around the 109.00 level.
Louis Navellier said "a currency war may be brewing since the weak euro is a big inflation catalyst." The chairman of Navellier & Associates also noted a further decline in the U.S. trade deficit and said the figure shrinking over the past four months "was contributing to a stronger dollar as well as to GDP growth."
USD/JPY, down 0.4%, could continue to rally, but this will likely be at a slower pace than previous rallies, UOB said.
"Deeply overbought conditions suggest a slower pace of advance and at this stage, the chance for USD to rise to the 1998 high near 147.65 is not high."
UOB has put USD/JPY support at 143.40 and resistance at 144.60.
Bonds:
Treasury yields have continued to rise in further reaction to Jerome Powell's hawkish comments on Thursday.
"The mid-August attempts to bull steepen on recessionary concerns proved premature--a fact that has been reinforced by the chorus of hawkish Fed rhetoric this week," said BMO.
The odds of a 75-basis point Fed rate increase have reached 88% in the CME's FedWatch tool, as investors turn their attention to next week's August CPI data.
The inflation figures "should show another muted monthly headline CPI change spurred by tumbling gasoline prices," said. It has forecast core CPI to increase at a 0.43% monthly pace, faster than 0.31% in July, while the headline annual inflation is forecast at 8.1%, down from 8.5%.
Other News:
A closely watched U.S. bond-market gauge of near-term inflation expectations has fallen below the Fed's 2% target for the first time in two years in a sign that stocks could find some near-term relief after Nasdaq suffered its longest losing streak since 2016 in the past week.
Read more here.
Energy:
Oil futures posted further gains in Asia, extending Thursday's modest advance.
Sentiment was being supported by news the IEA has upgraded its global oil demand outlook for the next two quarters as electricity suppliers, particularly in Europe, could now switch to oil-based generating fuels from natural gas, OCBC said.
"The Biden administration is also weighing a possible release from the Strategic Petroleum Reserve to avoid another price spike when EU sanctions on Russia supplies take effect in December," OCBC noted.
Metals:
Gold has moved higher, recovering some of Thursday's post-Powell losses.
OANDA said the precious metal may trade sideways around the $1,700/oz level until next week's U.S. inflation report.
Meantime, the World Gold Council reckons gold could remain under pressure if central banks continue to raise interest rates aggressively, though the risk of either stagflation or recession could offset this given that the haven metal has historically outperformed in these conditions.
"Near-term, we expect trading volumes and consumer demand to pick up in September," amid a historically strong demand season, it said.
---
Copper climbed and analysts said prices are likely to remain supported by supply concerns.
Galaxy Futures said these included the threat of a strike in Chile by mining workers, raw-material supply tightness and weather-related shipping delays.
"Copper supply is indeed tight, and copper prices may have more room for rebound."
TODAY'S TOP HEADLINES
China Inflation Eases on Slower Domestic Demand Amid Covid Restrictions
China's consumer inflation unexpectedly slowed in August, pointing to softening domestic demand amid increased Covid-19 control measures.
The consumer-price index rose 2.5% from a year earlier in August, compared with a 2.7% increase in July, the National Bureau of Statistics said Friday.
White House Weighs Order to Screen U.S. Investment in Tech in China, Other Countries
WASHINGTON-The Biden administration is weighing an executive order to screen and possibly restrict U.S. overseas investment in cutting-edge technology development in China and other potentially hostile countries.
The White House is aiming to issue such an order within the next couple of months to monitor and potentially block outbound investment by American companies and investors, according to people familiar with the matter.
Fed's Powell Affirms Need to Act Strongly to Fight Inflation
Federal Reserve Chairman Jerome Powell said the central bank is squarely focused on bringing down high inflation to prevent it from becoming entrenched as it did in the 1970s, firming expectations of a third consecutive 0.75-percentage-point rate rise later this month.
"It is very much our view, and my view, that we need to act now forthrightly, strongly, as we have been doing, and we need to keep at it until the job is done," Mr. Powell said Thursday morning at a virtual conference hosted by the Cato Institute.
Ukrainian Forces Punch Forward in East, Threatening Russian Supply Lines
Ukraine's military advanced as much as 30 miles in the country's east and liberated more than 20 villages and towns, a senior commander said, in a rapid thrust aimed at cutting Russian supply routes.
Brig. Gen. Oleksiy Hromov, a senior officer on Ukraine's General Staff, gave the first official confirmation of the gains of an offensive launched Tuesday to the east of Ukraine's second-largest city of Kharkiv.
Twitter Agreed to Pay Whistleblower Roughly $7 Million in June Settlement
Twitter Inc. agreed in June to pay roughly $7 million to the whistleblower whose allegations will be part of Elon Musk's case against the company, according to people familiar with the matter.
The settlement was completed days before Peiter Zatko filed his whistleblower complaint in July. Mr. Zatko is the hacker who was Twitter's security head before being fired in January. In his whistleblower complaint, Mr. Zatko accuses the company of failing to protect sensitive user data and lying about its security problems.
Write to paul.larkins@dowjones.com
Expected Major Events for Friday
04:30/NED: Jul Manufacturing output
05:00/FIN: Jul Industrial Production
06:00/ROM: Jul International trade
06:00/NOR: Aug CPI
06:00/NOR: Aug PPI
06:45/FRA: Jul Industrial production index
07:00/SVK: Jul Industrial Production
07:00/SVK: Jul Construction production
07:00/SPN: Jul Industrial Production
07:00/AUT: Jul Production Index
08:00/BUL: Jul Industrial Production
08:30/UK: Aug Bank of England/Ipsos Inflation Attitudes Survey
09:00/MLT: Jul International Trade
09:00/CYP: Jul Foreign Trade (provisional)
09:00/MLT: Jul Industrial Production Index
09:00/GRE: Jul Industrial Production Index
09:00/GRE: Aug CPI
09:00/LUX: Jul Industrial Production
10:00/POR: Jul International trade statistics
10:00/FRA: Jul OECD Harmonised Unemployment Rates
15:59/UKR: Aug CPI
15:59/UKR: Aug PPI
All times in GMT. Powered by Onclusive and Dow Jones.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
09-09-22 0024ET
