Market Update
Powell Says Cooling Inflation Will Take Time
Brian Turner
21 Jun, 2023
New York City
Treasury yields perked up and stocks on Wall Street turned lower after the Fed Chairman Powell sounded an alarm on inflation.
In his prepared remarks for his testimony to be delivered to the House Financial Services Committee, Powell said that the latest rate pause is likely to be followed by rate hikes as inflation remains too high for the central bank's comfort.
"Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go," Chairman Powell noted in his prepared remark for lawmakers.
"Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets," highlighted Powell while reviewing the current economic situation.
Nearly all FOMC participants expect that "it will be appropriate to raise interest rates somewhat further by the end of the year."
The Federal Reserve's hawkish stance has failed to bring down inflation to its target rate of 2% despite the increase in rates by five percentage points over the last fifteen months.
Overall inflation has cooled in the last six months but that is largely because of the sharp fall in crude oil and natural gas prices but housing prices are still 50% to 150% above the pre-Covid 2019 levels in the most urban areas.
Market Averages Turn Lower After Powell Reiterates Need for Rate Hikes
Barry Adams
21 Jun, 2023
New York City
Stocks on Wall Street remained under pressure for the second day this week after Fed Chairman Powell sounded an alarm on inflation.
In his prepared remarks for his testimony to be delivered to the House Financial Services Committee, Powell said that the latest rate pause is likely to be followed by rate hikes as inflation remains too high for the central bank's comfort.
"Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go," Chairman Powell noted in his prepared remark for lawmakers.
"Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets," highlighted Powell while reviewing the current economic situation.
Nearly all FOMC participants expect that "it will be appropriate to raise interest rates somewhat further by the end of the year."
Crude oil drifted lower to a 15-month low as demand growth following the ending of China's "zero Covid" remains uncertain and weaker-than-expected.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.4% to 4,373.83 and the Nasdaq Composite futures declined 0.4% to 13,619.85.
The yield on 2-year Treasury notes increased to 4.72%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds edged up to 3.84%.
Crude oil decreased $0.02 to $71.54 a barrel and natural gas prices decreased 1 cent to $2.45 a thermal unit.
U.S. Stock Movers
FedEx Corp declined 3% to $224.01 after the parcel delivery company grounded additional planes because of lack of demand.
FedEx reported weaker-than-expected quarterly revenue but adjusted earnings were ahead of market expectations.
Rivian Automotive Inc increased 1.6% to $15.70 after the company announced that its customers will be able to charge vehicles made by the company using Tesla electric charging stations next year.
Winnebago Industries, Inc declined 8.1% to $59.01 after the maker of RVs reported sales declined 38% in its latest quarter because of heavier discounting and macroeconomic headwinds.
Cryptocurrencies linked stocks advanced after Bitcoin continued to scale higher.
Coinbase Global increased 2.5% to $58.41, MicroStrategy advanced 3.3% to $323.31 and Riot Platforms Inc surged 4.4% to $11.79.
Europe Movers: Automakers, Banks, Lufthansa, VEON
Bridgette Randall
21 Jun, 2023
Frankfurt
Automakers were in focus after new passenger car registration in May increased 18.5% following a 17.2% rise in April.
BMW AG increased 0.6% to €111.20, Stellantis NV added 1.1% to €15.55 and Renault SA jumped 2.6% to €36.44.
Banks traded higher in the region after UK inflation was ahead of expectations and bond yields advanced on the hopes of a rate hike cycle to continue.
Deutsche Bank AG increased 1.6% to €9.48, Commerzbank advanced 1.8% to €10.38, BNP Paribas jumped 1.1% to €57.34, Barclays inched lower 0.9% to 152.88 pence and HSBC Holdings Plc advanced 0.4% to 617.50 pence.
Deutsche Lufthansa AG increased 1.1% to €9.37 after the German airline sold its travel solution business Lufthansa AirPlus Servicekarten GmbH to Sweden-based SEB Kort Bank AB for €450 million.
VEON Ltd declined 1.4% to 72 euro cents after the company announced its plan to invest $600 million in its Ukrainian subsidiary Kyivstar, the largest mobile telecom network in Ukraine.
EU Car Registration Jumped 18.5%, UK Inflation Held at 8.7%
Bridgette Randall
21 Jun, 2023
Frankfurt
European markets traded down for the third day in a row on valuation worries and economic uncertainties.
Benchmark indexes in Frankfurt and Paris edged lower but traded near record highs.
The benchmark index in London declined after the latest inflation data reinforced additional tightening by the Bank of England and core inflation accelerated to a 31-year high.
The latest inflation data also led many to forecast that the Bank of England may lift interest rates by 50 basis points rather than 25 basis points as had been expected on Thursday.
Higher interest rates are expected to affect 800,000 mortgages due for refinancing in the second half of this year, according to the financial service industry association UK Finance.
Higher UK mortgage rates will force most borrowers to cut spending elsewhere, affecting overall household spending and GDP growth.
Automakers were in focus after new car registration rose for the tenth month in a row.
UK Inflation Held Steady at 8.7%
The consumer price inflation in May matched the April level of 8.7%, the Office for National Statistics reported Wednesday.
Core inflation, which excludes food, energy, alcohol and tobacco, accelerated to 7.1%, the highest level since March 1992.
