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North American Morning Briefing: Stock Futures Tick Up Ahead of Earnings

08/08/2022 | 06:01am EDT

MARKET WRAPS

Watch For:

Employment Trends Index for July.

Opening Call:

Stock futures edged up, starting the week on a positive note ahead of a slew of earnings reports that are expected to provide some insight into the impact of higher inflation on companies and consumers.

Stocks have swayed in recent days, buffeted by shifting views on central bank policy. Last Friday's better-than-expected jobs report divided investors and analysts. Some raised concerns that the Federal Reserve could continue raising interest rates aggressively, while others questioned whether the economy could really be in recession.

"Markets are still digesting the payrolls report from Friday. When you see what's happening in the labor market, this doesn't look like a recession in the sort of broad sense," said Kiran Ganesh, a multiasset strategist at UBS. "Investors seem to be in the mood to listen to the good news."

Trading volumes also tend to be lower in August while many traders take summer vacations, which can drive outsize moves, analysts said. For those still in the office, investors are awaiting inflation data for July out on Wednesday, a key release which is expected to provide more direction for markets.

"What we infer from the bond market is that investors are positioning for a slowdown. Bond markets have started to increasingly price in a higher chance of a 75-basis-point hike in September," said Karim Chedid, an investment strategist at BlackRock.

"Despite this, equities have somewhat held up. I think the reasons for it have to do with better-than-expected earnings so far this season," Mr. Chedid said.

Companies including Palantir Technologies, Dominion Energy and Tyson Foods are scheduled to report earnings Monday morning ahead of the opening bell. Videogame firm Take-Two Interactive Software, vaccine-maker Novavax, insurer American International Group and News Corp, which owns The Wall Street Journal, are slated for after markets close.

In premarket trading, Berkshire Hathaway rose 0.7% after reporting quarterly results over the weekend. The investment firm's operating earnings, CEO Warren Buffett's preferred metric, rose although the company posted a net loss.

Tesla rose 3% premarket. The Senate passed a bill on Sunday to spend billions of dollars on climate, including the extension of a tax incentive for electric vehicles. Signify Health jumped 15% after The Wall Street Journal reported that drugstore chain CVS Health is planning to bid for the company.

Overseas, stocks in Europe were up while major benchmarks in Asia were mixed.

Forex:

Friday's unexpectedly strong jobs data has caused short-term Treasury yields to rise and markets to price in a higher terminal rate (or peak) for interest rates, which should help the dollar strengthen further, MUFG said.

"There is room for the U.S. dollar to rebound further in the near-term," the bank said.

The rate market is now pricing a higher probability of a third 75 basis-point interest-rate rise in September, while ISM surveys and the "blow out" July jobs data have eased recession fears, MUFG said.

Energy:

Oil prices ticked higher, supported by economic data from China. China's exports grew at a faster-than-expected pace last month, suggesting the major economy isn't yet feeling the impact of a slowdown in Western economies.

Meanwhile, Russia-related supply risks will put a floor under prices, Capital Economics said. A limited supply increase from OPEC+ means the oil market is likely to remain tight and prices should remain close to $100 a barrel, the economic-research firm said.

Metals:

Metals prices inched up Monday after China reported better-than-expected export figures for July. China's exports and trade surplus both beat expectations with the former 18% higher in dollar terms and the trade surplus hitting $101.3 billion in July.

China's trade figures ease some concerns over falling global demand, weighed down by rising prices and higher interest rates, Stephen Innes, managing partner at SPI Asset Management said. However, Innes added that manufacturing data still remains weak, weighing on commodity prices for now.

---

Steel prices are expected to reach their near-term floor, Citi said. Steel-producer margins in China are already negative, while in Europe, spot-based price margins for producers are also starting to turn negative, the bank said.

Negative steel margins usually precede production cuts and a rebalancing of supply, it noted. Steel prices typically recover when cuts to supply accelerate, though the scale of the rebound will depend on the overall recovery in demand for steel, Citi said.

Although European producers are expected to remain highly profitable in the second half of the year due to contracted steel prices and hedged energy costs, they are still seen implementing production cuts, the bank said.


TODAY'S TOP HEADLINES


SoftBank Reports Record $23 Billion Quarterly Loss as Tech Downturn Hits

TOKYO-Japanese technology investor SoftBank Group Corp. on Monday reported a record quarterly loss of more than $23 billion after its Vision Fund investments suffered from the global selloff in technology shares.

The April-June loss was about 1 1/2 times the previous record set just three months earlier in the January-March quarter.


UPS to Buy Italian Healthcare-Logistics Provider Bomi Group

United Parcel Service Inc. agreed to acquire Italy's Bomi Group, as the transportation giant looks to bolster its medical-product-distribution business.

UPS didn't disclose the sale price. The Wall Street Journal previously reported that the deal was worth several hundred million dollars, according to people familiar with the matter.


Carlyle Chief Executive to Step Down

Carlyle Group Inc. Chief Executive Kewsong Lee is leaving the private-equity firm, as it struggles to expand and its shares lag.

Carlyle said late Sunday after The Wall Street Journal inquired about the matter that Mr. Lee will step down as CEO immediately and will leave the firm when his five-year employment agreement ends at the end of this year. William Conway, a co-founder and former co-CEO of the firm, will serve as interim chief executive until a permanent successor can be found.


Two Chinese Cities Approve Baidu's Unmanned Self-Driving Taxis

SINGAPORE-China took a notable regulatory step in the field of driverless taxis, with two cities giving Baidu Inc. approval to operate ride-hailing services without a driver or a person overseeing safety in the vehicle.

