Market Update
Stock and Bond Markets Welcomed Weakening Inflation
Barry Adams
10 Aug, 2023
New York City
Stocks on Wall Street traded higher after the release of the consumer inflation report .
Market averages popped and Treasury yields held stable with a downward bias after the consumer price index rose 3.2% in July and core inflation edged lower to 4.7%, far above the Fed's target rate of 2%.
On a monthly basis, seasonally adjusted inflation rose 0.2%, the U.S. Bureau of Labor Statistics reported Thursday.
The inflation index, which understates price increases felt by most urban families, has gone up and down largely following the trajectory of crude oil prices.
Consumer inflation peaked at 9.1% in August and ever since it has been on the slide reflecting weakness in the crude oil prices, which declined at a slower pace of 12.5% in July after falling at 16.7% in June.
Markets reacted positively to the report and investors hoped that the latest inflation data may provide one reason to pause rate hikes at the next meeting.
The good news on the inflation front was also outweighed by the recent rise in crude oil prices, stoking fears of another bout of inflation at pump stations and at grocery stores.
At least in the last month, it was the cost of housing that drove the 90% increase in inflation.
Shelter cost jumped 0.4% on a monthly basis and rose 7.7% from a year ago, and housing cost weighs only one third in the CPI, the BLS noted in the report today.
On the employment front, real wages rose 0.3% from the previous month or increased 1.1% from a year ago, slower than overall inflation, the BLS reported in a separate report today.
While inflation is moving in the right direction and it has eased considerably from the 40-year high of 9.1% in June 2022, inflation is still above the Fed's target rate of 2%.
Moreover, much of the decline in inflation is because of base-effects and not Fed's doing, because rates are still not restrictive enough to slow economic growth.
Initial claims for jobless benefits rose 21,000 from the previous week to 248,000 in the week ending on August 5, the U.S. Department of Labor reported Thursday.
U.S. Indexes & Yields
The S&P 500 index traded up 0.7% to 4,502.25 and the Nasdaq Composite gained 0.8% to 13,835.40.
The yield on 2-year Treasury notes increased to 4.78%, 10-year Treasury notes inched lower to 4.02% and 30-year Treasury bonds edged down to 4.30%.
Crude oil decreased $0.87 to $83.56 a barrel and natural gas prices decreased 16 cents to $2.79 a thermal unit.
U.S. Stock Movers
Six Flags Entertainment Corp decreased 1.9% to $22.45 after the amusement park operator reported weaker-than-expected quarterly results.
The company reported revenue of $444 million and earnings of 25 cents a share and the company blamed the decline in earnings to higher reserves for self insurance.
Walt Disney Co increased $90.03 after the media and theme park operator reported a rare quarterly loss and the company said it will crack down on password sharing and lift prices on its free streaming services.
Alibaba Group Holding Ltd jumped 4.7% to $100.21 after the China-based e-commerce company reported better-than-expected earnings and revenue surged 14%, the best in two years.
Tapestry Inc dropped 12.5% to $36 after the apparel company agreed to acquire Capri Holdings, the parent of Versace, for $8.5 billion or $57 a share in cash.
Capri Holdings jumped 56.5% to $54.20.
AppLovin Corp jumped 26.2% to $37.15 after the game developer reported better-than-expected second quarter earnings of 22 cents and forecasted stronger-than-expected revenue between $780 million and $800 million.
Movers: Allianz, Antofagasta, Entain, Hapag Llyod, Novo Nordisk, Persimmon, Siemens, Thyssenkrupp, Zurich Insurance
Inga Muller
10 Aug, 2023
New York City
European markets traded higher for the second day in a row and bond yields held stable.
The DAX index increased 0.4% to 15,919.91, the CAC-40 index rose 0.9% to 7,388.29 and the FTSE 100 index added 0.07% to 7,591.98.
The yield on 10-year German bonds increased to 2.49%, French bonds traded higher to 3.06%, the UK gilts edged up to 4.37% and Italian bonds increased to 4.17%.
