MARKET WRAPS
Watch For:
EIA Weekly Petroleum Status Report; Jerome Powell participates in a policy panel discussion at the European Central Bank forum on central banking; Earnings from Micron, BlackBerry
Today's Top Headlines/Must Reads:
- China's Industrial Profit Decline Narrowed in May
- Cheaper Natural-Gas Prices in Store This Summer
- FTX Begins Talks on Reboot as Managers Uncover Past Misconduct
- Fanatics Raises Bid to Buy PointsBet's U.S. Business by 50%
Follow WSJ market coverage here
Opening Call:
Nasdaq futures were leading early declines on Wednesday following a WSJ report that the Biden administration is considering a new ban on sales of AI chips to China.
Read U.S. Considers New Curbs on AI Chip Exports to China
Nasdaq's losses has halted the latest rally.
"The rebound has been clipped a bit overnight" after the AI chip ban report, Deutsche Bank said.
"Nvidia, which makes 20% of its revenues in China, has produced lower-end chips that don't require an external export license. However, the article suggests that even these may be included going forward," Deutsche Bank said.
Premarket, Nvidia stock was down 4.8%, and Advanced Micro Devices dropped 3.6%.
Traders also will be keeping an eye on the ECB forum in Portugal, where Jerome Powell is set to speak alongside the heads of the U.K., eurozone and Japan central banks.
Investors remain wary of the prospects for higher borrowing costs as monetary guardians continue to battle stubborn inflationary pressures - so any comments on that topic, particularly from Powell, should color the market's mood.
However, Fundstrat said recent market action portends further gains.
"Tuesday's rally back to multi-day highs looked important and positive in having halted the recent decline in its tracks. Following five days lower out of the past six, SPX [S&P 500] managed to rally sharply enough to recoup nearly 50% of the entire pullback since mid-June highs," Fundstrat said.
Overseas indexes mostly rose. Europe's Stoxx 600 gained 0.5%. In Asia, the Nikkei 225 rose 2%. Chinese stocks were more subdued as fears of U.S. AI chip restrictions dampened sentiment. The Shanghai Composite Index was flat while the Hang Seng edged up 0.1%.
More Pre-Market Movers
AeroVironment said fourth-quarter revenue rose a better-than-expected 40% and issued guidance for its current fiscal year ahead of Wall Street expectations. The stock rose 5.2%.
AST SpaceMobile was falling 24% after announcing the launch of a sale of 12 million class A common shares.
https://urldefense.com/v3/__http://C3.ai__;!!F0Stn7g!El7_CjF8BC97-y_zu6xt_SKUmI4geRYpkXyOV45nIp_JtBSOsfljq5hdHRePTuHkFfEfGbW4Yx3_1l7uKvxQO2Zs6LShF5aAjDMU7FBLlMM$ slipped after its chief technology officer registered with the SEC to sell more than 450,000 restricted shares.
IHS Holding's shares surged after the Journal reported that activist investor Blackwells was pushing for changes. Read more here .
Micron Technology, which is scheduled to report quarterly earnings after the closing bell Wednesday, declined 1.5%. Other chip makers such as Intel and Qualcomm also traded lower.
The FDA rejected an application from Regeneron Pharmaceuticals for approval of a new, higher-dose version of its blockbuster eye disease treatment Eylea. The stock fell 1%.
Post-Close Mover
Astrotech received an unsolicited, non-binding proposal from BML Investment Partners to buy the company for $17.25 a share. Shares rose 7.7%.
Economic Insight
The second half of 2023 should deliver a continuation of the tightening journey for most developed market central banks, at least over the summer, although differentiation across jurisdictions will emerge as the end of the cycle draws closer, JPMorgan said.
"We see the Fed and the ECB closer to the end of their tightening cycle than the Bank of England and Scandinavian central banks, with risks broadly tilted toward higher peak in policy rates, while Antipodean central banks are expected to stay on hold."
Resilient growth and persistent inflation will rule out an imminent recession, according to JPM's baseline scenario.
Forex:
The dollar inched higher in early trade, building on Tuesday's gains after a set of stronger-than-expected economic data.
The data "show resilience in the near-term to the negative impact of higher rates and tightening credit conditions," and should allow the Federal Reserve to continue raising interest rates, MUFG said.
"It is the strongest run of positive U.S. economic data surprises since early April which keeps the Fed on track to deliver at least one of their planned two further hikes in July."
