OPENING CALL
Stock futures and bond yields rose on Wednesday as the economic growth scare that contributed to a severe bout of stock market risk-aversion-and a rush into haven sovereign debt at the start of the week-continued to fade.
"The relatively orderly improvement in equity markets saw fixed income retreat...as markets inevitably dialed back on Fed cut expectations," Deutsche Bank said.
AJ Bell said there remains an air of tension around financial markets despite a continued global recovery in stocks.
It said there are warnings that some carry trades still need to be unwound, but that markets will have felt some measure of calm after the Bank of Japan signaled there was no current plan to increase interest rates.
Premarket Movers
Airbnb warned about signs of a demand slowdown in the U.S. and shorter booking lead times globally. Its stock dropped around 16%.
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.
Reddit posted higher revenue and narrowed its quarterly loss, beating Wall Street expectations. Its shares fall around 2%, however.
Super Micro Computer more than doubled its quarterly revenue, but earnings came in below forecasts. Shares dropped over 10% premarket.
Postmarket Movers
Lumen Technologies raised its free-cash-flow projection and said its future earnings will benefit from its ability to support artificial-intelligence initiatives. Shares rose 36%.
Rivian posted a wider quarterly loss as the company continues to lose money on every vehicle it sells. Shares fell 7%.
Trex cut its revenue outlook for the year as weaker sales of its entry-level decking product weighed on results in the second quarter. Shares fell 15%.
Watch For:
EIA Weekly Petroleum Status Report; earnings from CVS Health, Disney
Today's Headlines/Must Reads:
-Big Food Would Benefit from Private Ownership
-'Top Gun Democrat' Tim Walz Cultivated Centrist Record in Washington
-AI Is Coming for India's Famous Tech Hub
-Delta's Reputation on the Line as It Haggles With Fliers Over Meltdown
MARKET WRAPS
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 U.S. inventories and disappointing import data from China.
In China, daily crude oil imports fell 3% on year in July on weaker demand and unattractive refining margins keeping the utilization rate lower.
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.
TODAY'S TOP HEADLINES
Novo Nordisk Stock Slumps After Earnings Miss
Novo Nordisk shares fell in morning trading after the Danish pharmaceutical giant, known for its blockbuster drugs Ozempic and Wegovy, reported disappointing second-quarter earnings.
Novo reported an operating profit of 25.9 billion Danish crowns ($3.8 billion), missing expectations of 31.8 billion Danish crowns, according to FactSet. Earnings were 4.5 Danish crowns a share, below the 4.9 crowns a share expected by analysts.
Tesla Recalling 1.68 Million Cars in China Over Hood Problem
Tesla is recalling 1.68 million cars in China to fix the same hood problem that recently affected models in the U.S.
The U.S. electric-vehicle maker will issue an over-the-air software update to correct the problem, which affects imported S and X models and 3 and Y models made in China from late 2020 to mid-2024, China's State Administration for Market Regulation said late Tuesday.
Nvidia Stock Rising Again. Why Super Micro AI Chip Comments Are Helping.
Nvidia was edging up early Wednesday, after one of the chip maker's partners said a reported delay in next-generation processor shipments shouldn't be a major issue.
Nvidia shares were up 1.4% at $105.71 in premarket trading. The stock closed up 3.8% on Tuesday.
SoftBank Plans $3.5 Billion Buyback After Surprise Quarterly Loss
TOKYO-Japanese technology investor SoftBank Group said it plans to buy back up to about $3.5 billion of its shares-an encouraging sign for the Tokyo stock market, which recently suffered its worst day in decades.
SoftBank Group said Wednesday that it will buy back up to 6.8% of shares available, valued at up to 500 billion yen, or $3.46 billion, over the next 12 months.
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.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
Ag Growth Intl 2Q
Air Canada 2Q
Aurora Cannabis 1Q
Bird Construction 2Q
Brookfield Asst Management 2Q
CAE 1Q
Calian Group 3Q
Comp Modelling 1Q
Copperleaf Tech 2Q
Coveo Solutions 1Q
Curaleaf Holdings 2Q
DATA Communication 2Q
ECN Capital 2Q
Enerflex 2Q
Equinox Gold 2Q
Fiera Capital 2Q
Fortuna Mining 2Q
GDI Integratedd 2Q
i-80 Gold 2Q
IGM Financial 2Q
Info Services 2Q
Innergex Renewable 2Q
InPlay Oil 2Q
Kits Eyecare 2Q
Linamar 2Q
Manulife Financial 2Q
Medexus Pharma 1Q
NexGen Energy 2Q
Nutrien 2Q
Osisko Mining 2Q
Pan Amer Silver 2Q
Pason Systems 2Q
Pollard Banknote 2Q
Propel Hldgs 2Q
Shopify 2Q
SilverCrest Metals 2Q
Stantec 2Q
Stelco Hldgs 2Q
Stella-Jones 2Q
SunOpta 2Q
Thinkific Labs 2Q
Torex Gold 2Q
VerticalScope 2Q
Vox Royalty 2Q
Economic Calendar (ET):
1000 Jul Ivey Purchasing Managers Index
1330 Bank of Canada Summary of Monetary Policy Deliberations
Stocks to Watch:
American Hotel Income Properties 2Q FFO 12c/Unit; 2Q Rev $73.6M
IA Financial 2Q Adj EPS C$2.75; Net C$206M; EPS C$2.12
K-Bro Linen 2Q Net C$4.54M; EPS C$0.43; Rev C$93.5M
Kneat Com 2Q Loss/Shr C$0.04; Rev C$11.7M
Labrador Iron Ore 2Q EPS C$0.78; Rev C$53.1M
Magellan Aerospace 2Q EPS C$0.13; Rev C$242.9M
Maxim Power 2Q EPS C$0.02; Rev C$17M
Melcor Developments 2Q EPS C$0.76; 2Q Rev C$69.7M
Orezone Gold 2Q EPS 2c; Rev $58.3M; Adj EPS 1c
Osisko Gold Royalties 2Q Loss/Shr C$0.11; Rev C$46.2M; Names Wendy Louie to Board; Lowers 2024 Gold Equivalent Ounces Delivery Guidance to 77,000-83,000 From 82,000-92,000
PHX Energy 2Q Rev C$154.2M, Down 1% on Year; Strong Canadian Segment Rev Partially Offset Impact of Lower US Rig Count; 2Q EPS C$0.26; Slightly More Cautious on Outlook for US Division as Rig Count Continues to Soften; Sees Canadian Division Continuing to Generate Strong Results
Stingray 1Q EPS C$0.11; Rev C$89.1M; Adj EPS C$0.20
Expected Major Events for Wednesday
05:00/JPN: Jun Indexes of Business Conditions - Preliminary Release
06:00/GER: Jun Foreign Trade
06:00/GER: Jun Industrial Production Index
06:00/UK: Jul Halifax House Price Index
06:45/FRA: Jun Foreign trade
06:45/FRA: Jun Balance of payments
(MORE TO FOLLOW) Dow Jones Newswires
08-07-24 0619ET
