MARKET WRAPS
Watch For:
PPI for August; EIA Weekly Petroleum Status Report; Canada Manufacturing Survey for July
Opening Call:
Futures advanced, suggesting stocks could stage a modest rebound in Wednesday trading, after stronger-than-expected inflation data triggered a huge selloff in the previous session.
"I don't think that a bad print of the CPI warrants this extreme reaction," said Peter Andersen, founder of Boston-based investment firm Andersen Capital Management.
"When you look at data like this, if it isn't a consistent straight line or improvement, I don't think it means that we're not progressing," he added.
Economic Insight:
The persistent nature of U.S. services inflation will be a headache for the Fed for some time, and it will make meeting the 2% inflation target difficult to achieve on a sustained basis, Insight Investment said.
It sees "sticky" sectors keeping headline U.S. CPI around 6% at year-end.
Insight Investment still expects the terminal rate between 4% and 4.5%, and it doesn't foresee an interest-rate cutting cycle before 2024.
Forex:
The dollar pulled back slightly after rising sharply in reaction to Tuesday's higher-than-expected inflation data.
The dollar's reaction to the data was due to the fact Fed officials did "quite a lot over the past weeks to strengthen their credibility when it comes to fighting inflation," Commerzbank said.
"From the market's point of view, the stubbornly high inflation levels increase the likelihood of more pronounced Fed rate hikes."
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The euro's scope to rise will remain limited while the Fed maintains a restrictive policy stance and this is unlikely to change in light of Tuesday's inflation data, UniCredit Research said.
Evidence that U.S. consumer price inflation hasn't fallen much in August and core inflation rose "dashed EUR/USD recovery attempts," UniCredit said.
That illustrates that factors lifting the euro--including European Central Bank officials signalling further interest rate rises, positive Ukraine war developments reducing the dollar's safe-haven appeal, and a EU debate to address soaring energy prices--do no more than help the common currency remain resilient rather than triggering a complete turnaround sentiment, UniCredit said.
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USD/JPY dropped around 70 points in Asia trading on reports that the BOJ has been checking rates, something that is typically a sign that intervention is imminent.
This followed another round of verbal intervention from officials that included explicit comments that intervention is among the options.
While the risk of intervention has clearly risen, it remains unclear what it would actually achieve while it would clearly be in conflict with domestic policy, RBC Europe said.
Read: Talk of Possible Japan Forex Intervention May Not Have Material Impact
Energy:
Weaker demand for oil in China, as the economy faces stop-start Covid-19 lockdowns, is outweighing robust crude demand elsewhere in the world and will crimp oil demand growth this year, the IEA said on Wednesday.
Read more here.
A challenge for the G-7's planned price cap on Russian oil will be getting Asian buyers on board, the Center for Strategic and International Studies said.
India and China enjoy discounted Russian crude and can buy as much as they want if they don't deal directly with sanctioned companies or individuals. In theory, a cap would mean even lower prices, but the CSIS thinks the countries could be wary about joining a cumbersome monitoring and enforcement system.
"They will also chafe at another imposition of Western energy sanctions." Without full cooperation, the price cap would score a partial victory, avoiding market shortages and price spikes but not cutting Russia's oil revenue dramatically.
Metals:
Weak macroeconomic sentiment continued to weigh on metal prices, with investors still looking toward haven assets over risk commodities.
Following Tuesday's CPI print "markets were extremely brutal as the only safe asset was the dollar rallying," Marex said.
It added that general optimism in metals has been lost in both Europe and China.
TODAY'S TOP HEADLINES
Google Loses Most of Appeal of EU Android Decision
BRUSSELS-Alphabet Inc.'s Google lost most of its appeal to overturn a $4.33 billion antitrust decision imposed by the European Union for allegedly using its Android operating system to squash competition-but got a roughly $215 million reduction in the fine.
The ruling on Wednesday is a vote of confidence for the European Commission, the bloc's antitrust enforcer, which has been aggressive in targeting big U.S. tech companies over concerns about anticompetitive behavior. The Android case was the biggest of three antitrust fines totaling more than $8 billion that the Commission has levied against Google since 2017-and it focused on mobile phones, one of the company's fastest growth areas.
Agriculture Company Corteva Plans to Lay Off 5% of Global Workforce
Corteva Inc. is preparing to lay off roughly a thousand of its workers across the globe as part of the seed and pesticide maker's broader restructuring plan.