Zurich Insurance Group AG increased 1.8% to CHF 427.90 after the Swiss company reported strong results in the first-half.
Allianz SE jumped 2.9% to €220.75 after the German company reported better-than-expected profit increase in the second quarter.
Novo Nordisk AS decreased 1.9% to DKK 1,239.0 after the maker of weight loss blockbuster drug Wegovy extended supply restrictions in some areas for some doses.
Siemens AG declined5.4% to €138.18 after the German engineering group reported weaker-than-expected profit in the latest quarter.
Thyssenkrupp AG increased4.5% to €6.99 after the company estimated 2023 operating earnings are likely to be towards the upper end of the range.
Hapag Lloyd AG declined 3.4% to €186.10 after the container shipping company said profit in the first-half fell 67% from a year ago.
Antofagasta Plc jumped 1.5% to 1,631.0 pence after the company reported better-than-expected sales and earnings growth and increased its shareholder payout.
Luxury stocks in Paris advanced and Hermes and LVMH jumped between 1% and 2.5% after China permitted group tours to South Korea for the first time since 2017.
Entain Plc rose 1% to 1,371.0 pence after the gambling company swung to a pre-tax loss of £502.5 million from a profit of £28.1 million a year ago.
Persimmon Plc increased 3.4% to 1,160.0 pence after the UK-based home builder forecasted annual profit in line with market expectations.
European Markets Advanced and Energy Prices Stayed Elevated
Bridgette Randall
10 Aug, 2023
Frankfurt
European markets traded higher and investors reacted to regional corporate earnings.
Market averages in London, Paris and Frankfurt rebounded and banks continued to recover following losses two days ago after the Italian finance minister announced a cap on windfall tax.
Bond yields were stable ahead of the release of the U.S. inflation report later today.
Traders are looking for overall inflation to edge slightly higher but it is the core inflation that will drive the market sentiment.
Overall inflation has declined sharply from close to 9% high in August 2022 and has steadily fallen to below 4% reflecting the weakness in crude oil prices.
But core inflation has stayed near 4%, significantly higher than the Fed's preferred level of 2%, making some traders worried that the central bank may abandon its long standing target.
Crude oil prices traded near a 9-month high on the tighter supply conditions and natural gas prices soared on the worries that global supplies worries.
Europe Indexes & Yields
The DAX index increased 0.4% to 15,919.91, the CAC-40 index rose 0.9% to 7,388.29 and the FTSE 100 index added 0.07% to 7,591.98.
The yield on 10-year German bonds increased to 2.49%, French bonds traded higher to 3.06%, the UK gilts edged up to 4.37% and Italian bonds increased to 4.17%.
The euro edged lower to $1.102, the British pound to $1.272 and the U.S. dollar fetched 82.62 Swiss cents.
Natural gas prices jumped to a two-week high after LNG flows to terminals in the U.S. eased and traders are forecasting supplies from the U.S. are likely to be diverted to Asia in the next three months because of higher prices.
Despite the recent surge in prices, natural gas storage across the European Union is near a record 87% level and regulators are aiming for 90% level before the end of November to meet demand next winter.
Germany, Italy and Spain are at or near levels set by the EU authorities and France is expected to catch up in the next few weeks.
Brent crude decreased $0.11 to $87.40 a barrel and the Dutch TTF natural gas decreased €0.48 to €39.44 per MWh.
Europe Stock Movers
Zurich Insurance Group AG increased 1.8% to CHF 427.90 after the Swiss company reported strong results in the first-half.
Allianz SE jumped 2.9% to €220.75 after the German company reported better-than-expected profit increase in the second quarter.
Novo Nordisk AS decreased 1.9% to DKK 1,239.0 after the maker of weight loss blockbuster drug Wegovy extended supply restrictions in some areas for some doses.
Siemens AG declined5.4% to €138.18 after the German engineering group reported weaker-than-expected profit in the latest quarter.