The inflation remained at a 13-month low but significantly above the 2% target set by the Bank of England, adding more urgency to policymakers' tightening campaign.
Food inflation slowed to 18.3% from 19.0% and energy price decline increased to 13.1% from 8.9% offsetting air travel inflation to 31.4% from 12.6% and recreational and cultural goods and services to 6.7% from 6.3%.
EU Passenger Car Registration Up 18.5% in May
Passenger car registration in the European Union increased for the tenth month in a row, the European Automobiles Manufacturers Association reported Wednesday.
Passenger car registration increased 18.5% to 938,950 units, and all four largest markets reported an increase.
Registration in Italy increased 23.1%, in Germany 19.2%, in France 14.8% and in Spain 8.3%.
Battery powered cars soared 70.9% to 129,847 units, lifting its market share by four percentage points from a year ago to 13.8%.
Automobile registration in the first five months increased 18% to 4.4 million but still 23% below 5.7 million in the period a year ago.
Europe Indexes & Yields
The DAX index increased 0.1% to 16,132.61, the CAC-40 index declined 0.04% to 7,289.96 and the FTSE 100 index increased 0.1% to 7,575.18.
The yield on 10-year German Bunds inched lower to 2.41%, French bonds traded lower to 2.96%, the UK gilts edged down to 4.41% and Italian bonds decreased to 4.05%.
The euro edged lower to $1.09, the British pound to $1.27 and the Swiss franc to 89.75 cents.
Brent crude increased $0.30 to $76.20 a barrel and the Dutch TTF natural gas decreased €0.82 to €37.89 per MWh.
Europe Stock Movers
Automakers were in focus after new passenger car registration in May increased 18.5% following a 17.2% rise in April.
BMW AG increased 0.6% to €111.20, Stellantis NV added 1.1% to €15.55 and Renault SA jumped 2.6% to €36.44.
Banks traded higher in the region after UK inflation was ahead of expectations and bond yields advanced on the hopes of a rate hike cycle to continue.
Deutsche Bank AG increased 1.6% to €9.48, Commerzbank advanced 1.8% to €10.38, BNP Paribas jumped 1.1% to €57.34, Barclays inched lower 0.9% to 152.88 pence and HSBC Holdings Plc advanced 0.4% to 617.50 pence.
Deutsche Lufthansa AG increased 1.1% to €9.37 after the German airline sold its travel solution business Lufthansa AirPlus Servicekarten GmbH to Sweden-based SEB Kort Bank AB for €450 million.
VEON Ltd declined 1.4% to 72 euro cents after the company announced its plan to invest $600 million in its Ukrainian subsidiary Kyivstar, the largest mobile telecom network in Ukraine.
Market Rally Stalled After Stocks Hit Valuation Ceiling
Barry Adams
20 Jun, 2023
New York City
Stocks lacked direction and market indexes declined after advancing for weeks.
U.S. market indexes opened lower and spent today's session in red following the Juneteenth holiday on Monday.
Investors also digested the unexpected surge in housing starts in May despite elevated home prices and rising mortgage rates.
For weeks, markets extended rally on the expectations that the Federal Reserve is more likely to pause rate hikes and continued to rally after the Fed's decision.
The rally continued on the hopes that the central bank is nearing the end of its monetary tightening cycle despite the Fed Chairman Jerome Powell saying future rate path is data dependent.
At the end of last week, the S&P 500 index advanced for the fifth week in a row by 2.6% and the Nasdaq Composite index gained for the eighth week and added 3.2%.
Tech stocks rally powered the two-month rally on the expectations of AI fueled demand for semiconductor chips and software platforms.
The narrow rally of the last two months has relied on the hopes of rising sales and earnings at tech companies in the belief that demand for AI services will kick off a new business and consumer spending cycle.
Investors are hoping that the latest rate-pause is likely to be extended at the next policy meeting in July and the U.S. economy is resilient enough to avoid recession this year, two large assumptions that may not prove to be correct.
In addition, market gains are muted because of the decline in energy prices.
In overseas news, China trimmed its loan prime rate by 10 basis points for 1-year to 3.65% and 5-year to 4.2%.
Despite the expected marginal rate cuts, market indexes in Hong Kong and Shanghai declined after the government did not announce deeper structural reforms to revive the weak economic recovery.
The Hang Seng index declined 1.5% and the Shanghai Composite index dropped 0.5% after a cabinet meeting on Friday failed to provide additional stimulus measures.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.3% and the Nasdaq Composite futures declined 0.4%.
The yield on 2-year Treasury notes increased to 4.70%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds eased to 3.85%.
Crude oil increased $1.30 to $70.68 a barrel and natural gas prices increased 1 cent to $2.66 a thermal unit.
U.S. Stock Movers
Alibaba Group Holding Ltd declined 2.2% to $90.10 after the company announced management shakeup.
Co-founder Eddie Wu will succeed Daniel Zhang as chief executive of the company.
European Markets Extend 2-day Losses
European markets eased and investors focused on the region's economic health and digested the latest news from China.
Benchmark indexes in Frankfurt, London and Paris declined for the second day this week after the widely anticipated rate cut in China failed to mist market sentiment.
