MARKET WRAPS
Watch For:
Eurozone 2Q preliminary flash estimate GDP, July flash estimate inflation; Germany 2Q GDP, June foreign trade price indices, July labor market statistics; France 2Q GDP, June household consumption expenditure in manufactured goods, June housing starts, July provisional CPI; Italy 2Q GDP, July provisional CPI, July cities CPI, June PPI; UK June Money and credit, June monetary and financial statistics, June Bank of England effective interest rates; updates from IAG, BBVA, Caixabank, EssilorLuxottica, Renault, Vinci, Engie, Hermes International, Legrand, Air France-KLM, Bollore, BNP Baribas, Eni, Nexi, Intesa Sanpaolo, Swiss Re
Opening Call:
Some positives in U.S. tech results should help lift European shares. In Asia, shares were mixed; the dollar fell and Treasury yields weakened; while oil and gold rose.
Equities:
European stocks are poised to open higher Friday after a late rush of U.S. tech earnings, with Amazon and Apple rising in after-hours trading.
U.S. stocks climbed Thursday despite fresh data showing the U.S. economy contracted for a second straight quarter, as investors look to earnings results from major blue-chip and technology companies for guidance about the state of the economy.
All three major U.S. indexes have risen at least 8% from their 2022 lows in mid-June and are headed toward strong monthly gains.
But despite recent gains for the major stock indexes, some investors remain concerned about stretched valuations and the pace of Fed rate rises.
"The rally we have seen looks like a classic bear market rally, rather than the launch of a new bull market," said David Donabedian, chief investment officer of CIBC Private Wealth US.
"We are still going to have a period where inflation is uncomfortably high and growth is uncomfortably low, and that is not a good backdrop."
Forex:
The dollar weakened in Asia amid risk-on sentiment partly driven by gains in U.S. stock futures.
Investors continued to trim hawkish Fed bets, while stronger-than-expected earnings reports from a few U.S. tech giants boosted risk sentiment, said MUFG Bank currency analyst Sophia Ng.
Bonds:
Treasury yields fell further in Asia after falling sharply Thursday following data showing the U.S. economy contracted in the second quarter, which heightened recession fears and reinforced ideas the Federal Reserve may slow the pace of rate increases.
The yield curve, as measured by the spread between 10- and 2-year yields, remains inverted, with the 2-year rate above the 10-year--a phenomenon that has been a reliable recession warning flag.
"With weekly jobless claims continuing to edge higher and at 8-month highs, markets appear to be pricing out Fed rate rises beyond the end of this year, with Treasury yields dropping sharply, and the U.S. 10-year yield falling to its lowest level in 3 months," said Michael Hewson, chief market analyst at CMC Markets, in a note.
"Given Powell's comments yesterday that the Fed is data dependent on future rate rises, then further deterioration in the data could well see further declines in U.S. yields," he said.
Energy:
Oil futures rose in Asia after settling overnight on a mixed note, as Brent notched modest gains and WTI crude gave up early gains.
"It still seems like traders need little justification to pare bullish bets against a generally gloomy economic backdrop and the threat of a protracted economic slowdown," SPI Asset Management said.
Metals:
Gold rose in Asia after posting its biggest one-day rally since March overnight.
Gold benefited from Fed Chair Powell's comment on Wednesday that the next interest-rate hike in September would depend on the tenor of upcoming U.S. economic data. Traders have interpreted Powell's vague guidance as opening the door to a rate hike of just 50 basis points in September.
Because of Powell's comments, "we could see the Fed start to pivot" toward a slower pace of rate hikes, said Daniel Ghali, director of commodity strategy with TD Securities. This should benefit gold and silver at the expense of the U.S. dollar and Treasury yields.
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Aluminum rose in Asia amid signs of tightening supplies.
Inventories at LME warehouses have fallen to a 31-year low, equating to around 1.5 days of consumption, ANZ Research said.
This comes amid ongoing curbs on supply in Europe, where the energy-intensive smelting process has suffered from rising costs, ANZ added.
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Chinese iron-ore futures extended recent gains on an improvement in market sentiment.
Expectations of recovering profitability at Chinese steel mills are rising, while the macro outlook appears brighter after the Fed signaled that the pace of interest-rate increases could moderate, Guotai Junan Futures said.
TODAY'S TOP HEADLINES
Private-Equity Investors Push Secondhand Asset Sales to a First-Half Record $57 Billion
The market for secondhand stakes in private-equity funds accelerated this year, with $57 billion worth of transactions in the first six months, the highest sum ever recorded for the period, investment bank Jefferies LLC said.