Thyssenkrupp AG increased4.5% to €6.99 after the company estimated 2023 operating earnings are likely to be towards the upper end of the range.
Hapag Lloyd AG declined 3.4% to €186.10 after the container shipping company said profit in the first-half fell 67% from a year ago.
Antofagasta Plc jumped 1.5% to 1,631.0 pence after the company reported better-than-expected sales and earnings growth and increased its shareholder payout.
Luxury stocks in Paris advanced and Hermes and LVMH jumped between 1% and 2.5% after China permitted group tours to South Korea for the first time since 2017.
Entain Plc rose 1% to 1,371.0 pence after the gambling company swung to a pre-tax loss of £502.5 million from a profit of £28.1 million a year ago.
Persimmon Plc increased 3.4% to 1,160.0 pence after the UK-based home builder forecasted annual profit in line with market expectations.
S&P 500 and Nasdaq Drop 1% On Inflation Jitters, Natural Gas in Europe Soar 40%
Boris Petrov
09 Aug, 2023
New York City
Market averages failed to rebound a day after regional banks dropped more than 3% after Moody's downgraded several banks.
The S&P 500 index and the Nasdaq Composite traded down in a choppy session ahead of inflation data tomorrow and traders feared that despite the weakening overall inflation core inflation may stay elevated.
Investors are anticipating that the recent cooling trend will continue in July but core inflation may stay around 4.8% and overall inflation may dip to 3.3%.
Consumer prices have cooled following a decline in energy prices but service costs are still rising at elevated pace and core inflation is significantly above the 2% target set by the Federal Reserve.
Market participants are worried that the Federal Reserve may abandon its target rate of 2% after the stubborn core inflation staying near 3% for the next several months.
Moreover, the recent pick up in crude oil prices has stoked fears of a rebound in inflation and natural gas prices soared 40% in Europe after workers in Australia voted to strike at natural gas fields.
In overseas news, China reported deflation in July after consumer prices fell 0.3% from flat in June, the National Bureau of Statistics reported Wednesday.
Commodities prices traded volatile after the China inflation report but traders held out for an announcement of stimulus measures.
Closer to home, regional banks are expected to remain in focus after Moody's downgraded 10 banks and placed 11 other banks on its negative watch list.
Several analysts said rating agency's action may be too late and markets have already discounted reasons for downgrade.
U.S. Indexes & Yields
The S&P 500 index traded down 0.7% to 4,467.71 and the Nasdaq Composite declined 1.2% to 13,722.02.
The yield on 2-year Treasury notes decreased to 4.71%, 10-year Treasury notes inched lower to 4.01% and 30-year Treasury bonds edged down to 4.19%.
Crude oil decreased $1.17 to $84.07 a barrel and natural gas prices increased 18 cents to $2.96 a thermal unit.
U.S. Stock Movers
Lyft Inc declined 6.9% to $10.76 after the ride-hailing company released its quarterly results.
Stock jumped after the company reported adjusted earnings per share of 16 cents and revenue of $1.02 billion, meeting estimates set by some analysts.
But the stock turned lower after investors reassessed the company's fiscal fourth quarter revenue outlook which fell short of some analysts' estimates.
Rivian Automotive Inc was nearly unchanged at $24.80 after the maker of electric vehicles narrowed its quarterly loss and revised higher its production target.
Rivian said second quarter revenue jumped to $1.1 billion from $364 million and net loss shrank to $1.2 billion from $1.7 billion and diluted pre share declined to $1.27 from $1.89 a year ago.
The company forecasted 2023 production target of 52,000 from the previous estimate of 50,000 and higher than 25,000 from a year ago.
The company delivered 12,640 vehicles in the second quarter, sharply higher than 4,467 vehicles a year ago.
WeWork Inc plunged 9.9% to 19 cents after the company said in an SEC filing that it may consider restructuring its debt including bankruptcy amid weak membership rates.