The Peoples' Bank of China lowered its loan prime rate by 10 basis points for 1-year to 3.65% and 5-year to 4.2%.
Investors are also anticipating a 25-basis points rate hike by the Bank of England on Thursday.
Closer to home, producer price inflation in Germany declined for the eighth month in a row 1.0% and dropped to the level last seen in January 2021.
The European Central Bank said adjusted current account surplus of 20-nation dropped to Є4 billion in April from Є31 billion in the previous month.
German Producer Price Inflation Slowed to 28-month Low
Producer price inflation on an annual basis eased to 1% in May from 4.1% in April, the Federal Statistics Office or Destatis reported Tuesday.
The inflation rate was the slowest since January 2021, after energy prices declined 3.3% from a year ago and fell 3.5% from the previous month.
The sharp fall in energy prices by 34% since September 2022, helped to cushion price increases in capital goods and intermediate goods.
On a monthly basis, inflation from April decreased 1.4%
Prices for non-durable consumer goods were 10.1% higher in May and rose 0.1% from the previous month. Food prices were 11.9% from a year ago.
Prices of durable consumer goods increased 7.9% compared to May 2022, mainly driven by an 8.8% increase in furniture prices and domestic appliances by 9.1%.
The 10.9% decline in metals prices drove down intermediate goods prices by 2.3% in May from a year ago.
Swiss Trade Surplus Advanced to 15-month High
Swiss trade surplus rose to CHF 4.3 billion in May from the revised 2.1 billion surplus in April, the Federal Customs Administration said Tuesday.
The trade surplus was the largest since February 2022 because exports rose 7.8% to CHF 22.3 billion and imports declined 3.1% to a 17-month low of CHF 18.0 billion.
Exports of chemicals and pharmaceuticals increased 15.1%, machinery and electronics 0..2%, watches 3.8%, food and beverages 5.6% and vehicles by 9.1%.
Exports to the U.S. increased 7% to CHF 4.2 billion, China jumped 11% to CHF 1.4 billion, Germany 4% to CHF 3.5 billion and Slovenia soared 39% to CHF 1.5 billion and to India decreased 2.5% to CHF 152 million.
Imports from Germany declined 5.1% to CHF 4.6 billion, Italy increased 0.3% to CHF 1.8 billion, declined 1.6% to CHF 1.5 billion, the U.S. jumped 9.8% to 1.2 billion and declined 12.9% to CHF194 billion.
Europe Indexes & Yields
The DAX index decreased 0.6% to 16,111.30, the CAC-40 index declined 0.4% to 7,294.18 and the FTSE 100 index dropped 0.3% to 7569.31.
The yield on 10-year German Bunds inched higher to 2.49%, French bonds traded lower to 3.00%, the UK gilts edged down to 4.46% and Italian bonds increased to 4.08%.
The euro edged lower to $1.09, the British pound to $1.27 and the Swiss franc to 89.70 cents.
Brent crude decreased $0.80 to $75.25 a barrel and the Dutch TTF natural gas decreased €2.28 to €37.19 per MWh.
Europe Stock Movers
Stellantis NV declined 2.2% to €15.39 after the Italian vehicle maker struck a 50:50 partnership with Foxconn to design and sell semiconductors for the automotive industry from 2026.
Braemar Plc dropped 3.5% to 278.0 pence after the company said chief finance officer Nick Stone will step down on July 31.
Abrdn Plc declined 1.1% to 213.20 pence after the company sold its 10% stake or 21.8 million shares in the India-based HDFC Asset Management Company.
Monks Investment Trust Plc declined 0.1% to 994 pence after the company posted a smaller loss in the fiscal year 2023.
Renault SA declined 3.9% to €35.45 and the company assigned additional responsibilities to group chief executive Luca de Meo as chairman and CEO of its electric vehicle unit Ampere.
Renault is still considering listing Ampere on the stock market.
Sanofi SA increased 3.5% to €97.75 after the company won an international arbitration case related to claims by Boehringer Ingelheim in connection with cancer lawsuits linked to Zantac in the U.S.
Housing Permits, Starts and Completions Increased in May
Brian Turner
20 Jun, 2023
New York City
Housing market showed resilience despite elevated home prices, rising interest rates and tight market conditions.
Building permits, housing starts and completions rose in May from the previous month, the U.S. .Census Bureau and the U.S. Department of Housing and Urban Development reported Tuesday.
Seasonally adjusted residential building permits annual rate increased 5.2% to 1..49 million from 1.417 million in April but declined 12.7% from a year ago.
Single family resident permit increased 4.8% from April to 897,000 and multi-unit permits rose to 542,000.
Seasonally adjusted housing starts annual rate increased 21.7% from the April level to 1.631 million from 1.34 million and 5.7% from a year ago level of 1.543 million.
Housing starts were downwardly revised in April to 1.34 million from the previous estimate of 1.401 million units.
Single-family housing starts increased 18.5% to 997,000 units from April and multi-family rate was 624,000 units.
Housing completions annual rate increased 9.5% to 1,518 million from April and 5.0% from a year ago rate of 1.386 million.
Single-family housing completion rate in May increased 3.9% from April to 1.518 million and multi-family rate was 493,000.
Stocks Face Headwinds On Wall Street After Rallying for Two Months
Barry Adams
20 Jun, 2023
New York City
Stocks struggled to advance after rallying in the previous week and Treasury bond yields traded mixed.
