MARKET WRAPS
Watch For:
University of Michigan Preliminary Consumer Survey for August; World Agricultural Supply & Demand Estimates
Opening Call:
Stock futures traded higher Friday as more signs emerged that inflation in the U.S. has been cooling.
Inflation, and the Federal Reserve's quest to conquer it by raising interest rates, have dominated the attention of markets in recent months and largely drove their direction this week.
"The data keep piling up that the corner has been turned on inflation," said Jamie Cox, managing partner at Harris Financial Group. "The Fed no longer needs to apply emergency brake monetary policy, and that's a good thing. Soft landing runway is in sight."
However, San Francisco Fed President Mary Daly said the central bank's fight against rising inflation wasn't over. She told Bloomberg Television that inflation data for July are "significant in that they are saying that we're seeing some improvement but they're not victory."
Daly added her base case calls for an interest-rate hike of 50 basis points when the Fed next meets in September, following the last two more aggressive rates boosts of 75 basis points. But the Fed president told Bloomberg she has an "open mind" if the data point to another large increase being necessary.
A consumer sentiment gauge from the University of Michigan due Friday could further clarify how consumers are feeling about prices. It also might offer investors an extra clue about how consumer demand could evolve in the coming weeks and months.
Michigan's survey is expected to report midmonth sentiment of 52.5, according to two dozen economists surveyed by The Wall Street Journal. That would mark a slight improvement from July's final reading of 51.5. The survey's consumer-confidence index has plummeted this year, nearing the lowest level in the indicator's roughly six-decade history.
"We are living through a very confusing economic moment," Ross Mayfield, an investment strategy analyst at Baird Private Wealth Management, said. "Thanks to the millions of aftershock effects of the Covid-19 pandemic and Russia-Ukraine war, it can feel like up is down and bad is good.
"Inflation still reigns supreme in the minds of investors," Mayfield added. "And whether the stock market has officially bottomed or not, the path forward will be determined by inflation and the reaction of the Fed."
John Lynch, chief investment officer at Comerica Wealth Management, said while he was encouraged by the moderation in pricing pressures, "investors must recognize the Fed's challenge in reducing inflation."
Lynch said that "simply shifting to a pattern of 50 basis points [interest rate hikes] doesn't eliminate the risk to the economy or the financial markets."
The CME FedWatch tool indicates that a majority of investors, 59.5%, are anticipating the Fed will boost rates by 0.5 a percentage point in September. The probability for a rate hike of 0.75 a percentage point was at 40.5%. The probabilities were more or less reversed earlier in the week before the inflation data were issued.
Forex:
The dollar was slightly higher in Europe against a basket of currencies but may weaken again as "Fed pivot" bets grow, analysts said.
If the Fed meets market expectations to raise rates by only 50 basis points in September, this will likely mark the peak of its aggressive rate-increase cycle, according to CMC Markets.
However, other central banks may keep pace on tightening, especially the European Central Bank which appears to have just begun its aggressive rate-increase cycle and which may cause further dollar weakness.
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Sterling is more likely to be driven by broad risk appetite than Friday's better-than-expected U.K. economic growth data, said MUFG Bank.
"In reality the better June print doesn't change the overall backdrop and won't alter at all the Bank of England's outlook and hence its policy outlook," MUFG said.
The U.K. economy contracted 0.6% on month in June, less than the 1.3% decline expected by economists in a WSJ survey. For the second quarter, the economy contracted by 0.1% on quarter against expectations for a 0.2% drop.
Bonds:
The 10-year Treasury yield has probably reached bottom, based on technical charts, according to UOB Global Economics & Markets Research.
On Thursday, the 10-year yield rose to breach resistance on a declining trendline and the 55-day exponential moving average. These developments and the yield's movements suggest the 10-year yield's downside risk has dissipated and the 2.516% level is likely a bottom which may hold for at least several weeks.
Going forward, the 10-year yield is expected to move between 2.516% and 3.103%, UOB said.
Energy:
Oil prices ticked higher in early European trade and remained on course for a weekly rise as concerns about limited supplies persist.
Recession fears have undermined the demand outlook for oil and weakened prices in recent days but investors remain concerned about extreme tightness in the market, limited spare capacity, and a lack of investment in new supplies, said Neuberger Berman.
"We know supply across the board is visibly tight due to underinvestment and supply is going to remain very tight."
Metals:
Base metals and gold were holding steady in London, with sentiment wavering over mixed macro signals.
Figures from the U.K. showed the economy contracted 0.1% in the three months to June, with a recession likely from October onward.
In Asia, "sentiment onshore is still generally positive this week, especially when domestic demand is expected to improve in the second half of 2022," according to Marex.
