MARKET WRAPS
Stocks:
European stocks fell on Wednesday as investors weighed surging
inflation in the U.K. and positioned ahead of the release of the
latest FOMC meeting minutes.
London's FTSE 100 edged into negative territory after data
showed the U.K.'s annual rate of inflation moved into double digits
in July and is set to rise even higher by the end of the year.
Read more here.
Economists at JPMorgan see increasing signs that global
inflation is set to ease, with prices of food and many commodities
down from recent peaks. However, they expect that disinflation to
be evident first in the U.S., with Europe set to lag behind despite
some recent easing in the prices of goods leaving factory
gates.
"Europe, however, faces ongoing pressure from surging natural
gas prices that have more than doubled over the past three months,"
JPMorgan wrote in a note to clients.
"We expect the combined drag of a squeeze on purchasing power
and depressed sentiment to tip the region into recession this
year."
Economic Insight:
Inflation expectations are relatively firmly anchored in the
eurozone, Helaba said.
The five-year/five-year forward--a measure of longer-term
market-based inflation expectations--for the eurozone has been
hovering just above 2% since the beginning of July.
"The topic of inflation seems to have receded somewhat into the
background currently," Helaba said.
U.S. Markets:
Stock futures fell in premarket trading and while more earnings
reports from retailers such as Target and Lowe's are scheduled for
Wednesday, the focus for investors will be on the Fed meeting
minutes.
Recent signs of cooling inflation at both the consumer and
wholesale levels have led investors to bet on a less aggressive
Fed.
"Investors will be looking for any clues in the minutes report
that suggest the Fed may slow its pace of rate hikes now that the
inflation data are starting to decelerate," said AlphasFuture.
Forex:
The dollar could rise if the Fed's latest meeting minutes push
back against market expectations for the central bank to pivot
towards interest-rate cuts next year, ING said.
Rhetoric from Fed officials since the July meeting suggest this
is likely to be the case, particularly since the Fed funds future
price the policy rate being cut from 3.6% to 3.2% in the second
half of 2023, ING said.
"A further rejection of this market pricing should help the
dollar" and could help the DXY Dollar Index rise to around 107.00,
ING said.
Sterling and U.K. Inflation:
Sterling stayed higher on the day after data showed U.K.
inflation accelerated by more than expected in July.
Inflation rose to a four-decade high of 10.1% in July from 9.4%
in June, exceeding the 9.8% expected by analysts in a WSJ
survey.
"Inflation printing above forecasts adds to the mounting
pressure on the Bank of England to tighten monetary policy and
continue to raise interest rates," Silicon Valley said.
"Expect sterling to remain volatile in response as markets
grapple with a cost of living crisis, a fall in real wages, rampant
price growth and a bleak outlook for economic activity."
Ebury said the inflation data has both positive and negative
implications for sterling.
Higher inflation should trigger a more aggressive policy
response from the BOE, which is a "bullish signal" for sterling,
Ebury said.
"On the other hand, however, higher prices present a clear
downside risk to economic activity, and raises the possibility of a
potentially prolonged U.K. recession, which is clearly bearish for
GBP."
Read: Pound Won't Necessarily Rise if BOE Steps Up Inflation
Battle
Read: Surging UK Inflation Increases Recession Risk
Bonds:
The 1% mark for the 10-year German Bund yield is expected to
remain a support level, Commerzbank said, as it sticks to its
constructive outright stance.
Commerzbank said the market remains in summer trading mode,
characterized by larger swings in shaky liquidity.
---
10-year gilt yields rose after the latest U.K. annual inflation
print.
"Every upwards inflation surprise tightens the bind the BOE
finds itself in, with mounting inflation pressure combined with
growing recessionary headwinds," abrdn said.
It expects the BOE will deliver another 0.5% interest rate
increase at its next meeting.
With monetary policy having to tighten even in the face of bad
economic news, investors continue to have little in the way of a
safety net from central banks, which is likely to keep markets
volatile, abrdn said.
Mizuho said it was looking to fade rallies in gilts, with
further increases in year-on-year inflation to come in the coming
months.
"The U.K. faces eye-watering YoY inflation rates until at least
Q1 2023," Mizuho said.
The uncertainty of forecasting of Ofgem [Office of Gas and
Electricity Markets] energy price cap rises, and the feed-through
into CPI, will maintain hawkish pressure on the BOE, it said.
Mizuho's year-end target for the 10-year gilt yield is 2.3%.
Energy:
Oil prices ticked higher by midmorning in Europe, recovering
after dropping to their lowest level in six months, as data showed
that U.S. crude and gasoline inventories shrank.
However, Brent remained close to its lowest level since just
before Russia's invasion of Ukraine.
