MARKET WRAPS
Stocks:
European shares continued to recover on Wednesday after the Bank of Japan sent a strong dovish signal by playing down the chances of near-term interest-rate rises when markets remain volatile.
However, some disappointing earnings in Europe capped the advance. Puma shares slumped after it trimmed its earnings outlook toward the lower end a guidance range due to muted consumer sentiment and higher freight costs. Commerzbank and Novo Nordisk also fell sharply after their financial updates underwhelmed investors.
Stocks to Watch
BP's stock hasn't performed as well as its competitors and has significantly lagged behind the industry over the long term, RBC Capital Markets said, as it cut its rating on the stock to sector perform from outperform and lowered its price target to 550 pence from 650 pence.
Shares look appealing at first glance but RBC remains cautious because the energy major's balance sheet isn't as strong as it should be at this point. Additionally, BP's shareholder distributions seem less secure than those of its peers.
"Ultimately, we think BP needs to lower its debt in order to provide more defensiveness to its distribution plans for shareholders."
U.S. Markets:
Stock futures were higher, though the key indexes they remain in negative territory for the week.
Walt Disney and CVS Health are due to report earnings early Wednesday.
Stocks on thr Move
Amgen said it was doubling down on efforts to take on weight-loss kingpins Eli Lilly and Novo Nordisk. Its stock slipped in offhours trading after its profit missed expectations.
Instacart posted double-digit revenue growth, topping Wall Street expectations. Its share rose over 8% premarket.
Super Micro Computer more than doubled its quarterly revenue, but earnings came in below forecasts. Shares dropped over 10% premarket.
Forex:
EUR/USD could soon rise above 1.10, from 1.0914 currently, as the market is unlikely to trim its Federal Reserve interest-rate cut expectations much further, but the same cannot be said for European Central Bank pricing, ING said.
The euro overnight index swap curve currently prices in 69 basis points of ECB rate cuts but this is largely a spillover from Fed pricing as the latest eurozone inflation data showed risks that the ECB may skip a cut in September, ING added.
"Risks are undoubtedly skewed to [50 basis points of rate cuts] as opposed to 75bp by the ECB in the three meetings until year-end."
The dollar continued to recover from Monday's selloff.
"The risks for the U.S. economy have of course increased with the July labor market report, as have the risks for possible faster and stronger interest-rate cuts by the Fed, should the future data situation support this," Commerzbank said.
However, the "crisis mode" seen in markets on Monday was inappropriate and investors now seem to realize this with a little more distance, Commerzbank added.
Bonds:
The risk-off sentiment has slowly started to fizzle out as risk assets move further away from the lows reached at the start of the week, Commerzbank Research said.
Amid an essentially empty data calendar in the eurozone, Bunds, as well as yield spreads, will probably remain highly directional to equity markets or the yen, Commerzbank added.
Meantime, Treasury yields extended Tuesday's gains, with a $42 billion auction of new 10-year notes due, Deutsche Bank Research said.
The auction will mark "a possible test of investor appetite after the recent volatility," it added.
ING said the 10-year Treasury yield close to 3.9% is consistent with a scenario whereby recession risk is mounting and the Federal Reserve is ready to cut interest rates, but over a longer horizon it should eventually settle higher.
"History shows that a 10-year equilibrium yield of 4.5% or even higher is not far-fetched and going forward there are plenty of reasons to believe U.S. inflation will average above 2%."
In that context, next week's U.S. CPI inflation data will be key to the direction of bond yields, ING said.
Energy:
Oil prices edged higher in volatile trade on reports of a surprise build in inventories and disappointing import data from China. U.S. crude stocks rose by 176,000 barrels last week, according to reports citing figures from the API.
Meanwhile in China, daily crude oil imports fell 3% on year in July on weaker demand and unattractive refining margins keeping the utilization rate lower. On Tuesday, the EIA lowered its estimates for global demand growth for next year, citing concerns over slowing economic growth in China.
Metals:
Gold futures were broadly flat and Pepperstone said that with calmer heads now prevailing, there are increased flows into gold exchange traded funds and gold buyers supporting the moving average, though there is a clear hesitancy to push the price further.
Base metals continued to fall back on fears of slowing demand after Friday's poor U.S. economic data.