TODAY'S TOP HEADLINES
J&J to Stop Selling Talc-Based Baby Powder Globally Next Year
Johnson & Johnson will stop selling baby powder made with talc globally in 2023, the company said Thursday.
The decision comes after the New Brunswick, N.J.-based company stopped selling the product in the U.S. and Canada in 2020, citing a decline in customer demand amid safety concerns about one of its most famous products.
Meditation App Calm Lays Off 20% of Staff
Calm.com Inc., maker of popular meditation and wellness app Calm, has laid off 20% of its staff, according to a memo sent by Chief Executive David Ko to employees on Thursday.
People familiar with the matter said San Francisco-based Calm employed roughly 400 people, and that approximately 90 were laid off.
Rivian's Losses Nearly Triple to $1.7 Billion
Rivian Automotive Inc. reported its net loss in the second quarter nearly tripled to $1.7 billion, further pressuring the electric-vehicle startup to conserve cash and move quickly to fill customer orders.
The California-based SUV and truck maker said revenue for the quarter was about $364 million as it increased production and deliveries of its first three models. Rivian started manufacturing vehicles for the first time late last year.
GSK, Sanofi, Haleon Shares Recover Some Recent Losses After Zantac Drug Responses
Shares in GSK PLC, Sanofi and Haleon PLC all rose on Friday--recouping some of their losses over the past few days--after the companies issued statements responding to recent comments related to the U.S. lawsuits over discontinued heartburn drug Zantac.
Shares of GSK are currently trading 2.0% higher at 1,427.60 pence, Sanofi 0.4% higher at EUR85.18 and Haleon 0.3% higher at 266.70 pence.
UK Economy Contracted in 2Q As Inflation and Ukraine War Takes Toll
The U.K. economy contracted in the second quarter, as inflation and uncertainty from Russia's invasion of Ukraine took their toll on the economy.
U.K. gross domestic product fell 0.1% from April to June compared with the preceding quarter, the Office for National Statistics said Friday, easing from the 0.8% expansion registered in the first quarter. Economists polled by The Wall Street Journal expected the economy to contract by 0.2%.
Trump Won't Oppose Release of Search Warrant
WASHINGTON-The Justice Department on Thursday asked a Florida judge to unseal the warrant FBI agents used to search former President Donald Trump's Mar-a-Lago home this week, along with a list of items they took from the property.
The request raises the prospect that underlying reasons for the extraordinary search of the former president's home could soon become public.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
2Q unless stated otherwise
Anaergia
Aya Gold & Silver
dentalcorp
Fennec Pharma
Karora Resources
MDA
Neo Performance
Q4
Softchoice
Economic Indicators:
None scheduled
Stocks to Watch:
Algonquin Power 2Q Rev $624.3M; 2Q Adj EPS 16c; 2Q Loss/Shr 5c
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Avcorp 2Q Loss/Shr C$0.02; 2Q Rev C$29.3M
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Epsilon Energy 2Q EPS 44c
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Farmers Edge 2Q Loss/Shr C$0.56 Vs. Loss C$0.24; 2Q Rev C$7.7M Vs. C$6.15M
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FG Financial Group 2Q Loss/Shr 87c; 2Q Loss $5.48M
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Global Atomic 2Q EPS C$0.00; 2Q Rev C$397,862
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Hardwoods Distribution 2Q EPS $1.76; 2Q Sales $700.2M
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High Arctic 2Q Rev C$25.7M Vs. C$16.4M; Rev Rose Across Drilling, Ancillary Services, Canadian Production Services Segments; Loss/Shr C$0.42 Vs. Loss C$0.08; 6-Mos Loss/Shr C$0.47 Vs. Loss C$0.19; 6-Mos Rev C$54.4M Vs. C$34.1M; Maintained Strong Balance Sheet, With Working Cap Balance of C$27.5M; to Focus on Growth Opportunities in PNG; Might Return Surplus Cash From Canadian Well-Servicing Business Sale to Shareholders
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Intermap 2Q Loss/Shr 2c
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Mdf Commerce 1Q Rev C$32.2M Vs. C$22.6M; 1Q Loss/Shr C$0.14 Vs. Loss C$0.15
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Nexus Industrial REIT 2Q Property Rev C$34.1M Vs. C$18.7M; NAV Per Unit at C$12.41 as of End June Vs. C$12.35 End March; C$11.21 End June 2021; 2Q FFO C$15.7M Vs. C$8.9M; 2Q Distributions Per Unit C$0.160 Vs. C$0.160; 2Q Net Operating Income of C$24.0M, Up 96%; to Make Aug Cash Distribution of C$0.05333/Unit
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(MORE TO FOLLOW) Dow Jones Newswires
08-12-22 0510ET