Data from the API on Tuesday showed U.S. crude stocks fell by
400,000 barrels last week while gasoline stocks slumped by 4.5
million barrels. Demand for gasoline in the U.S. had been sluggish
despite peak driving season. API's data could suggest delayed
demand is kicking in. The Department of Energy's inventory stats
are due later Wednesday.
Metals:
Base metals were mixed, "chopping sideways with weak supply
meeting weak demand," Marex said, referring to earlier trading in
Asia.
Zinc was down 1% after shooting higher Tuesday following
Nyrstar's announcement that it will be moving its Dutch zinc
operations into "care and maintenance." Marex said zinc inventories
were "close to record lows" at 75,000 ton.
It added that aggregate demand for base metals "has been dipping
and coupled with poor PMI and global inflation as a gauge, it has
been impacting sentiment for commodities and base metals
consumption in general."
DOW JONES NEWSPLUS
EMEA HEADLINES
U.K. Inflation Tops 10%, Underlining Gloomy Outlook for
Europe
The U.K.'s annual rate of inflation moved into double digits in
July and is set to rise even higher by the end of the year, heaping
greater pressure on stretched household budgets and threatening a
lengthy economic contraction.
That pickup in inflation has been replicated in other parts of
Europe, even as consumer prices have started to slow in the U.S.
That is because energy prices have continued to accelerate across
Europe as Russia withholds supplies of natural gas, with the
continent facing a possible crunch this winter.
GSK Says First US Plaintiff to Drop Zantac Case
GSK PLC said late Tuesday that the plaintiff's counsel in the
first of the U.S. lawsuits over discontinued heartburn drug Zantac
plans to file a notice of voluntary dismissal.
The pharmaceutical giant said that it didn't settle Joseph
Bayer's claim and hasn't made any payment for the dismissal.
Uniper Posts Massive 1H Loss as It Anticipates Further Russian
Gas Hit
Uniper SE on Wednesday reported a much-widened loss for the
first half of 2022 amid lower shipments of Russian gas and said its
full-year earnings should be negative.
The German utility company reported a net loss of 12.35 billion
euros ($12.56 billion), compared with a EUR20 million loss a year
earlier.
Cineworld Anticipates Significant Share Dilution After Weak
Admissions
Cineworld Group PLC said Wednesday that it is in funding talks
that will likely result in a significant dilution for existing
shareholders, as recent admissions have been below
expectations.
The FTSE 250 cinema operator said it is in discussions with
stakeholders and is evaluating strategic options for additional
liquidity and a potential restructure of its balance sheet through
a comprehensive deleveraging transaction. Steps to ensure balance
sheet strength and flexibility are being taken, including
significant operational and financial initiatives to manage costs
and enhance liquidity, it said.
Carlsberg 1H Revenue Beat Expectations as Volumes Rebounded
Carlsberg AS on Wednesday posted a forecast-beating rise in
first-half revenue after seeing strong growth in most markets.
The Copenhagen-based brewer said it achieved strong growth in
western Europe and Asia, partly offset by higher commodity prices
and energy costs.
Persimmon 1H Pretax Profit Fell; Backs 2022 Legal-Completions
Target
Persimmon PLC said Wednesday that pretax profit and revenue fell
in the first half of 2022, and that it anticipates delivery volume
to increase in the second half as the company rebuilds its outlet
position.
The U.K. house builder said that pretax profit was 439.7 million
pounds ($531.9 million), compared with GBP480.1 million a year
earlier.
Heat Wave Intensifies Energy Crisis in Europe
Natural-gas prices in Europe closed at a new record Tuesday,
with hot summer weather boosting fuel demand and Russia throttling
back supplies.
Europe has contended since June with drastically lower imports
of gas from Russia, until recently its biggest supplier by far.
Moscow cut flows through the Nord Stream pipeline by 80% to punish
Germany and others for supporting Ukraine. Fearing President
Vladimir Putin will order a full cutoff, the European Union has
embarked on a plan to conserve gas now to burn it over the
winter.
Germany to Keep Last Three Nuclear-Power Plants Running in
Policy U-Turn
BERLIN-Germany plans to postpone the closure of the country's
last three nuclear power plants as it braces for a possible
shortage of energy this winter after Russia throttled gas supplies
to the country, said German government officials.
While temporary, the move would mark the first departure from a
policy initiated in the early 2000s to phase out nuclear energy in
Germany and which had over time become enshrined in political
consensus.
Explosions Hit Russian Ammunition Depot in Crimea
Explosions rocked an ammunition depot in Crimea, damaging rail
tracks and power lines and marking a fresh blow to Moscow's war
effort.
The blasts were set off by Ukrainian saboteurs, according to a
senior Ukrainian government official. Russian officials also blamed
sabotage, their first official acknowledgment of a major strike on
the peninsula.