The total rose 19% from the previous record for first-half secondary-transaction volume, set last year at $48 billion.
House Passes Chips Act to Boost U.S. Semiconductor Production
WASHINGTON-The House passed a $280 billion bill aimed at boosting U.S. semiconductor manufacturing and competitiveness with China, despite a late push by Republican leaders to block the legislation over a separate Democratic spending proposal.
President Biden is expected to sign the legislation, which passed in a 243-187 vote. Twenty-four Republicans joined with Democrats to vote for the bill. One Democrat, Rep. Sara Jacobs (D., Calif.), voted present. Her family founded chip developer Qualcomm Inc.
China Pressures Cities as They Scramble to Repair Ailing Property Markets
China on Thursday said that local governments will ultimately be responsible for fixing the property woes in their own markets, as its leaders indicated the country is likely to miss its annual growth target.
Chinese cities have been resorting to a host of increasingly creative measures to entice home buyers, but economists say the effect of those policies is likely to be limited without better coordination between local and central governments in China and more stimulus from Beijing.
U.K Audit Regulator Hands Down Record Fines for Audit Failures
The U.K.'s audit regulator imposed record sanctions against audit firms during its latest fiscal year, highlighting the seriousness of recent failures in the industry.
The Financial Reporting Council on Thursday said financial sanctions during the year ended March 31 totaled GBP46.5 million before settlement discounts, equivalent to $56.6 million and up from GBP16.7 million the year before. The FRC also said it resolved more cases than in previous years.
U.K.'s Commercial Vacancy Rate Decreases for Third Quarter in a Row
The U.K.'s commercial vacancy rate fell slightly in the second quarter of the year when compared with the previous quarter, marking the third consecutive period of improvement for the retail industry metric, according to a report by the British Retail Consortium.
Overall, vacancy rates declined to 14.0%, representing a 0.1% and 0.5% improvement from the previous quarter and year-earlier period, respectively, the report said.
EU to Open San Francisco Office Focused on Tech Regulation
The European Commission, the executive branch of the European Union government, is opening a San Francisco office on Sept. 1 that will liaise with Silicon Valley companies affected by EU tech regulation.
The new West Coast office is the latest initiative to improve the trans-Atlantic relationship over technology policies. The EU and big U.S. tech firms have had an adversarial relationship for years, stemming from antitrust rulings and sweeping legislation on privacy, data and social-media content.
Apple iPhone Sales Remain Resilient as Company Reports 11% Decline in Profit
Apple Inc. reported an almost 11% decline in profit after weathering supply constraints and shutdowns in China, although iPhone sales continued to grow, remaining resilient despite economic challenges.
The better-than-expected results for the quarter ended in June followed a pattern of tech companies that posted a drop in profits but managed to assuage investor concerns about their strength in uncertain economic times.
Amazon Posts Net Loss for the Second Straight Quarter as It Manages Slower Demand
Amazon.com Inc. reported slowing sales and a net loss for the second straight quarter, as strength in the tech giant's cloud-computing business was outweighed by continued weakness in core retail operations suffering from the aftereffects of a pandemic boom.
Revenue for the tech giant in the latest period increased by 7.2% from a year earlier to $121.2 billion. That was a hair slower than the 7.3% rise in the first quarter, which had marked Amazon's slowest growth in about two decades.
Intel Posts Sharp Drop in Sales, Issues Muted Outlook
Chip maker Intel Corp. reported a surprise quarterly loss and cut its full-year outlook, reflecting a slump in personal-computer purchases and product delays.
Intel on Thursday said sales in the second quarter fell 22% to $15.3 billion, missing Wall Street's expectations. It was its biggest revenue drop in more than a decade. The company blamed a rapid decline in economic activity for its sagging sales as it forecast a 10% decline in overall PC sales this year.
Write to hoishan.chan@dowjones.com
Expected Major Events for Friday
04:30/NED: Jun PPI
04:30/NED: Jun Retail turnover
05:30/FRA: Jun Household consumption expenditure in manufactured goods
05:30/FRA: 2Q GDP - first estimate
06:00/NOR: Jun Retail Sales
06:00/GER: Jun Foreign trade price indices
06:00/SWE: Jun Labour Force Survey
06:00/DEN: Jun Unemployment
06:30/SWI: Jun Retail Sales
06:45/FRA: Jun Housing starts
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07-29-22 0038ET