U.S. financial markets were closed Monday due to the Juneteenth holiday.
Markets extended rally after the Federal Reserve left its key lending rates unrevised and raised hopes that the monetary tightening cycle is nearing end.
The S&P 500 index advanced for the fifth week in a row by 2.6% and the Nasdaq Composite index gained for the eighth by 3.2%.
Much of the market rally is powered by leading tech stocks on the expectations of AI fueled demand for semiconductor chips and software platforms.
The narrow rally of the last two months has relied on the hopes of rising sales and earnings at tech companies in the hopes that the AI services will lead to the next round of business and consumer spending following the latest cloud computing cycle.
Investors are hoping that the latest rate hike pause is likely to be extended at the next policy meeting in July and the U.S. economy is resilient enough to avoid recession this year.
In addition, the sharp fall in energy prices this year has tampered market gains and tech fueled rally has failed to broaden to multiple sectors.
In overseas news, China trimmed its loan prime rate by 10 basis points for 1-year rate to 3.65% and 5-year rate to 4.2%.
Despite the marginal rate cuts as expected, market indexes in Hong Kong and Shanghai declined on the worries that the government may need to announce deeper structural reforms to revive the weak economic recovery.
The Hang Seng index declined 1.5% and the Shanghai Composite index dropped 0.5% after a cabinet meeting on Friday failed to provide additional stimulus measures.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.3% and the Nasdaq Composite futures declined 0.4%.
The yield on 2-year Treasury notes increased to 4.70%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds eased to 3.85%.
Crude oil increased $0.04 to $71.88 a barrel and natural gas prices increased 1 cent to $2.66 a thermal unit.
U.S. Stock Movers
Alibaba Group Holding Ltd declined 2.2% to $90.10 after the company announced management changes.
Co-founder Eddie Wu will succeed Daniel Zhang as chief executive of the company.
Movers: Abrdn, Braemar, Lanxess, Monks Investment, Renault, Sanofi, Stellantis
Bridgette Randall
20 Jun, 2023
Frankfurt
Stellantis NV declined 2.2% to €15.39 after the Italian vehicle maker struck a 50:50 partnership with Foxconn to design and sell semiconductors for the automotive industry from 2026.
Lanxess AG declined 16.3% to €26.38 after the German specialty chemical company lowered its second quarter and full-year 2023 adjusted operating earnings outlook.
Braemar Plc dropped 3.5% to 278.0 pence after the company said chief finance officer Nick Stone will step down on July 31.
Abrdn Plc declined 1.1% to 213.20 pence after the company sold its 10% stake or 21.8 million shares in the India-based HDFC Asset Management Company.
Monks Investment Trust Plc declined 0.1% to 994 pence after the company posted a smaller loss in the fiscal year 2023.
Renault SA declined 3.9% to €35.45 and the company assigned additional responsibilities to group chief executive Luca de Meo as chairman and CEO of its electric vehicle unit Ampere.
Renault is still considering listing Ampere on the stock market.
Sanofi SA increased 3.5% to €97.75 after the company won an international arbitration case related to claims by Boehringer Ingelheim in connection with cancer lawsuits linked to Zantac in the U.S.
European Market Declined On Economic Jitters, German Wholesale Inflation Eased, Swiss Trade Surplus Expanded
Bridgette Randall
20 Jun, 2023
Frankfurt
European markets eased and investors focused on the region's economic health and digested the latest news from China.
Benchmark indexes in Frankfurt, London and Paris declined for the second day this week after the widely anticipated rate cut in China failed to mist market sentiment.
The Peoples' Bank of China lowered its loan prime rate by 10 basis points for 1-year to 3.65% and 5-year to 4.2%.
Investors are also anticipating a 25-basis points rate hike by the Bank of England on Thursday.
Closer to home, producer price inflation in Germany declined for the eighth month in a row 1.0% and dropped to the level last seen in January 2021.
The European Central Bank said adjusted current account surplus of 20-nation dropped to Є4 billion in April from Є31 billion in the previous month.
German Producer Price Inflation Slowed to 28-month Low
Producer price inflation on an annual basis eased to 1% in May from 4.1% in April, the Federal Statistics Office or Destatis reported Tuesday.
The inflation rate was the slowest since January 2021, after energy prices declined 3.3% from a year ago and fell 3.5% from the previous month.
The sharp fall in energy prices by 34% since September 2022, helped to cushion price increases in capital goods and intermediate goods.
On a monthly basis, inflation from April decreased 1.4%
Prices for non-durable consumer goods were 10.1% higher in May and rose 0.1% from the previous month. Food prices were 11.9% from a year ago.
Prices of durable consumer goods increased 7.9% compared to May 2022, mainly driven by an 8.8% increase in furniture prices and domestic appliances by 9.1%.
The 10.9% decline in metals prices drove down intermediate goods prices by 2.3% in May from a year ago.
Swiss Trade Surplus Advanced to 15-month High
Swiss trade surplus rose to CHF 4.3 billion in May from the revised 2.1 billion surplus in April, the Federal Customs Administration said Tuesday.
The trade surplus was the largest since February 2022 because exports rose 7.8% to CHF 22.3 billion and imports declined 3.1% to a 17-month low of CHF 18.0 billion.