The Chinese search-engine giant, which already operates self-driving taxis, plans to add five unmanned cars each to the cities of Wuhan and Chongqing, it said. These vehicles will run in designated areas of those cities during the daytime, when there tends to be more traffic on the road, the company said. The approvals also allow Baidu to charge users for the rides, it said.


Oz Minerals Rejects BHP Takeover Proposal

ADELAIDE, Australia-Oz Minerals Ltd. on Monday rejected a nonbinding takeover proposal from BHP Group Ltd. that values the Australian copper-and-gold mining company at almost 8.4 billion Australian dollars (US$5.8 billion), calling the approach highly opportunistic following a fall in copper prices.

Adelaide-based Oz Minerals said it received on Friday the unsolicited and conditional proposal from the world's largest mining company by market value to acquire its shares for A$25.00 each. Its stock last traded at A$18.92 a share.


Senate Passes Democrats' Climate, Healthcare and Tax Bill

WASHINGTON-The Senate passed a bill spending hundreds of billions of dollars on climate and healthcare programs while raising taxes on large, profitable companies, as Democrats unified around elements of President Biden's agenda after a year of frustrated efforts to advance a broader package.

The legislation, which passed the Senate 51-50 on Sunday with a tiebreaking vote by Vice President Kamala Harris, offers tax incentives for reducing carbon emissions, seeks to allow Medicare to negotiate the price of some prescription drugs, allots roughly $80 billion to the Internal Revenue Service and extends subsidies for health insurance under the Affordable Care Act.


Israel, Palestinian Militants Agree to Cease Fire After Three Days of Fighting

JERUSALEM-Israel and Gaza militant group Islamic Jihad agreed to a cease-fire late Sunday after three days of fighting that saw more than 40 Palestinians killed and rockets fly deep into Israel's heartland, in the most intense exchange of fire since an 11-day conflict last year.

The cease-fire, brokered by Egypt and the United Nations, came into effect at 11:30 p.m. local time, Israeli, Palestinian and Egyptian officials said.


Former Colombia Rebel Gustavo Petro Inaugurated as President

BOGOTÁ, Colombia-Gustavo Petro, a former member of a leftist guerrilla group that had fought the Colombian state, was inaugurated Sunday as president, a change in a country with a history of guerrilla wars that have stifled its modernization and polarized its people.

Standing before tens of thousands of supporters in Bogotá's colonial central square, the 62-year-old Mr. Petro pledged that he would work to lower poverty and hunger in this country of 50 million and secure peace by engaging in talks with several armed groups. He also laid out a platform to redistribute wealth, modernize a poor countryside and adopt environmentally friendly economic policies.


China's War Games Showcase New Tools to Intimidate Taiwan

HONG KONG-China wrapped up four days of live-fire and combat exercises that showcased its growing offensive capabilities against Taiwan and updated Beijing's tool kit for intimidating the island democracy.

(MORE TO FOLLOW) Dow Jones Newswires

08-08-22 0600ET

Stocks mentioned in the article
ChangeLast1st jan.
BAIDU, INC. -0.20% 117.49 Delayed Quote.-21.04%
BERKSHIRE HATHAWAY INC. -0.06% 406470 Delayed Quote.-9.76%
BHP GROUP LIMITED 0.92% 38.52 Delayed Quote.16.32%
BLACKROCK, INC. -2.42% 550.28 Delayed Quote.-39.90%
BRITISH POUND / US DOLLAR (GBP/USD) -0.09% 1.116 Delayed Quote.-19.96%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -1.09% 0.7227 Delayed Quote.-7.30%
CVS HEALTH CORPORATION -1.66% 95.37 Delayed Quote.-5.99%
DOMINION ENERGY, INC. -2.74% 69.11 Delayed Quote.-12.03%
EURO / US DOLLAR (EUR/USD) -0.29% 0.98003 Delayed Quote.-13.57%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.04% 0.01227 Delayed Quote.-8.53%
LONDON BRENT OIL -3.84% 85.29 Delayed Quote.14.15%
MSCI SINGAPORE (GDTR) 1.29% 5346.57 Real-time Quote.-15.92%
MSCI TAIWAN (STRD) -1.08% 459.986 Real-time Quote.-37.48%
NASDAQ COLOMBIA -1.77% 254.785892 Real-time Quote.-29.09%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -2.55% 0.5594 Delayed Quote.-16.40%
NEWS CORPORATION 0.40% 15.11 Delayed Quote.-32.27%
NOVAVAX, INC. -1.99% 18.2 Delayed Quote.-87.02%
OZ MINERALS LIMITED 0.12% 25.78 Delayed Quote.-8.75%
PALANTIR TECHNOLOGIES INC. 0.62% 8.13 Delayed Quote.-55.35%
SIGNIFY HEALTH, INC. -0.21% 29.15 Delayed Quote.104.99%
SOFTBANK GROUP CORP. -2.60% 4900 Delayed Quote.-7.42%
TESLA, INC. -1.10% 265.25 Delayed Quote.-23.86%
THE CARLYLE GROUP INC. -1.52% 25.84 Delayed Quote.-52.20%
TYSON FOODS, INC. -1.38% 65.93 Delayed Quote.-24.36%
UNITED PARCEL SERVICE INC -2.29% 161.54 Delayed Quote.-24.63%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) 4.32% 59.2 Delayed Quote.-22.70%
WTI -2.49% 79.673 Delayed Quote.8.35%
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