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North American Morning Briefing: Stocks to Struggle as Investors Look Ahead to Latest CPI Print

08/09/2022 | 05:15am EDT

MARKET WRAPS

Watch For:

Preliminary Productivity and Costs for 2Q

Opening Call:

Stock futures edged higher on Tuesday as investors awaited inflation data this week that they hope will provide a clearer indication of how aggressive the Federal Reserve will have to be in raising interest rates.

Investors also were monitoring earnings reports to determine how hard inflation has been hitting businesses and consumers.

Greg McBride, chief financial analyst at Bankrate.com, said a decline in commodity prices since mid-June, mostly in gasoline prices, bodes well for a better report on inflation when the data for July are released.

"While the headline number may look a lot better, the true gauge of whether inflation has peaked is what happens with core prices that exclude the volatile food and energy prices movements," McBride said.

Zach Stein, chief investment officer at investment advisory firm Carbon Collective, said there is the belief in the market that inflation may have peaked. But Stein said even with that likelihood "inflation will still remain elevated for some time, as supply-chain issues persist and there is still plenty of instability with the Ukraine war, which has caused significant swings in energy prices.

"It's going to take years to see inflation revert back to the Federal Reserve's 2% target," he added.

Stocks to Watch:

Novavax slumped 29% in premarket trading after the Covid-19 vaccine maker slashed its guidance for 2022 revenue.

Novavax said it expects revenue this year of $2 billion to $2.3 billion, down from previous expectations of $4 billion to $5 billion. Coming into Tuesday, the shares have slumped almost 60% this year.

Forex:

The dollar edged down again on signs inflation may have peaked last month after data showed consumers lowered expectations of future inflation, said Swissquote.

A survey by the Federal Reserve Bank of New York showed a median expectation in July for annual inflation of 6.2% in one year, down from 6.8% in June.

"Investors are confident that inflation in the U.S. may have peaked last month. For economists, inflation expectations are more important than the actual data." However, Wednesday's CPI print "will say the last word, " said Swissquote.

Commerzbank said the euro may continue to trade sideways against the dollar even after this week's inflation data, adding that it can't think of any good reasons why EUR/USD should break out of its current 1.00-1.04 range.

Commerzbank said Friday's nonfarm payrolls data failed to do that and Wednesday's CPI data probably won't succeed either, as everyone knows inflation will remain high and the Fed will continue raising interest rates decisively.

The European Central Bank is unlikely to change its view either for now, Commerzbank said.

Energy:

Oil futures were down around 1% in Europe, with the prospect of Iranian exports returning to global markets following the latest talks between Washington and Tehran.

"The U.S. and Iran have weeks to decide whether they will revive the 2015 nuclear accord, which would open the door for Iran to resume oil exports," said Commonwealth Bank. "The deal rests on Iran eliminating their stockpiles of enriched uranium first before the U.S. lifts economic sanctions," with European Union diplomats presenting the two countries with the final draft of the accord.

Read Barrons.com: Oil Earnings Outlook Dims. Blame Cheaper Oil

Metals:

Base metals were higher in early London trading, with macro sentiment improving on lower risk drivers.

"The macro mood feels better this morning," said Peak Trading Research. There was "a mild risk recovery" after Nancy Pelosi's visit to Taiwan with agricultural commodities also being boosted by the improved sentiment.

Peak said most investors are looking to Wednesday's consumer inflation data release.

"Investors and the Fed want to see a lower inflation print, which would help reinforce the 'worst Fed hikes are behind us' narrative."


TODAY'S TOP HEADLINES


Tesla, EV Makers Stand to Get Billions for Factories From Senate Bill

The Senate climate bill passed over the weekend offers billions of dollars for electric-vehicle and battery factories, and includes rules that the auto industry says will make it tougher for some consumers to qualify for EV tax breaks.

The bill, which passed 51-50 on Sunday, sets aside more than $15 billion to retool factories and build new ones, according to industry groups. The measure aims to help traditional auto makers, startups and suppliers as they grow their facilities to collectively roll out dozens of EV models in the next couple of years.