Exports of chemicals and pharmaceuticals increased 15.1%, machinery and electronics 0..2%, watches 3.8%, food and beverages 5.6% and vehicles by 9.1%.
Exports to the U.S. increased 7% to CHF 4.2 billion, China jumped 11% to CHF 1.4 billion, Germany 4% to CHF 3.5 billion and Slovenia soared 39% to CHF 1.5 billion and to India decreased 2.5% to CHF 152 million.
Imports from Germany declined 5.1% to CHF 4.6 billion, Italy increased 0.3% to CHF 1.8 billion, declined 1.6% to CHF 1.5 billion, the U.S. jumped 9.8% to 1.2 billion and declined 12.9% to CHF194 billion.
Europe Indexes & Yields
The DAX index decreased 0.8% to 16,073.30, the CAC-40 index declined 0.4% to 7,284.28 and the FTSE 100 index was nearly unchanged at 7589.04.
The yield on 10-year German Bunds inched higher to 2.49%, French bonds traded lower to 3.00%, the UK gilts edged down to 4.46% and Italian bonds increased to 4.08%.
The euro edged lower to $1.09, the British pound to $1.27 and the Swiss franc to 89.70 cents.
Brent crude increased $0.72 to $76.82 a barrel and the Dutch TTF natural gas decreased €1.49 to €36.49 per MWh.
Europe Stock Movers
Stellantis NV declined 2.2% to €15.39 after the Italian vehicle maker struck a 50:50 partnership with Foxconn to design and sell semiconductors for the automotive industry from 2026.
Braemar Plc dropped 3.5% to 278.0 pence after the company said chief finance officer Nick Stone will step down on July 31.
Abrdn Plc declined 1.1% to 213.20 pence after the company sold its 10% stake or 21.8 million shares in the India-based HDFC Asset Management Company.
Monks Investment Trust Plc declined 0.1% to 994 pence after the company posted a smaller loss in the fiscal year 2023.
Renault SA declined 3.9% to €35.45 and the company assigned additional responsibilities to group chief executive Luca de Meo as chairman and CEO of its electric vehicle unit Ampere.
Renault is still considering listing Ampere on the stock market.
Sanofi SA increased 3.5% to €97.75 after the company won an international arbitration case related to claims by Boehringer Ingelheim in connection with cancer lawsuits linked to Zantac in the U.S.
Movers: Astra Zeneca, BAT, Coca Cola HBC, MTU Aero Engines, Sartorius, Spectris, Surface Transforms
Bridgette Randall
19 Jun, 2023
Frankfurt
The DAX index decreased 0.5% to 16,272.18, the CAC-40 index declined 0.5% to 7,350.17 and the FTSE 100 index fell 0.3% to 7,622.64.
Coca Cola HBC AG declined 2.3% to €26.78 after the company agreed to acquire the Finlandia Vodka brand for $220 million from Brown-Forman.
AstraZeneca Plc declined 0.9% to 11,684.0 pence on the news that the company is looking to spin off its China business.
MTU Aero Engines AG increased 3.4% to €234.40 after the company revised higher its 2023 annual outlook.
Resource companies traded down on the worries of weakening demand from metal manufacturing companies.
Glencore, Antofagasta, and Anglo American declined between 1% and 2%.
Luxury stocks declined after China's State Council failed to announce no new measures to boost economic growth after a meeting on Friday.
Hermes International SCA declined 0.8% to €1,969.80 and LVMH dropped 1.1% to €859.10.
Spectris plc edged up 0.08% to 3,708.25 pence after the company signed an agreement to acquire MicroStrain Sensing Systems Business for 37.6 million.
Sartorius AG plunged 16.3% to €247.50 after the lab equipment maker lowered its 2023 outlook on weaker-than-expected demand in the second half.
British American Tobacco added 0.5% to 2,592.50 pence after the company announced significant changes to its board.
Surface Transforms Plc decreased 1.5% to 32.50 pence after the company appointed Isabelle Maddock as new Chief Financial Officer from September 4.
European Stocks Turn Lower, Bond Yields at 12-year Highs, Euro and Pound 14-month Highs
Bridgette Randall
19 Jun, 2023
Frankfurt
European markets turned lower after setting milestones in the previous week.
Benchmark indexes in Frankfurt, London and Paris declined as investors reassessed the economy's health in the face of elevated interest rates.
The Bank of England is set to lift its interest rate by 25 basis points to a 15-year high of 4.75% at the end of its policy meeting on Thursday.
Thursday's rate hike will be the 13th in a row and is expected to cool down inflation that has been hovering above 9%.
Investors are also awaiting rate increase decision in China on Tuesday and the People's Bank of China is expected to lift its loan prime rate on Tuesday by 10 basis points.
Trading volumes are expected to light today as the U.S. markets are closed for the Juneteenth holiday.
Europe Indexes & Yields
The DAX index decreased 0.5% to 16,272.18, the CAC-40 index declined 0.5% to 7,350.17 and the FTSE 100 index fell 0.3% to 7,622.64.
The yield on 10-year German Bunds inched higher to 2.49%, French bonds traded higher to 3.02%, the UK gilts edged up to 4.45% and Italian bonds increased to 4.08%.
