MARKET WRAPS
Watch For:
Eurozone, Germany, France, UK Flash PMI; UK Retail Sales; ECB Survey of Professional Forecasters; updates from Hermes, Thales, Sika, Lonza, Renault, Autoliv, SSAB, Danske Bank, Homeserve, United Utilities, Darktrace
Opening Call:
Growth fears will likely keep stocks in check on Friday, with the ECB the latest central bank to tighten policy aggressively in the fight against inflation. In Asia, stocks mostly gained; the dollar and Treasury yields steadied; oil prices rose and gold edged down.
Equities:
European stocks will likely struggle for momentum as investors continue to react to the European Central Bank's aggressive move to combat runaway inflation.
Financial markets ricocheted on Thursday after news of the ECB's first rate hike in 11 years, with the Stoxx Europe 600 wavering between small gains and losses. This trading pattern could continue early on Friday
Taken together, the ECB's actions point to a potentially "treacherous" stretch ahead for policy makers, said Capital Economics.
"We think this will be the first of a series of hikes by which the ECB will raise the deposit rate to around 2% next year--and we also think the bank will ultimately have to use its new asset purchase program to avert another eurozone crisis."
U.S. stock futures were slightly weaker as disappointing second-quarter earnings from Snap sent the stock down 26% after hours. The major U.S. indexes had recorded a third straight day of gains on Thursday before post-close results from some companies, including Snap, underwhelmed.
Snap's results could spell concern for companies that rely on digital advertising for a significant portion of their revenue.
"We are also seeing increasing competition for advertising dollars that are now growing more slowly," Snap said. "Our revenue growth has substantially slowed, and we are evolving our business and strategy to adapt."
Forex:
The dollar was firmer against its major rivals, as risk appetite faded in Asian markets.
The euro, recently down 0.4% against the buck, remains "extremely weak historically" despite its post-ECB rise, said Piper Sandler.
"The plunging euro and yen have been contributing to the surge in the safe-haven dollar--a drag on the global economy/markets in general, and EMs in particular."
Piper Sandler added that "the war-induced energy crisis has helped hammer the euro..."
Bonds:
Treasurys continued to rally after yields posted their biggest declines of the past three to five weeks on Thursday, as traders assessed signs of a slowing U.S. economy
Investors are likely to keep monitoring the data flow ahead of next Wednesday's Fed rate decision. As of now, the CME's market-based target rate prediction tool has the odds of a 75-basis point hike at 73%.
"The outlook for the world economy has darkened again and we have reduced our forecasts for all major economies, leaving them further below the consensus of economists," said Capital Economics.
"We now anticipate recessions in the euro-zone and the U.K. and expect the U.S., Canada and Australia to avoid economic contraction only narrowly."
Energy:
Oil prices moved higher in Asian trade, after they settled with losses of around 3% on Thursday, logging their lowest finish in a week on worries of weaker demand.
Overall, "oil traders have watched a plethora of negative factors: rising supplies from Libya and Russia, continued lockdowns in China and potentially declining U.S. demand," said Velandera Energy Partners.
SPI Asset Management said the market's focus likely will be on China's oil demand, with rising Covid-19 cases in the country. The situation remains volatile and will likely keep traders on edge in the near term.
Other News:
Spain and Portugal pushed back against a European Union plan that would require countries to curb their natural-gas consumption by 15% in an emergency situation, saying the blanket proposal doesn't account for differences between European countries.
Read more here.
Metals:
Gold futures were little changed but with a negative bias after they settled at their highest in over a week on Thursday.
ANZ said bullion could get further support on Friday from safe-haven demand, pointing to flashpoints like the worsening political crisis in Italy. Recession concerns have yet to fade and could be heightened by disappointing U.S. data and the continued resurgence of Covid in China.
OANDA has put support for gold at $1,675 and resistance at $1,720.
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Copper prices gained more than 1% as traders seemed to be adding to long positions.
TD Securities's tracking of Shanghai's top metals traders indicated they added to their net longs on Thursday after covering short positions over the past few sessions.
Trader activity continues to confirm that the pace of commodity liquidations has peaked, TD Securities said.
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Chinese iron ore futures rose almost 3%, stabilizing after recent weakness.
Ferrous metals may be supported by further government policies to support the property sector and as infrastructure projects ramp up, said CITIC Futures.