Kenya Opposition Leader Rejects Presidential Election Results,
Risking Turmoil
NAIROBI, Kenya-Opposition leader Raila Odinga, declared the
loser of last week's presidential election in Kenya, rejected the
results Tuesday and vowed to challenge William Ruto's victory in
court.
Mr. Odinga's move risked throwing the bitterly fought race into
crisis and raised fears Kenya could again face the partisan and
ethnic violence that left some 1,100 people dead after disputed
elections in 2007. In that race, Messrs. Odinga and Ruto ran on the
same opposition ticket and their supporters spent months fighting
backers of then-President Mwai Kibaki.
GLOBAL NEWS
New Zealand Central Bank Raises Cash Rate, Sees More
Tightening
WELLINGTON, New Zealand-The Reserve Bank of New Zealand raised
its benchmark interest rate by 50 basis points for a fourth
consecutive time and said more monetary tightening is needed to
control high inflation.
The central bank's decision on Wednesday increased the official
cash rate to 3.0% from 2.5%. The RBNZ's cash rate is now at its
highest in seven years and has been raised by 275 basis points
since October, when it was at a record-low 0.25%.
Glynn's Take: Australia Not yet Gripped by Wage-Price Spiral
SYDNEY-The wages of Australian workers grew at their fastest
pace since 2014 in the second quarter, but the country is still
well short of facing a damaging wages blowout.
When the Reserve Bank of Australia began raising interest rates
in May, the first tug on the monetary policy reins in over a
decade, it justified the decision in part by citing concerns that
surging inflation might trigger a 1970s-style wage-price surge.
Japan Exports Grew for 17th Consecutive Month in July
Japan's exports rose for the 17th month in a row in July, driven
by strong demand for autos and mineral fuels, Ministry of Finance
data showed Wednesday.
Exports rose 19% in July from a year earlier, which was slightly
stronger than the 18.2% increase expected by economists surveyed by
FactSet. Exports rose 19.4% in June.
U.S. to Buy Ukraine Grain, as Ship Traffic Increases
The U.S. Agency for International Development is spending more
than $68 million to purchase and ship Ukrainian grain in the
largest such export deal since Russia's invasion this year and the
start of a July agreement to allow for renewed shipments from
Ukraine's Black Sea ports.
USAID is providing the funds to the World Food Program, a United
Nations agency that historically gets the biggest part of its grain
from Ukraine, to purchase, ship and store up to 150,000 metric tons
of wheat, the agency said.
North Korea Resumes Weapons Activity With Two Cruise-Missile
Launches
SEOUL-North Korea fired two cruise missiles on Wednesday
morning, returning to weapons activity for the first time in two
months after having recently declared victory over its Covid-19
outbreak.
The missiles were launched from South Pyongan province, South
Korea's military said, without specifying the flight distance,
altitude or the precise launch time. North Korea hadn't conducted a
weapons test since June 5, when it fired eight short-range
ballistic missiles.
Liz Cheney Concedes to Trump-Backed Challenger in Wyoming
Primary
U.S. Rep. Liz Cheney conceded defeat Tuesday in the Republican
primary in Wyoming, an outcome that was a priority for former
President Donald Trump as he urged GOP voters to reject one of his
most prominent critics on Capitol Hill.
Ms. Cheney was the last House Republican to face a primary among
the 10 who voted to impeach Mr. Trump for his actions related to
the Jan. 6 Capitol riot. She was defeated by Harriet Hageman, a
water and natural resources attorney who was endorsed by the former
president.
Sarah Palin Advances in Alaska House Race
Sarah Palin, the former governor and 2008 vice-presidential
hopeful, advanced to the November general election in the race for
Alaska's only House seat, the Associated Press projected.
The race will be a competition between the top four candidates,
under a new ranked-choice voting system.
China's Ambassador Accuses U.S. of Exacerbating Crisis Over
Taiwan
WASHINGTON-China's ambassador to the U.S. accused Washington of
escalating the current crisis over Taiwan, in the latest round of
official objections from Beijing to the recent visits by House
Speaker Nancy Pelosi and other lawmakers to the island.
"Some Americans do not recognize and correct their mistakes,"
Ambassador Qin Gang said in an 11-minute statement at the beginning
of a news briefing Tuesday. "The U.S. side took the first step to
provoke China on the Taiwan question," he said, adding that the
visit of Mrs. Pelosi (D., Calif.) and a subsequent delegation that
included Sen. Ed Markey (D., Mass.) "greatly infringed on China's
sovereignty."
Write to paul.larkins@dowjones.com
Write to us at newsletters@dowjones.com
We offer an enhanced version of this briefing that is optimized
for viewing on mobile devices and sent directly to your email
inbox. If you would like to sign up, please go to
https://newsplus.wsj.com/subscriptions.
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
August 17, 2022 05:46 ET (09:46 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Mar 2024 to Apr 2024
FTSE 100
Index Chart
From Apr 2023 to Apr 2024