The euro edged lower to $1.09, the British pound to $1.28 and the Swiss franc to 89.47 cents.
Brent crude decreased $0.34 to $74.26 a barrel and the Dutch TTF natural gas decreased €2.70 to €32.31 per MWh.
Europe Stock Movers
Coca Cola HBC AG declined 2.3% to €26.78 after the company agreed to acquire the Finlandia Vodka brand for $220 million from Brown-Forman.
AstraZeneca Plc declined 0.9% to 11,684.0 pence on the news that the company is looking to spin off its China business.
MTU Aero Engines AG increased 3.4% to €234.40 after the company revised higher its 2023 annual outlook.
Resource companies traded down on the worries of weakening demand from metal manufacturing companies.
Glencore, Antofagasta, and Anglo American declined between 1% and 2%.
Luxury stocks declined after China's State Council failed to announce no new measures to boost economic growth after a meeting on Friday.
Hermes International SCA declined 0.8% to €1,969.80 and LVMH dropped 1.1% to €859.10.
Spectris plc edged up 0.08% to 3,708.25 pence after the company signed an agreement to acquire MicroStrain Sensing Systems Business for 37.6 million.
Sartorius AG plunged 16.3% to €247.50 after the lab equipment maker lowered its 2023 outlook on weaker-than-expected demand in the second half.
British American Tobacco added 0.5% to 2,592.50 pence after the company announced significant changes to its board.
Surface Transforms Plc decreased 1.5% to 32.50 pence after the company appointed Isabelle Maddock as new Chief Financial Officer from September 4.
U.S. Markets Set To Close Higher 6th Consecutive Week
Barry Adams
16 Jun, 2023
New York City
Stocks opened higher and major averages extended gains of the week where several new milestones were created.
The S&P 500 index is up for the sixth week in a row and the Nasdaq Composite index advanced for the eighth week in a row.
Both indexes are up for the sixth session in a row after the consumer price and wholesale price inflation receded in May and the Federal Reserve paused its monetary tightening cycle.
Stocks are expected to be volatile today as several indexes and options expire for the second quarter.
Despite the hawkish stance of the Federal Reserve after the latest rate hikes, many investors are estimating that the central bank may be nearing its rate tightening cycle.
The Fed has suggested in its accompanying statement that rates may go up by another 50 basis points by the year's end.
The Federal Reserve has increased interest rates ten times in a row since March 2022 before pausing this week, and multiple rate hikes have not cooled the economy into a recession and tempered tight labor market conditions.
The central bank is estimating the economy to grow at 1.1% in the current year, below its long term average of 1.8%, but higher rates for longer may keep economic growth near 1% than its long term average for years to come.
U.S. Indexes & Yields
The S&P 500 index increased 0.2% to 4,436.21 and the Nasdaq Composite increased 0.7% to 13,797.93.
The yield on 2-year Treasury notes increased to 4.73%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds eased to 3.85%.
Crude oil increased $0.51 to $71.14 a barrel and natural gas prices increased 7 cents to $2.60 a thermal unit.
U.S. Stock Movers
Adobe Inc increased 5.7% to $490.91 after the company reported better-than-expected quarterly results.
The company's guidance for the current quarter and 2023 exceeded market expectations.
Luxury stocks advanced on the hopes that China will provide a more targeted stimulus program next week.
China linked luxury stocks Hermes SCA, LVMH, Ralph Lauren, Oxford Industries and Tesla Inc gained between 0.5% and 3%.
Exxon Mobil, Chevron, Occidental Petroleum, EQT increased about 1% after natural gas prices extended weekly gains following the supply worries in Europe.
The Netherlands plans to temporarily shut down a LNG terminal and energy supplies from Norway were curtailed for regular maintenance.
European Markets Extended Gains, Eurozone Inflation Confirmed at 6.1%
Bridgette Randall
16 Jun, 2023
Frankfurt
European markets traded higher a day after the central bank lifted its benchmark rate.
Market indexes in Frankfurt, London and Paris edged higher after a week of volatile trading as investors remained focused on the health of the economy and pace of future rate hikes.
Bond yields in the region traded near recent highs, and the U.S. dollar index weakened 1.2% on the hopes that the U.S. Federal Reserve will remain on hold at its next policy meeting in July.
The eurozone inflation was confirmed flat from the previous month in May, Eurostat reported on Friday.
The annual pace of inflation was 6.1%, slower than 7.0% in April and lower than 8.1% in the month a year ago.
Overall inflation in May was driven by food, alcohol & tobacco inflation of 2.54%, followed by services inflation of 2.15%, non-energy industrial goods 1.51% and energy price declined of 0.09%.
The Bank of Japan kept its ultra-loose monetary policy intact, bucking the hawkish trend in the Euro Area and the U.S.
The BOJ left its key lending rate at minus 0..1% and kept its Yield Curve Control policy framework in place and 10-year Japanese government bond yield around zero.
Expectations of additional stimulus in China rose after the People's Bank of China decreased its medium term lending facility rate by 10 basis points to 2.65%.
Earlier in the week, fixed-assets investments, retail sales, property investments, and youth unemployment data suggested uneven and weak economic conditions in China.
The Chinese government is expected to announce economic stimulus measures in the form of infrastructure spending in addition to lowering interest rates.