EMEA HEADLINES
Glencore Drops Coal-Spinoff Plan; Swings to Surprise Loss
Glencore scrapped plans to spin off its coal unit following its $6.93-billion acquisition of Elk Valley Resources, and unexpectedly reported a swing to a net loss for the first half due to lower coal prices and impairments.
The world's largest mining company by revenue said Wednesday that the highly cash-generative business will support investments in growing its copper portfolio and help boost shareholder returns.
Maersk Reports Lower Net Profit After Red Sea Diversions Lift Costs
A.P Moeller-Maersk posted a drop in second-quarter net profit after Red Sea shipping disruptions prompted a pick-up in freight rates but also increased costs.
The Danish shipping giant's quarterly net profit fell to $798 million from $1.45 billion a year prior, as revenue fell to $12.77 billion from $12.98 billion. Analysts expected net profit of $781.1 million, according to consensus estimates provided by FactSet.
German Industry Remains Fragile Despite Fastest Uptick This Year
Germany's industrial sector picked up pace in June, with the country's automotive industry in particular helping output, although questions remain as to whether this represents a sustained recovery for the sector.
Industrial output rose 1.4% on month in June, on a seasonally and calendar-adjusted basis, its fastest rate in 2024, but only partially offsetting the 3.1% decline in May, German statistics agency Destatis said Wednesday. Economists expected a 0.9% uptick according to The Wall Street Journal poll.
Continental Cuts Sales Guidance on Lower Car Production
Continental cut its full-year sales guidance due to lower-than-expected car production.
The German automotive supplier and tire company said Wednesday that second-quarter net profit rose 46.2% to 305 million euros ($333.4 million) from EUR209 million for the same period last year.
Siemens Energy Net Loss Narrows as Recovery at Wind Division Continues
Siemens Energy booked a narrowed net loss for the third quarter after revenue surged and recovery continued at its wind unit amid restructuring efforts.
The German energy company on Wednesday reported a net loss of 102 million euros ($111.5 million) in the quarter ended June 30 compared with a loss of EUR2.93 billion in the same period last year, when earnings were hit hard by one-off charges at wind division Siemens Gamesa.
GLOBAL NEWS
The Stock Market Is in Summer Mode. Low Trading Volumes Could Lead to More Pain.
The Japanese yen. Earnings. Recession worries. All played a part in Monday's meltdown. But something that isn't being talked about enough as a co-conspirator: low trading volume.
History suggests the number of shares changing hands could exacerbate the market's ups and downs-for weeks to come.
China Export Growth Slows But Recovery Seems Intact
China's trade figures for July were a mixed bag, with exports slowing unexpectedly but imports growing at a faster-than-expected clip, signaling some improvement in domestic demand.
Outbound shipments rose 7.0% from a year earlier in July, down from June's 8.6% increase, said the General Administration of Customs on Wednesday.
German Trade Balance Drops on Shrinking Exports
Germany's trade surplus narrowed in June as exports fell more than expected in a new headwind for Europe's powerhouse.
The eurozone's most important economy, which traditionally has boasted strong exports of manufactured goods, recorded 20.4 billion euros ($22.30 billion) in its trade surplus, a measure of the difference between imports and exports. That was less than the EUR24.9 billion surplus it booked in May and below economists' expectations of EUR21.5 billion, according to forecasts compiled by The Wall Street Journal.
U.S. Charges Man With Ties to Iran With Plot to Assassinate Trump, Other Politicians
A Pakistani man with ties to Iran has been charged with plotting assassinations of former President Donald Trump and other politicians, law-enforcement officials said Tuesday.
Asif Merchant traveled to New York in April to recruit hit men to carry out his scheme but was foiled when one of the people approached reported him to the FBI and became an informant, federal prosecutors in Brooklyn said. The indictment doesn't mention Trump by name, but it was unsealed weeks after U.S. officials said a threat against Trump from Iran prompted them to bolster security for the former president.
Hamas's Gaza Chief Yahya Sinwar to Take Place of Killed Political Leader
DUBAI-Hamas said Tuesday it had selected Yahya Sinwar, the group's leader in Gaza and architect of the Oct. 7 attacks against Israel, to succeed the former head of its political wing, Ismail Haniyeh, who was killed last week in Tehran.
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08-07-24 0532ET