Nevertheless, prices of the raw material may be weighed in the second half given softer demand expectations and an oversupply.
TODAY'S TOP HEADLINES
Japan CPI Rises Above BOJ's 2% Target for Third Straight Month
TOKYO-Japan's overall consumer inflation rose 2.4% from a year earlier in June, exceeding the Bank of Japan's 2% target for three straight months, government data showed Friday.
Core consumer inflation excluding volatile fresh food prices rose 2.2% in June, while the index excluding fresh food and energy prices rose 1.0%.
Spain, Portugal Push Back on EU Plan to Trim Gas Use
Spain and Portugal pushed back against a European Union plan that would require countries to curb their natural-gas consumption by 15% in an emergency situation, saying the blanket proposal doesn't account for differences between European countries.
The opposition could pose problems for the European Commission, the bloc's executive body, which this week laid out a plan meant to help Europe get through a winter without ample supplies of Russian gas. The proposal called on all EU countries to trim their gas consumption by 15% beginning in August. It suggested those reductions could be made mandatory in an emergency situation.
Turkey, U.N. Officials Say Deal Reached With Russia, Ukraine on Grain Exports
ISTANBUL-Officials from Russia, Ukraine and the United Nations planned to sign a deal to resume exports of Ukrainian grain via the Black Sea on Friday, Turkish and U.N. officials said, in an announcement that raised hopes of freeing food supplies trapped by the Russian invasion.
U.N. Secretary-General António Guterres landed in Istanbul on Thursday evening, a U.N. official said, adding that the parties involved had come to an agreement but cautioned that last-minute problems could still arise before they sign off on the deal, expected on Friday.
California Holds Firm Against Truck Protests at Port of Oakland
California Gov. Gavin Newsom is digging in against protesters who this week shut down most operations at the Port of Oakland, saying truckers "should focus on supporting this transition" to a new employment law, even as shippers warned the impasse was hurting their businesses.
Mr. Newsom's administration indicated Thursday it wouldn't bow to the protesters' demands to pause the implementation of the new state law, known as AB5, that will make it harder for tens of thousands of independent truckers to operate in the state.
U.K. Consumer Confidence Remained at Record Low in July
British consumer confidence remained severely depressed in July as cost-of-living pressures and dim economic prospects continued to build.
The consumer-confidence barometer compiled by research firm GfK steadied at minus 41 in July, the lowest level since the survey began in 1974 and in line with economists' expectations.
Snap Posts Weakest-Ever Sales, Sending Shares Tumbling After Hours
Snap Inc. posted its weakest-ever quarterly sales growth as a public company, highlighting the extent of the upheaval the digital-advertising market is suffering from economic turmoil and other factors.
The parent company of popular photo-sharing social-media app Snapchat on Thursday said that revenue for the April through June period was $1.11 billion, narrowly missing scaled-back Wall Street expectations, according to analysts surveyed by FactSet. The 13% year-over-year sales growth in the second quarter was even lower than what the company registered early in the pandemic, when it slipped to 17%, and Snap said sales in the current period so far were roughly flat from a year ago.
Staff at HSBC's China Securities Arm Set Up Communist Unit
Workers at HSBC Holdings PLC's Chinese securities subsidiary have formed a unit that represents the Communist Party, in the latest instance of the party establishing a presence inside a foreign company.
HSBC, one of the world's largest banks by assets, said Thursday that as few as three workers had formed a party branch at HSBC Qianhai Securities, a Shenzhen-based investment bank. London-based HSBC owns 90% of the company after increasing its stake this spring.
Russian Titanium Maker Is Pulled Off Sanctions List
The European Union blocked a proposal to sanction Russian metals company VSMPO-Avisma PJSC at the last minute, EU diplomats said, after France and other member states objected to the move over fears of a potential retaliatory ban by Russia on titanium exports to the bloc.
The company is a critical supplier of titanium to Airbus SE, the world's biggest commercial jet maker. Airbus, headquartered in France, employs a large workforce across Europe. It has publicly called for the EU to refrain from banning Russian sales of titanium.
Write to paul.larkins@dowjones.com
Expected Major Events for Friday
06:00/UK: Jun UK monthly retail sales figures
07:15/FRA: Jul France Flash PMI
(MORE TO FOLLOW) Dow Jones Newswires
07-22-22 0039ET