Europe Indexes & Yields
The DAX index increased 0.2% to 16,327.07, the CAC-40 index advanced 0.7% to 7,346.60 and the FTSE 100 index increased 0.3% to 7,650.25.
For the week, the DAX index added 1.5%, the CAC-40 advanced 1.9% and the FTSE 100 index increased 1.3%.
The yield on 10-year German Bunds inched lower to 2.47%, French bonds traded lower to 2.98%, the UK gilts edged up to 4.34% and Italian bonds decreased to 4.08%.
The euro edged lower to $1.09, the British pound to $1.28 and the Swiss franc to 89.14 cents.
Brent crude decreased $0.40 to $75.27 a barrel and the Dutch TTF natural gas decreased €8.10 to €35.05 per MWh.
Europe Stock Movers
Solvay SA declined 2.9% to €104.20 and the company is in the process of splitting itself into two companies - Solvay and Syensqo.
The company said it plans to repay 1.3 billion of hybrid bonds before the completion of the proposed split by the end of 2023.
The ratings agency Moody's placed Solvay's debt rating on review for downgrade.
Tesco Plc declined 1.3% to 261.0 pence and the discount grocery retailer said sales in the UK rose 9% in the latest quarter.
Travis Perkins Plc declined 5.7% to 816.80 pence after the UK-based home improvement retailer lowered its annual profit outlook citing the difficult housing market.
Longer Rate-Pause Expectations Extends Market Rally to 6th Day
Barry Adams
15 Jun, 2023
New York City
Major averages accelerated gains for the sixth session in a row as tech stocks led gainers.
The S&P 500 index advanced for the sixth day in a row and closed at a new 13-month high after tech and growth stocks led gainers.
Investors bid up stocks on the hopes that the Federal Reserve is nearing its tightening cycle and a resilient economy and job market are likely to provide a sustained boost to corporate earnings this quarter and in 2023.
The Federal Reserve held the federal funds rate as expected but sent clear signals that its inflation fight is not done yet and policymakers are prepared to lift rates to cool inflation to 2%.
In a balancing act, the central bank is attempting to cool inflation while avoiding the economy from slipping into a recession and avoiding widespread unemployment.
The tough act of keeping the economic expansion at a steady pace and enlarging job market without fueling too strong price pressures, got easier after crude oil prices dropped 40% in the year so far and supply chain issues largely under control.
The Federal Reserve is not in a position to influence supply chain issues or commodities prices but has a significant impact on the aggregate demand.
Microsoft hit a new record high after optimism surrounding AI driven demand lifted several stocks for the second week in a row.
Investors also digested the latest jobless claims and retail sales data.
Jobless Claims Held at Elevated Levels
Initial jobless claims for the week ending on June 10 were 262,000, matching the previous week's level, the U.S. Department of Labor reported Thursday.
Continuing claims for four weeks increased 20,000 from the previous week to 1,775 million.
Retail Sales Unexpectedly Rose In May
U.S. retail sales rose 0.3% in May following a 0.4% rise in April, the U.S. Census Bureau reported Thursday.
Retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $686.6 billion, up 0.3% from the previous month, and up 1.6% from a year ago.
Retail trade sales were up 0.3% from April 2023, and up 0.7 percent (±0.5 percent) above last year.
Nonstore retailers were up 6.5% while food services and drinking places were up 8.0% from a year ago.
U.S. Indexes & Yields
The S&P 500 index increased 1.2% to 4,426.01 and the Nasdaq Composite increased 1.2% to 13,782.82.
The yield on 2-year Treasury notes decreased to 4.65%, 10-year Treasury notes edged down to 3.73% and 30-year Treasury bonds eased to 3.83%.
Crude oil increased $2.38 to $70.59 a barrel and natural gas prices increased 22 cents to $2.56 a thermal unit.
U.S. Stock Movers
Cava Group soared more than 110% and traded as high as $45 after the restaurant company completed its initial public offering.
Cava sold 14.4 million shares at $22 each and raised $318 million.
Toyota Motor Corp increased 1.9% to $168.72 and the stock extended its weekly gain after shareholders reelected company chairman Akio Toyoda yesterday.
Kroger Co declined 2.8% to $45.88 after the company reiterated its same store sales excluding gasoline sales for the year.
Lennar Corp advanced 3.5% to $118.78 after the home builder reported better-than-expected fiscal second quarter results and the company lifted its unit sales outlook for the year.
European Markets Lacked Direction, ECB Signaled More Rate Hikes
European markets remained under pressure and the central bank lifted rates higher.
Market averages in London, Paris and Frankfurt traded down after the rate decision was announced and more rate hike worries dragged the indexes lower.
“We are not thinking about pausing," said ECB president Christine Lagarde at a press conference after the rate decision.
The central bank also revised higher its estimate of the headline inflation and core inflation for 2023 and lowered its economic growth outlook.
Investors largely ignore the improvement in international goods trade deficit data in April after imports fell at a faster pace than expected.
Tech stocks led decliners in trading across the region followed by declines in construction and telecom stocks.
In other news, China lowered its medium term lending facility rate by 10 basis points to revive the faltering economic growth.
The People's Bank of China lowered its one-year medium term rate following the decision to lower short term 7-day reverse repo rate by 10 basis points to 1.9% on Tuesday.
