MARKET WRAPS
Watch For:
Canada New Housing Price Index; Earnings from Zoom
Today's Top Headlines/Must Reads:
- Big Treasury Rout Lures Fresh Buyers
- Why the Era of Historically Low Interest Rates Could Be Over
- Banks Don't Love Rich Mortgage Borrowers as Much as They Used To
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Opening Call:
Stock futures moved higher early on Monday, as Wall Street looks to snap a three-week losing streak.
"Global markets have recently experienced a series of stumbles due to concerns about China's economy and higher sovereign bond yields. Last week the S&P 500 dropped 2.1 %, worryingly, with every sector ending in the red," SPI Asset Management said.
Neither of those factors are providing much succor early Monday. A trimming of interest rates over the weekend by China's central bank has underwhelmed the market, while the 10-year Treasury yield is up about 4 basis points to 4.29%, holding near 15-year highs.
Read Rates in China Cut Again, but by Less Than Expected
The rising borrowing costs have been a particular problem for some of the big technology stocks that tend to lead the market, SPI added.
The reception afforded Nvidia's results, due on Wednesday, may shape market sentiment for a while. The chipmaker is among the stragglers of an earnings season that has generally beaten forecasts but failed to deliver additional bullish propulsion to the market.
"This picture simply means that the fear of a further Fed tightening, prospects of higher interest rates, combined [with] the set of bad news from China simply didn't let investors enjoy the better-than-expected earnings," Swissquote Bank said.
However, Fundstrat reckons the recent sell-off will be halted at or before Jerome Powell makes a speech at the Jackson Hole symposium at the end of the week.
"Over our many conversations with institutional investors in the past week, the vast majority cite the rise in interest rates as the most concerning for equities," Fundstrat said.
Pre-Market Movers
Meta is expected this week to launch of desktop version of its microblogging app Threads, a competitor to X, the former Twitter, The Wall Street Journal reported. Shares were up 0.4%.
Read Meta's Threads App to Launch Web Version as Rivalry With X Enters New Stage
Napco Security Technologies was falling 30% after saying it identified errors related to the calculation of cost of goods sold and inventory for each of the first three quarters of fiscal 2023.
Palo Alto Networks topped fiscal fourth-quarter earnings expectations, and its profit forecast for the first quarter also beat estimates. The stock was rising 12%.
Tesla rose nearly 3%. Shares lost more than 11% last week, as the company released cheaper versions of some key U.S. models, and cut some prices in China.
Forex:
The dollar should hold onto its recent gains this week due to rising U.S. government-bond yields and anticipation of Powell's speech at Jackson Hole, ING said.
"It looks too early for the Fed to sound the all-clear on inflation and the dollar probably holds its gains," ING said, adding that the DXY dollar index can probably edge up to 104.00 this week.
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The euro was little moved against the dollar at the start of the week as traders wait for new factors to trade on, DZ Bank Research said.
Later in the week, flash estimate purchasing manager surveys and Germany's Ifo business climate index could move the euro, ahead of the Fed symposium.
Read Euro Could Struggle as Investor Sentiment Deteriorates
Energy:
Oil prices rose in early European trading, with speculators looking to position for higher prices in the near future, amid tight inventories globally.
"The latest positioning data shows that speculators increased their net long in ICE Brent by 19,748 lots to 230,735 lots," ING said. Traders took advantage of the lower prices seen last week to set their long positions.
"The market appears to be concerned about the fact that ARA gasoil inventories are still looking quite tight and we are yet to start seeing a build in inventories as we edge closer towards the start of winter."
Natural Gas
Natural gas prices rose as worries over strikes at Australian producer Woodside Energy threatened to limit supplies, with workers saying they would inform the company by Wednesday if they are planning to take industrial action.
Woodside's North West Shelf facilities are equivalent to a little over 4% of global supply, ING said, however more strike action at Chevron's Gorgon and Wheatstone facilities could threaten exports even more.
ING indicates that European prices would likely be capped given stores are 91% full. More of the issue would be for Chinese and Asian cargoes.
Metals:
Base metals prices were mixed while gold edged higher in early London trading, with indexes continuing to be stifled by weak global growth.
Commonwealth Bank of Australia forecast falling prices for both gold and base metals in the fourth quarter on the back of a stronger dollar and weak demand.
It forecast a gold price of $1,875 an ounce in the fourth quarter and $7,810 a ton for copper.
