MARKET WRAPS
Watch For:
Chicago Business Barometer - ISM Chicago Business Survey, Canadian GDP for March, Speeches by Fed governors Michelle Bowman and Philip Jefferson, Ford Motor Company May Sales
Today's Top Headlines/Must Reads:
- China's Recovery Slows Further as Factory, Services Activity Pulls Back
- U.S. Manufacturers Seek China Alternatives as Tensions Rise
- Here's Why Stock Market Investors Turned Bearish on China
- Where Is the U.S. Economy Headed? Follow the Money
Follow WSJ market coverage here
Opening Call:
Stock futures were lower on Wednesday as disappointing data from China triggered a risk-off mood across global markets.
An official gauge of the country's manufacturing activity slipped unexpectedly to 48.8 in May, falling deeper into contractionary territory. Read more here .
"Growth slowdown fears have accelerated as the latest data from China shows a faltering recovery, knocking back sentiment on markets," Hargreaves Lansdown said.
Hong Kong's Hang Seng lost 2.5% to hit a six-month low and Germany's DAX 40, which is usually sensitive to Chinese growth expectations, shed 0.4%.
"Far from being the powerhouse which will offset America's slowdown, China's economic recovery from the pandemic is looking more precarious. A cloudy geo-political landscape is also causing concern, amid ongoing chip wars and sanctions, after it emerged that China turned down a US request for their defence chiefs to meet on the sidelines of a summit in Singapore," Hargreaves Lansdown said.
Read ANZ Cuts China 2023 GDP Growth Forecast to 4.9% After Weak PMIs
Adding to the caution is a House of Representatives' vote on the debt ceiling deal expected later Wednesday. Analysts reckon the Fiscal Responsibility Act will be passed, but are wary of hiccups.
"[M]arkets have been taken by surprise on these [type of] votes before, even if all might look OK for the time being," Deutsche Bank said.
Stocks to Watch
https://urldefense.com/v3/__http://3c.ai__;!!F0Stn7g!EkjDye3cRF5MB4mq6l88MQ8y8u3uFTw0smbDqyT_9O1zx-kaKi-OUH7yRNQ8qxzCOvuXq6xbRxjeMr3fmLkWjdXgnXehZpdFwGikTEZfRaU$ rose 7% premarket on heavy volume, adding to the nearly 300% gain it has enjoyed this year.
Ambarella projected second-quarter revenue below Wall Street estimates. Shares dropped 13% in after-hours trading.
Hewlett Packard Enterprise fell 7% after revenue came in below the company's own guidance.
HP stock was also 5% lower after it posted its lowest quarterly revenue since the start of the Covid-19 pandemic. The company said it sees market conditions improving in the second half of the year.
MEI Pharma said it is reviewing a buyout proposal from stockholders Anson Funds Management and Cable Car Capital. Shares rose 5% in after-hours trading.
Nvidia retreated in premarket trading a day after it briefly became the first chip company with a $1 trillion market value.
Sportsman's Warehouse reported a swing to a loss in its latest quarter and guided for lower sales in the fiscal second quarter. Shares fell 6% in after-hours trading.
Forex:
The dollar was higher in European trading due to growing expectations that the Fed will continue raising interest rates and falls in equity markets which increases demand for safe havens, UniCredit Research said.
"The dollar remains firm, still benefiting from the recent upward correction in Fed rate expectations and from weak equities, especially in Asia this morning."
Weaker-than-expected economic data from China and Japan cause equities to fall while markets await a likely final approval of the U.S. debt-ceiling deal, UniCredit said.
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The euro fell to a 10-week low against the dollar following the Chinese manufacturing data and a deceleration in Spanish and French inflation data.
German inflation data are due at 1200 GMT followed by eurozone inflation data on Thursday.
With markets fully pricing in two more European Central Bank interest rate rises by September, the euro is vulnerable to a scaling back of those expectations on any further signs of inflation slowing faster than expected, ING said.
EUR/USD may soon test 1.0600, it added.
Energy:
Oil prices edged lower in Europe, extending Tuesday's steep losses, after the Chinese PMI data.
"Markets are worried that China's commodity demand is weakening more quickly than anticipated," Commonwealth Bank said.
Concerns that the debt deal could fail to make it through Congress, and uncertainty about what OPEC+ may do at a meeting this weekend have weighed on oil prices, Commonwealth Bank said.
Metals:
Industrial metal prices slipped in early London trade, with China's disappointing economic recovery continuing to weigh on the demand outlook, ANZ said.