The central bank is expected to lower its loan prime rate by a similar amount on June 20.
ECB Lifted Reference Rates 0.25%
The European Central Bank decided to lift its lending rate for the eighth time in a row and revised its annual inflation outlook and lowered its annual economic growth estimate for 2023.
The Governing Council decided to lift the three key ECB interest rates by 25 basis points.
The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be increased to 4.00%, 4.25% and 3.50% respectively, with effect from June 21.
The central bank also estimated average annual inflation of 5.4% in 2023 before it cools to 3.0% in 2024 and 2.2% in 2025.
Core inflation, excluding food and energy, is estimated to average 5.1% in 2023 and 3.0% in 2024.
Economic growth was revised slightly lower to 0.9% in 2023 and to 1.5% in 2024.
Eurozone Trade Deficit Shrank In April
The Euro Area international goods trade deficit in April shrank to €11.7 billion from €34.5 billion a year ago.
Exports declined 3.6% to €216.0 billion and imports dropped 11.9% to €227.7 billion.
In January to April 2023, euro area exports of goods to the rest of the world rose 5.4% from a year ago to €940.0 billion, and imports fell 2.9% to €957.2 billion.
Exports to the U.S. increased 2.5%, to China advanced 2.5%, to Turkey soared 26% and the UK jumped 6% but shipments to Russia declined 32% and Japan dropped 12.5%.
Imports from Russia plunged 73% and from China declined 10.5%.
Europe Indexes & Yields
The DAX index decreased 0.6% to 16,205.64, the CAC-40 index declined 0.8% to 7,270.65 and the FTSE 100 index increased 0.07% to 7,608.02.
The yield on 10-year German Bunds inched higher to 2.50%, French bonds traded higher to 3.03%, the UK gilts edged up to 4.42% and Italian bonds increased to 4.18%.
The euro edged lower to $1.08, the British pound to $1.26 and the Swiss franc to 90.26 cents.
Brent crude increased $2.32 to $75.54 a barrel and the Dutch TTF natural gas increased €2.80 to €41.15 per MWh.
Europe Stock Movers
Informa PLC increased 2.5% to 722.0 pence after the publisher and event organizer lifted its annual outlook.
Origin Enterprises Plc gained 1.7% to €3.51 after the agriculture services provider said revenue in the fiscal year 2023 increased to €1.9 billion.
Halma Plc declined 4.90% to 2,310.0 pence after the company posted lower net income attributable to stockholders.
H&M Group increased 3.3% to kr150.50 after the Swedish apparel retailer said net sales increased 6% in the three months to May.
Legal & General Group Plc declined 2.4% to 231.97 pence after the company appointed an outsider as its next chief executive.
Siemens AG added 0.3% to €164.82 after the German industrial conglomerate said it plans to invest €2 billion and build a new manufacturing plant in Singapore and expand its production facility in Chengdu, China.
Hugo Boss AG declined 2% to €68.70 after the German apparel designer and retailer said it is ahead on its target to reach €4 billion in sales by two years.
Movers: Autozone, Cava Group, John Wiley, Kroger, Lennar, Toyota Motor
Scott Peters
15 Jun, 2023
New York City
Cava Group soared more than 110% and traded as high as $45 after the restaurant company completed its initial public offering.
Cava sold 14.4 million shares at $22 each and raised $318 million.
Toyota Motor Corp increased 1.9% to $168.72 and the stock extended its weekly gain after shareholders reelected company chairman Akio Toyoda yesterday.
Kroger Co declined 2.8% to $45.88 after the company reiterated its same store sales excluding gasoline sales for the year.
Sales in the first quarter increased to $45.1 billion from $44.6 billion and net income increased $962 million and diluted earnings per share increased to $1.32 from 90 cents a year ago.
The company reaffirmed Identical sales excluding gasoline sales to grow between 1.0% and 2.0%, with underlying growth between 2.5% and 3.5% after adjusting for the effect of Express Scripts.
Adjusted net earnings per diluted share between $4.45 and $4.60, including an estimated benefit from the 53rd week of approximately $0.15.
Lennar Corp advanced 3.5% to $118.78 after the home builder reported better-than-expected fiscal fourth quarter results and the company lifted its unit sales outlook for the year.
Total revenue increased 21% to $10.2 billion from $8.4 billion and net income edged up to $1.3 billion from $1.2 billion and diluted earnings per share advanced to $4.55 from $3.91 a year ago.
Homes delivered increased 13% to 20,064 and order backlog dropped 21% to 18,869 and backlog order value dropped 23% to $8.7 billion.
The company guided new orders and home deliveries in the quarter between 12,000 and 13,500 and average sales price between $440,000 and $450,000 and gross margin of 21%.
Autozone Inc jumped 3.5% to $2,489.51 after the specialty retailer expanded its stock repurchase program by $2 billion.
John Wiley & Sons Inc dropped 13.5% to $31.43 after the company reported a decline in quarterly sales and management announced a restructuring plan including the sale of non-core education businesses.
Revenue in the fiscal fourth quarter ending in April declined 4% to $526 million and net income increased to $68.3 million from $43.2 million and diluted earnings per share advanced to $1.22 from 76 cents a year ago.