"Our outlook for a recession in most advanced economies, alongside growing evidence of fading demand in China heightens the risk of a global copper surplus in 2023."
TODAY'S TOP HEADLINES
Debt-Addicted Landlord Struggles to Keep a Roof Over its Head
This column is part of the Seventh Annual Heard on the Street stock-picking contest.
The founder of SBB once said the property company could withstand interest rates of 10%. In reality, less dramatic increases have turned the stock into a bonanza for short sellers.
Chinese Developers' Shares Fall After PBOC Holds Mortgage Rate
Shares of many Chinese property developers were lower in Asian morning trade, as investor sentiment took a hit after the country's central bank kept its mortgage rate unchanged, exacerbating concerns over problems in the country's property sector.
Property developers' shares fell in both the Hong Kong and mainland markets. The Hang Seng Mainland Properties Index dropped 0.4%, with both Longfor Group Holdings and Seazen Group declining 0.8%. In the mainland market, Poly Developments & Holdings Group dropped 1.3% and China Merchants Shekou Industrial Zone Holdings retreated 1.6%.
Wall Street All-Stars Including Weinstein, Ackman Bid for Hedge Fund
Boaz Weinstein and several other high-profile investors including William Ackman and Marc Lasry have made a rival offer for Sculptor Capital Management, a hedge-fund firm that already agreed to sell itself to another investment firm.
In late July, Sculptor agreed to a sale to real-estate investment firm Rithm Capital for about $639 million, or $11.15 in cash per Class A share of Sculptor, which formerly was known as Och-Ziff Capital Management. The offer was an 18% premium to Sculptor's closing price at the time. Should it be completed, the deal would leave Sculptor's current management, led by Chief Executive James Levin, in place.
Car Prices Might Be Unsustainable for Buyers
Five years ago, there were a dozen models of new cars that sold for less than $20,000. In 2023, there was only one: the spartan Mitsubishi Mirage hatchback, which accounted for about 5,300 of the 7.7 million new vehicles sold in the U.S. in the first half of the year.
If you are willing to spend more than $100,000, you can choose from 32 models. For the average American, paying off a new car at current prices demands 42 weeks of income, according to data from Cox Automotive, up from around 33 before the pandemic.
A Bright Spot in Commercial Real Estate: Retail Shops
Retailers are on track to open 1,000 net new stores in the U.S. this year as retail availability hits record lows, in fresh signs of the sector's resilience despite turmoil in commercial real estate.
Landlords say demand for retail space has remained robust this year, defying inflation pressures, high interest rates and liquidations including Bed Bath & Beyond and Christmas Tree Shops.
U.A.E. Cashes In on Russia's Economic Woes
DUBAI-A year and a half into the Ukraine conflict, few countries have capitalized on the economic opportunities quite like the United Arab Emirates, giving Russian President Vladimir Putin's war effort a lift while boosting this Persian Gulf state.
Banks here are poaching talent from Moscow to manage a gusher of Russian money. Dubai traders are moving more Russian oil and gold than ever before. And Russian buyers fuel this city's real-estate boom, often dealing in cash.
Kim Jong Un Turns to High-Profile Visits to Mask North Korea's Internal Struggles
SEOUL-With North Korea suffering from starvation and a down economy, Kim Jong Un has increasingly shone a light on the few areas worth touting: His weapons and himself.
Kim, the 39-year-old dictator, inspected a navy unit and oversaw a drill launching strategic cruise missiles from aboard a nearby vessel, state media reported Monday. It was the latest in a string of recent prominent visits highlighting the regime's military prowess and new hardware advances.
U.S., China Try to Draw Nations to Their Side as Divisions Harden
If this isn't another Cold War, it certainly resembles one.
On the one side, leaders of the U.S., Japan and South Korea, touting their shared democratic values, pledged cooperation in confronting China's "dangerous and aggressive behavior."
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
Nothing major scheduled
Economic Calendar (ET):
0830 Jul New Housing Price Index
Expected Major Events for Monday
05:00/JPN: Jul Convenience Store Sales
06:00/GER: Jul PPI
12:30/CAN: Jul New Housing Price Index
17:59/UK: Jul Aluminium Production report
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
Aceragen Inc (ACGN) is expected to report for 2Q.
Alaunos Therapeutics Inc (TCRT) is expected to report $-0.04 for 2Q.
(MORE TO FOLLOW) Dow Jones Newswires
08-21-23 0619ET