PENN Entertainment Inc jumped 19% to $29.64 after the company signed a 10-year deal with ESPN to create ESPN Bet, a sports betting site.
As a part of the deal, Penn agreed to pay ESPN $1.85billion in cash.
European Markets Trim Day's Losses, Banks Rebound
European markets traded higher after banks rebounded and investors reviewed China inflation data.
Market averages jumped more than 1% and banks across the region advanced after Italy's finance minister clarified that the windfall tax will not exceed 0.1% of bank assets.
The government was forced to clarify its intent of levying 40% tax on excess profit linked to higher interest rates with a cap of 0.1% on assets with the intention of raising Є3 billion.
Intesa Sanpaolo, UniCredit, Banco BPM and Monte Dei Paschi di Siena jumped between 2% and 4%.
Banks in France, Germany and Spain also recovered losses in the previous session.
In Asia, China reported its first deflation over two years in July after consumer prices declined 0.3% from flat in June, the National Bureau of Statistics reported Wednesday.
Prices fell in July because of higher base previous year
China's consumer price inflation data followed weak international trade data a day ago that showed exports and imports fell in double digits in July, indicating weakening demand.
Investors are also awaiting U.S. inflation data Thursday and economists are estimating that the recent cooling of inflation will continue in July.
Europe Indexes & Yields
The DAX index increased 0.5% to 15,852.58, the CAC-40 index rose 0.7% to 7,322.04 and the FTSE 100 index added 0.8% to 7,587.30.
The yield on 10-year German bonds increased to 2.46%, French bonds traded higher to 3.03%, the UK gilts edged up to 4.39% and Italian bonds decreased to 4.13%.
The euro edged lower to $1.092, the British pound to $1.270 and the U.S. dollar fetched 87.66 Swiss cents.
Natural Gas Prices Soar 40%
Natural gas prices jumped to a two-week high and soared above €40 per megawatt-hour for the first time since June after workers at Woodside Energy Group and Chevron coted to strike.
The potential strike could disrupt global natural gas supplies and cause prices to surge as high as 60 per megawatt-hour if the strike continues longer than a month.
Moreover, LNG flows to terminals in the U.S. eased and traders are forecasting supplies from the U.S. are likely to be diverted to Asia in the next three months because of higher prices.
The U.S. exports about 11% of its natural gas production and Asian buyers are most likely to bid at higher prices for that supply.
Moreover, Norway is also undergoing its seasonal maintenance at several natural production location and potential delays could further spike prices.
Despite the recent surge in prices, natural gas storage across the European Union is near a record 87% level and regulators are aiming for 90% level before the end of November to meet demand in next winter.
Germany, Italy and Spain are at or near levels set by the EU authorities and France is expected to catch up in the next few weeks.
Brent crude decreased $1.17 to $87.33 a barrel and the Dutch TTF natural gas increased €8.78 to €39.82 per MWh.
Europe Stock Movers
ABN Amro Bank NV decreased 2.8% to €14.31 after the Dutch lender postponed its plan to buy back shares to the fourth quarter.
Mining companies rebounded on the hopes that the latest China deflation data may spur policymakers in providing additional stimulus to the property sector.
Glencore, Antofagasta, and Angle American jumped between 1% and 2%.
Continental AG edged up 0.8% to €70.50 despite the tire maker lowering its annual outlook.
Delivery Hero SE soared 7.2% to €39.94 after the food delivery services platform revised higher its revenue outlook.
Vestas Wind Systems AS increased 1.8% to Kr 182.82 after the wind turbine company reported a narrower second quarter loss and maintained its full-year 2023 outlook.
Hill & Smith PLC jumped 6.2% to 1,670.0 pence after the infrastructure company reported record first-half results.
Coca Cola HBC jumped 2.1% to €26.45 after the soft drinks beverage maker revised higher its organic growth estimate for the fiscal year 2023 and reiterated its operating earnings forecast.