MARKET WRAPS
Watch For:
New Home Sales for July; Flash Manufacturing PMI for August; Flash Services PMI for August; Richmond Fed Business Activity Survey for August; Federal Reserve Bank of Minneapolis President Neel Kashkari speaks at Wharton Club of Minnesota event.
Opening Call:
Stocks futures edged higher Tuesday, signalling stocks were on track to make up some lost ground after Monday saw the worst day for the market in months, with investor sentiment hammered by concerns over the global economic outlook and likelihood of tighter central bank policy.
Looming large this week is Federal Reserve Chairman Jerome Powell's speech at the Jackson Hole economic conference on Friday, which should bring the market more clarity on the central bank's policy pathway.
The recent selloff has, in part, been driven by fears that the Fed will not ease up on its aggressive tightening of monetary policy--including the largest interest-rate hikes in decades--as it battles inflation at 40-year highs.
"Yesterday was a sea of red for risk assets and sovereign bonds, as the energy crisis intensified in Europe, contributing to the specter of global central bank tightening already weighing on asset markets," said Tim Wessel, an analyst at Deutsche Bank.
"Moving ahead, U.S. equity futures are indicating a slight rebound with the contracts on the S&P 500 and NASDAQ 100 inching upwards."
Bond yields remained in focus amid investors' shifting expectations around inflation and monetary policy.
The yield on the 2-year Treasury note, which attempts to forecast the benchmark lending rate a couple of years from the present, spiked higher again Monday to above 3.3%.
It remains well above the yield on the 10-year bill--which was down slightly Monday to 3.01%--in a phenomenon known as an inverted yield curve, which is an established indicator of a future recession.
Overseas, the pan-European Stoxx 600 was flat and Asian indexes ended lower, taking cues from the earlier Wall Street selloff.
Economic Insight:
Barring a tangible recession, developed-market central banks are likely to continue raising interest rates through inflation dips, J.P.Morgan said.
"DM CBs [developed market central banks] aren't likely to see the inflation threat receding through commodity price declines alone, and the moderation in recession risks actually warrants higher policy rates, " the bank said.
At the upcoming Jackson Hole symposium, to be held from Thursday to Saturday, Fed Chairman Jerome Powell is expected to push back against the idea that a dovish policy pivot is coming soon, JPM said.
Forex:
The dollar jumped to two-decade highs against a basket of currencies and the euro on expectations that Fed Chairman Jerome Powell will point to more interest-rate rises on Friday and safe-haven demand as risk aversion causes equity markets to fall, ING said.
At the same time, further increases in gas prices are worsening the outlook for countries outside the U.S., especially the eurozone, the Dutch bank said. "The dollar has remained well in demand at the start of this week, enjoying a rather ideal combination," ING said.
Energy:
Oil prices rose slightly after Saudi Arabia's energy minister said OPEC+ could cut production amid "harmful volatility" in the market. Prince Abdulaziz bin Salman told Bloomberg that OPEC+ has the "commitment, the flexibility and the means" within its agreements to deal with market challenges, including cutting production "at any time and in different forms".
The minister was pointing to the disconnect between volatile and illiquid markets and underlying fundamentals, Deutsche Bank said. The comments halted recent declines in oil prices, which have fallen around 20% since June highs. The next OPEC meeting is due on Sept. 5.
Metals:
Copper was down ahead of Jerome Powell's speech at Jackson Hole on Friday and jitters around a gloomier macroeconomic picture.
Risk-off sentiment and reports last week of higher inflation in Germany and Japan reinforced the weak global macroeconomic picture ahead of the key Fed meeting when Powell is expected to indicate further rate hikes and give commentary on inflation, RBC Capital Markets said.
China also cut its benchmark lending rate in an attempt to ease the property crisis that is hitting consumption, RBC added.
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Copper supply risks will remain elevated as production growth for 2022-2031 skews toward riskier countries including Chile, the Democratic Republic of the Congo and Argentina, Fitch Solutions said.
The firm singled out the industrial metal, which is increasingly in demand due to the accelerating global energy transition, as a troublesome commodity due to a mix of historic high prices and expectations of strong demand growth.