Corteva, which was part of DowDuPont before it was spun out of the industrial conglomerate in 2019, said at an investor presentation on Tuesday that it is laying off about 5% of its 21,000-person global workforce. The company is a top supplier to Iowa soybean producers, Brazilian corn operations and other farmers around the world.
Patreon Lays Off 17% of Staff, Closes Two Offices in Europe
Patreon Inc., an online platform that connects musicians and other creators with fans, said it has laid off about 17% of its workforce and closed two offices in Europe amid an economic slowdown.
The company cut 80 positions from operations, finance and other departments, said Jack Conte, the company's chief executive, in a blog post Tuesday. Patreon also closed its Dublin and Berlin offices.
Weyerhaeuser Union Members Strike in Oregon and Washington State
Weyerhaeuser Co. said Tuesday that a work stoppage involving union members is affecting its operations in Oregon and Washington state.
The forest-products manufacturer and distributor said it has about 1,200 employees who are members of the International Association of Machinists and Aerospace Workers, including employees in the company's wood-products and timberlands units.
Fosun International Shares Dive After Reports About State Exposure Checks
Shares of Chinese conglomerate Fosun International Ltd. slumped Wednesday after news reports the previous day said authorities told banks and state-owned firms to check their exposure to the company.
The stock lost as much as 9.8% in the morning and briefly extended losses in early afternoon trade, falling to an intraday low of 4.40 Hong Kong dollars (US$0.56). It clawed back some ground and was last down 8.8%, though still on track for the lowest close in nearly 10 years. Shares have lost about 46% so far this year.
Global Oil Demand Undermined by China Lockdowns, IEA Says
Weaker demand for oil in China, as the economy faces stop-start Covid-19 lockdowns, is outweighing robust crude demand elsewhere in the world and will crimp oil demand growth this year, the International Energy Agency said on Wednesday.
In its closely watched oil market report, the IEA lowered its forecasts for Chinese oil demand by 400,000 barrels a day this year, to 15 million barrels a day, 420,000 barrels a day less than last year. For 2023, the Paris-based agency lowered its China demand forecasts by 300,000 barrels a day, but still expects demand to rise to 16 million barrels a day as Covid-19 pandemic restrictions are relaxed.
Inflation Report Keeps Fed on Aggressive Rate-Rise Path
The acceleration in inflation last month clinches the case for the Federal Reserve to lift interest rates by at least 0.75 percentage point at its meeting next week and raises the prospect of hefty increases continuing in coming months.
Fed officials had suggested they were prepared to make their third consecutive increase of 0.75 point next week even if inflation had cooled in August, as many economists were anticipating.
Private-Equity Investors Plan to Stay the Course in Volatile Market
Investors have plenty of reasons to stay the course with their private-equity commitments despite challenges like labor shortages, rising inflation, higher interest rates and political polarization, speakers at a conference said.
"We do want to keep investing through this cycle, as it's proven out time after time after time that that's a proven strategy," said Maurice Gordon, head of private equity at Guardian Life Insurance Co. of America, which ended 2021 with $10.7 billion in capital.
New Hampshire GOP Senate Primary Too Close to Call
WASHINGTON-New Hampshire Republicans Chuck Morse and Don Bolduc were locked in a Senate primary too close to call Tuesday night after voters there went to the polls to pick their nominee to face Democratic Sen. Maggie Hassan.
The eventual matchup will help determine control of the Senate. Ms. Hassan's re-election bid is expected to be one of the nation's most competitive in November, and key to Democrats' hopes for keeping their majority in the 50-50 split chamber.
Package Explodes at Boston's Northeastern University, Injuring Staff Member
A package delivered to a Northeastern University campus building in Boston detonated Tuesday evening and injured a staff member who opened it, the university and police said.
A search revealed a second similar package that was rendered safe by the bomb squad, the police department said. The 45-year-old staff member, a man, had non-life-threatening hand injuries and was transported to a local hospital for treatment.
U.S. Army Chinooks Return to Service Following Grounding
The U.S. Army said most of its Chinook helicopters have returned to service after a maintenance error led to a fleetwide grounding of the battlefield workhorse.
(MORE TO FOLLOW) Dow Jones Newswires
09-14-22 0505ET