Carlyle CEO's Early Contract Proposal Was Met With Silence From Firm's Board

As Kewsong Lee's five-year contract was drawing to a close, advisers to Carlyle Group Inc.'s CEO worked with representatives of the buyout firm to prepare an initial proposal for a new deal. Submitted this past spring, the contract proposal never got a response from Carlyle's board, according to people familiar with the matter.

Carlyle said late Sunday that Mr. Lee, who has been its chief executive since 2018, was stepping down from the firm effective immediately. William Conway, a co-founder and former co-CEO of the firm who was also its chief investment officer, will serve as its interim chief until a permanent replacement can be found.


News Corp Posts Revenue Growth, Boosted by Dow Jones

News Corp said revenue increased by 7.3% in the latest quarter, thanks to continued strength in advertising and rapid growth at Wall Street Journal parent Dow Jones & Co.

The New York-based media company, whose holdings include The Wall Street Journal, HarperCollins Publishers and news organizations in the U.K. and Australia, reported $2.67 billion in revenue in the quarter ended June 30, the final quarter of its fiscal year. The company swung to a net profit of $110 million, compared with a loss of $14 million in the year-earlier period, due in part to a higher tax benefit.


Oklahoma's Schusterman Family Faces Trial Over Oil Company's Bankruptcy

Members of Oklahoma's billionaire Schusterman family will be among the defendants in a bankruptcy-court trial over a soured buyout of Samson Resources Corp.

Judge Brendan Shannon of the U.S. Bankruptcy Court in Wilmington, Del., issued a ruling last week ahead of a trial starting next month. In the suit, a trustee is seeking to claw back more than $6 billion in payments collected by Samson's then-shareholders when the privately held oil-and-gas company was sold to KKR & Co. in 2011 for $7.2 billion.


Consumers Lower Their Expectations of Future Inflation

Americans are expecting less inflation in coming years, according to a recent survey by the Federal Reserve Bank of New York.

Respondents' median expectation in July was for an annual inflation rate of 6.2% in one year, down from the 6.8% they expected in June, the regional reserve bank said Monday. They expected inflation in three years to be at 3.2%, down from the 3.6% they expected in June, and inflation in five years to be at 2.3%, down from a previous 2.8%.


China's Car-Sales Recovery Stays on Track

SINGAPORE-Car sales in China, the world's biggest auto market, continued to recover in July as production ramped up following disruptions from Covid-19 lockdowns and authorities offered incentives to boost consumption.

Last month, China's retail sales of passenger cars rose 20% from a year earlier to 1.81 million vehicles, China Passenger Car Association said Tuesday. Sales dropped 6.5% from June, with July tending to be a slower month for car sales in China as the heat makes customers go out to visit stores less often, according to the association.


FBI Searches Trump's Florida Home Mar-a-Lago in Document Investigation

WASHINGTON-FBI agents searched former President Donald Trump's Mar-a-Lago home in Palm Beach, Fla., on Monday, which people familiar with the matter said was part of an investigation into Mr. Trump's handling of classified information.

The search was made public in a statement released by Mr. Trump, in which he said FBI agents were at his home.


Russia Says it Won't Allow U.S. Inspection for Now of Its Nuclear Weapons

The crisis over Russia's invasion of Ukraine spilled into the realm of arms control on Monday when Moscow said it won't support the resumption of inspections of its nuclear arsenal under the New START nuclear arms treaty because of travel restrictions imposed by the U.S.

The accord, which cuts long-range nuclear arms, is the last major agreement regulating the nuclear competition between Washington and Moscow. Both sides have been observing its limits.


South Korea Suffers Worst Rainfall in Eight Decades

SEOUL-South Korea's heaviest rainfall since World War II submerged cars on the streets, flooded subway stations and left at least eight people dead.

The downpours also hit neighboring North Korea, which added to the chaos by discharging floodwaters near the two countries' border without giving advance notice as required by an inter-Korean accord. Water levels near one border-area bridge rose to nearly 17 feet Monday afternoon, or six times higher than normal, South Korean officials said.


Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

All 2Q unless tated otherwise

Alaris Eqty Ptrns Incm

Andlauer Hlthcare

Bausch Health

Bird Construction

Bragg Gaming

Calibre Mining

Charlotte's Wb Hldgs

Conifex Timber

Converge Tech Solus

Cronos Grp

Dexterra Grp

E Automotive

Endeavour Silver

EQB

Firm Cap Mtge Invest

Freehold Royalties

Greenlane Renewables

Hydro One

Kinaxis

Lundin Gold

Maxar Tech

Nuvei

Orla Mining

Osisko Gold Royalties

Pet Valu Hldgs

Superior Plus

Total Energy

Triple Flg Precs Mtls

VerticalScope Hldgs

Economic Indicators:

None scheduled

Stocks to Watch:

Imperial Metals 2Q Loss/Shr C$0.21; Loss C$29.3M; Rev C$36.4M

---

K-Bro Linen 2Q Net C$1.62M

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(MORE TO FOLLOW) Dow Jones Newswires

08-09-22 0515ET

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 1.30% 0.66411 Delayed Quote.2.29%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 1.48% 0.65169 Delayed Quote.-11.82%
BAUSCH HEALTH COMPANIES INC. 1.52% 7.005 Delayed Quote.-75.05%
BIRD CONSTRUCTION INC. 3.52% 6.17 Delayed Quote.-39.31%
BRITISH POUND / EURO (GBP/EUR) 1.32% 1.15203 Delayed Quote.-4.34%
CALIBRE MINING CORP. 6.32% 1.01 Delayed Quote.-29.10%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.89% 0.747222 Delayed Quote.5.98%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 1.04% 0.73294 Delayed Quote.-8.62%
COMMERZBANK AG -0.63% 7.296 Delayed Quote.9.76%
DEXTERRA GROUP INC. 1.74% 5.85 Delayed Quote.-33.06%
E AUTOMOTIVE INC. 1.02% 4.95 Delayed Quote.0.00%
ENDEAVOUR SILVER CORP. 11.30% 4.63 Delayed Quote.-22.24%
EURO / US DOLLAR (EUR/USD) 0.16% 0.98114 Delayed Quote.-13.87%
FREEHOLD ROYALTIES LTD. 5.70% 15.17 Delayed Quote.23.43%
HYDRO ONE LIMITED 1.27% 34.19 Delayed Quote.2.64%
IMPERIAL METALS CORPORATION 2.88% 2.5 Delayed Quote.-20.20%
INDIAN RUPEE / EURO (INR/EUR) 0.01% 0.01252 Delayed Quote.6.17%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.06% 0.012263 Delayed Quote.-8.63%
KINAXIS INC. 2.17% 140.06 Delayed Quote.-22.70%
KKR & CO. INC. 3.23% 44.39 Delayed Quote.-42.28%
LONDON BRENT OIL 1.07% 88.69 Delayed Quote.9.50%
LUNDIN GOLD INC. 4.38% 10.04 Delayed Quote.-7.87%
MCBRIDE PLC 1.06% 23.8 Delayed Quote.-60.75%
MSCI SINGAPORE (GDTR) 1.29% 5346.57 Real-time Quote.-14.84%
MSCI TAIWAN (STRD) -1.48% 453.193 Real-time Quote.-38.03%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 1.75% 0.572 Delayed Quote.-18.17%
NEWS CORPORATION 3.44% 15.64 Delayed Quote.-32.27%
NUVEI CORPORATION 3.62% 38.63 Delayed Quote.-54.48%
ORLA MINING LTD. 5.32% 4.75 Delayed Quote.-6.63%
OSISKO GOLD ROYALTIES LTD 1.42% 14.27 Delayed Quote.-9.11%
PAX DOLLAR (USDP/USD) -0.23% 0.9997 End-of-day quote.-0.02%
PET VALU HOLDINGS LTD. 1.44% 35.3 Delayed Quote.-3.66%
SILVER 8.02% 20.6382 Delayed Quote.-18.42%
SUPERIOR PLUS CORP. 2.69% 10.28 Delayed Quote.-22.92%
THE CARLYLE GROUP INC. 4.99% 27.15 Delayed Quote.-52.93%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -2.65% 58.625 Delayed Quote.-21.17%
VERTICALSCOPE HOLDINGS INC. -3.40% 9.66 Delayed Quote.-67.23%
WTI 1.92% 83.489 Delayed Quote.8.90%
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