"Despite the number of projects that exist on paper, considerable hurdles remain for supply investment to keep pace with demand," Fitch said.
"The growing mismatch between major miners' acquisition-focused strategies will come under greater pressure from shortfalls of supply investment."
TODAY'S TOP HEADLINES
When Is Tesla's Stock Split, and What Does it Mean for Investors?
Tesla Inc. will split its stock this week, the latest megacap company to divide its highly priced shares this year in a bid to make them more accessible to investors.
Stock splits have declined in popularity over the years, but Amazon.com Inc. and Google parent Alphabet Inc. also split their stocks in 2022. Investors often interpret such plans as signals of confidence by management.
Wireless Carriers Want to Be Your Home-Internet Provider-and Vice Versa
A budding battle between U.S. cable and phone companies has brought fresh competition for services typically dominated by a few large companies.
Wireless carriers are using the excess capacity on next-generation networks to win over customers who have been using traditional broadband-internet providers, while those same cable companies are promoting new and cheaper cellphone plans.
Elon Musk's Lawyers Seek Documents From Former Twitter Chief Jack Dorsey
Elon Musk's lawyers have sent a subpoena to Jack Dorsey, the first indication that Twitter Inc.'s co-founder and former chief executive will be officially involved in the legal fight over Mr. Musk's stalled $44 billion deal.
Mr. Musk is seeking documents from Mr. Dorsey relating to the effect of false or spam accounts on the social-media platform's business. The Tesla Inc. CEO is also seeking information about Twitter's use of monetizable daily active users, or MDAUs, as an important metric and any other metrics the company might use to describe user or advertiser engagement.
A Group of Apple Employees Protests Company's Three-Day-a-Week Office Policy
A group of Apple Inc. staffers is petitioning for a more flexible working environment after the tech giant recently told employees they will need to be in the office at least three days a week.
The group, AppleTogether, said it represents current Apple workers. It wrote a petition following Apple's announcement that employees must work from the office for three days a week starting next month.
Adidas's Leadership Change Might Not Be Enough to Fuel Share-Price Recovery
Adidas AG's move to change its chief executive officer should be welcomed, analysts say, though some warn that a share-price recovery might not come without more clarity on medium-term goals that look increasingly out of reach.
The German sportswear major surprised the market Monday with the news that boss Kasper Rorsted would step down next year. He will remain in office until then to ensure a smooth transition for his successor, the company said. The move was unexpected but positive given recent challenges, RBC Capital Markets analyst Piral Dadhania said in a note.
Global Economies Flash Warning of Sharp Slowdown
Business activity in Europe and Japan fell in August, according to new surveys, pointing to a sharp slowdown in global economic growth as higher prices weaken consumer demand and the war in Ukraine scrambles supply chains.
The second month of declining activity in Europe comes amid a renewed rise in energy prices over uncertainty about Russia's willingness to maintain its already reduced supply of natural gas ahead of the heating season.
Endless Demand Spurs U.S. Natural-Gas Prices to Shale-Era Highs
The 14-year highs reached this week by U.S. natural-gas futures show the unceasing demand for U.S. shale gas across the Atlantic-and likely point to higher prices ahead.
The latest price spike came in response to Russia's plans to shut down one of Europe's main fuel arteries for a few days at the end of the month. The shutdown announced Friday is either the latest episode of unplanned maintenance along the vital Nord Stream gas pipeline or an act of economic warfare on Russia's part in retaliation for Western Europe's support for Ukraine.
China's Yuan Slides to a Two-Year Low as Economy Stumbles, Dollar Soars
HONG KONG-China's currency has dropped to its weakest level against the U.S. dollar in two years. It is likely to depreciate further as the country's central bank moves to combat a slowing economy and a deep housing downturn.
On Tuesday, the yuan traded at more than 6.86 to the dollar in China's tightly controlled onshore market, hitting levels last seen in August 2020, according to FactSet. The currency weakened past 6.88 in the more freely traded offshore market, taking its year-to-date decline against the dollar to more than 8%.
America's Office Glut Started Decades Before Pandemic
A surplus of empty office space threatens to hollow out U.S. business districts. Don't blame the pandemic.
(MORE TO FOLLOW) Dow Jones Newswires
08-23-22 0627ET