"Lackluster earnings have stoked fears of further economic weakness. The market appears to be struggling with the adjustment that China's era of rapid growth is over."
TODAY'S TOP HEADLINES
Boeing 737 MAX Victims' Families Can Seek Compensation for Pain and Suffering, Judge Rules
A federal judge ruled that relatives of people who died in a 2019 Boeing 737 MAX crash can seek compensation for the victims' pain and suffering before the plane slammed into the ground in Ethiopia.
The order issued late Tuesday by U.S. District Judge Jorge Alonso in the Northern District of Illinois is a setback for Boeing ahead of possible trials to determine how much the plane maker should pay victims' families.
Purdue's Sacklers Win Appeal to Regain Legal Shield Against Opioid Suits
A federal appeals court in New York reinstated a bankruptcy settlement that resolves opioid-related lawsuits against Purdue Pharma's Sackler family owners for up to $6 billion and clears the way to end the OxyContin maker's chapter 11 case.
Tuesday's decision by the Second U.S. Circuit Court of Appeals in New York means the Sacklers' settlement will likely go into effect, shielding family members who own Purdue from current and future civil opioid lawsuits in exchange for billions of dollars in funding for opioid-abatement programs and compensation for people harmed by its products.
HP and HPE look to AI for future growth as legacy businesses cool
HP Inc. continues to navigate a tough economy, with all eyes on artificial intelligence and a PC rebound later in the year.
The PC and printer giant HPQ on Tuesday reported fiscal second-quarter net earnings of $1.07 billion, or 80 cents a share, compared with net earnings of $1 billion, or 95 cents a share, in the year-ago quarter. After stripping out costs, including restructuring charges, the company reported earnings of $1.07 a share, down from $1.10 a share a year ago.
Sam Bankman-Fried Could Have Some Charges Dropped if Bahamas Objects
The Justice Department said it would drop some of the criminal charges against FTX founder Sam Bankman-Fried if the Bahamas says they violate the terms of his extradition to the U.S.
Federal prosecutors said in a filing late Monday that they were waiting on the Bahamian government's approval of three additional counts that they brought against Bankman-Fried after his arrest and extradition in December.
China's Recovery Slows Further as Factory, Services Activity Pulls Back
HONG KONG-China's factory activity contracted for a second straight month while growth in the services sector slowed, the latest signs that the country's reopening growth momentum is struggling to take hold.
An official gauge of the country's manufacturing activity slipped unexpectedly to 48.8 in May, falling deeper into contractionary territory even as the broader economy has been unshackled from three years of strict zero-Covid restrictions.
U.S. Manufacturers Seek China Alternatives as Tensions Rise
Fears of military conflict and increasing security worries have some U.S. manufacturers re-evaluating their reliance on China.
Executives are plotting alternate supply chains or devising products that can be made elsewhere should China's hundreds of thousands of factories become inaccessible. That prospect became more conceivable, they said, after the 2022 invasion of Ukraine prompted companies to sever ties with Russia, sometimes taking huge write-downs.
Here's Why Stock Market Investors Turned Bearish on China
Chinese shares are back in a bear market.
The country's stock market experienced a boom earlier this year, as investors bet on the economy bouncing back after the end of the government's strict zero-Covid policy, which locked down major cities and proved a drag on economic activity. But the rally didn't last.
Debt-Ceiling Bill Faces Test as Some GOP Critics Vent
WASHINGTON-House Republican leaders projected confidence Tuesday that the debt-ceiling deal struck with President Biden would draw enough support to pass, while some conservative lawmakers angrily denounced the agreement.
The bill advanced past a closely watched procedural hurdle in the Rules Committee late Tuesday, and a final House vote is expected as soon as Wednesday night. While the bill appears on track to gain sufficient Republican and Democratic votes to pass the House and then the Senate by the June 5 deadline, it could still run into procedural obstacles, complicating the race to avoid an unprecedented default. Roughly 30 House Republicans announced Tuesday they would oppose the bill, with others saying they were undecided.
Pro Take: Crypto Runs Raise Urgent Policy Questions, Says Chicago Fed Paper
Customers pulled $12.9 billion from five crypto platforms in digital runs last year that drained about one-third of the firms' assets, leading to their bankruptcies, says new research from the Federal Reserve Bank of Chicago.
Even after the hurried money flight, Celsius Network, Voyager Digital, BlockFi, Genesis and FTX owed customers a total of $37.3 billion when they filed for bankruptcy protection between last July and this January, the Chicago Fed paper says. Big holders spearheaded the crypto runs, it says. Web portals and mobile apps greased them.
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05-31-23 0558ET