UBS said the dollar is "significantly overvalued" versus several other relevant currencies but should weaken.
The reason for the overvaluation is significant growth and interest-rate differentials, but UBS expects this "will decline in the coming months."
The Fed is expected to cut interest rates faster than the ECB, and UBS forecast a first Fed rate cut in December, ahead of market expectations.
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Sterling is likely to weaken in the second half of the year as the recent steep rise in interest rates takes a toll on the economy, Natixis said.
"The continued rise in key rates will only exacerbate the deterioration in economic activity, and in particular in the real estate market," Natixis said.
It also sees a risk the BOE won't raise rates as much as the market expects, weighing on sterling further. It expects EUR/GBP to rise to 0.88 by year-end, from 0.8597 currently.
Read Euro Could Rise if Inflation Data Support ECB's Stance
Bonds:
Natixis sees stability ahead in long-term euro rates but a rally in dollar rates, and expects the 10-year Bund yield to end the year broadly around current levels.
"The Bund is expected to remain slightly stable overall," Natixis said, targeting the 10-year yield at 2.35% in December 2023. It added that the rally should be more substantial on the 10-year Treasury, expecting the yield at 3.40% in December.
Read Developed-Market Bond Returns Seen Positive in 2H
Energy:
Oil prices were little changed following Tuesday's steep losses, after some strong U.S. economic data heightened the likelihood of more rate hikes from the Fed, according to some analysts.
Metals:
Copper prices weakened slightly after a sharp drop in China's industrial profits added to worries about the nation's economy.
Profits at China's industrial companies fell 12.6% year on year in May, following a 18.2% drop in April. China's industrial profits have declined almost 19% between January and May. While the data is weighing on base metals prices, low inventories are easing the declines.
Copper inventories on the LME are down 22% so far this month.
TODAY'S TOP HEADLINES
Google Violated Its Standards in Ad Deals, Research Finds
Google violated its promised standards when placing video ads on other websites, according to new research that raises questions about the transparency of the tech giant's online-ad business.
Google's YouTube runs ads on its own site and app. But the company also brokers the placement of video ads on other sites across the web through a program called Google Video Partners. Google charges a premium, promising that the ads it places will run on high-quality sites, before the page's main video content, with the audio on, and that brands will only pay for ads that aren't skipped.
Activist Investor Blackwells Pushes for New Directors at IHS
An activist investor is ratcheting up the pressure on IHS Holding, pushing for the cell-tower operator to appoint new independent directors to its board and offer investors more transparency to boost its stock price.
Blackwells Capital, a long-term shareholder of IHS, says the board changes are necessary to reverse the company's growing losses and its weak stock price, according to a copy of a letter reviewed by The Wall Street Journal that will be sent to the company's directors Wednesday.
Oaktree Capital to Appoint New Leadership at Firm
Credit-investing giant Oaktree Capital Management is elevating the leaders of two of its businesses to the position of co-chief executive officer.
The Los Angeles firm, which manages about $172 billion in assets, is naming Robert O'Leary and Armen Panossian co-CEOs, according to people familiar with the matter. They will succeed Jay Wintrob, 65 years old, who was named CEO in 2014 and will leave the firm.
German Consumer Sentiment to Weaken in July on Gloomier Outlook
Consumer confidence in Germany worsened for the first time in nine months in July, reflecting a more uncertain climate for household spending, as the country's economic outlook continues to be bleak after a recession in the winter.
Germany's forward-looking consumer sentiment index forecasts confidence to tick down to minus 25.4 in July-the first decline since October 2022-from a revised minus 24.4 in June, according to data from market-research group GfK published Wednesday.
Supreme Court's Redistricting Rulings Boost Democrats' House Hopes
WASHINGTON-Democrats have new hopes of gaining three U.S. House seats in the 2024 elections and offsetting potential Republican pickups as a result of actions in recent days by the Supreme Court.
In one ruling, the justices set the stage for the creation of additional majority- or nearly- majority-Black districts in Alabama, Louisiana and Georgia, though that outcome isn't assured and is subject to additional court action. Democrats need to gain a net five seats to win control of the House.
After Wagner Revolt, Questions of Blame in Vladimir Putin's Inner Circle
For decades, Russian President Vladimir Putin has assembled a kitchen cabinet of security advisers from his native St. Petersburg to tighten his grip over Russia, manage its factions, and build a vast security apparatus to support an imperialist vision that led to his invasion of Ukraine.
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06-28-23 0615ET
