MARKET WRAPS
Watch For:
Personal Income & Outlays for August; ISM Chicago Business Survey; University of Michigan Consumer Survey for September
Opening Call:
Markets calmed Friday, with U.S. stocks on track to rebound to close out a volatile week, while bond yields stabilized after a turbulent week.
Investors will watch the Federal Reserve's preferred inflation gauge and consumer-spending data, due out at 8:30 a.m. ET. Trading on Friday is also likely to be influenced by portfolio rebalancing among investors as the third quarter and month come to a close, according to analysts.
Stocks in Europe, including the U.K. bounced back, while Asian markets were mixed, with the Nikkei closing almost 2% lower.
Stocks to Watch:
Nike shares dropped 9% premarket after it said price-cutting efforts to flush off-season clothing from warehouses in North America would dent gross margins for the rest of its fiscal year and warned of a big potential hit from the stronger dollar.
The stock fell as much as 10% after hours on Thursday.
Forex:
The dollar fell to a one-week low against a basket of currencies, largely due to quarter-end flows as investors adjusted positions after a turbulent week. But reasons for dollar strength remain, ING said.
"While the macro risks remain skewed for a stronger dollar, over the short term the dollar does look to be getting caught up with quarter-end re-balancing flows and the de-leveraging of tightly held positions - including long dollars," ING said.
Prospects of further Fed interest rate rises and safe-haven demand due to economic and geopolitical risks should ensure any losses are temporary, ING added. It reckons the DXY Dollar Index could hit 120 by year-end.
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Sterling has erased much of its losses against the dollar since Friday's mini budget, reaching a one-week high of $1.209, but the U.K. government needs to clarify its plans sufficiently to avoid renewed declines, MUFG said.
This week's intervention by the Bank of England and news that Prime Minister Liz Truss and Chancellor Kwasi Kwarteng will meet today with the head of the Office for Budget Responsibility has calmed trading in sterling.
A YouGov opinion poll showing collapsing support for the ruling Conservative Party could encourage parliament opposition to the budget, MUFG said. Still, the U.K.'s hefty external financing burden underlines the urgent need for clarity, it added.
Bonds:
Global bond yields fell back Friday to return to levels similar to where they started the week, reversing highly unusual spikes that required one central bank to intervene.
The yield on the 10-year Treasury slipped about 7 basis points, or 0.07 percentage point, to 3.718% on Friday after climbing above 4% on Wednesday. The U.K. benchmark 10-year yield fell by a similar amount to 4.047%, leaving it little changed from Monday's open after climbing as high as 4.5% mid-week.
Read: Gilts Are Expected to Remain Under Pressure
Bonds have dropped even more than stocks this year. Losses in long-term Treasuries, preferred stock, municipals, and international government bonds are running as high as 30% or more, the worst selloff in decades.
The Bank of England's intervention on Wednesday, which was needed to stop a doom loop of pension funds shedding long-term government bonds to meet margin calls on shorter-term loans, seems to have stopped the slide for now. But the aid is time-limited, due to expire next month.
Energy:
Oil prices were on course to end the week higher for the first time in five weeks as investors looked ahead to an expected OPEC+ production cut next week.
OPEC+ meets next Wednesday and is increasingly expected to cut production levels for a second time to help arrest a slide in oil prices on concerns about weak demand.
"There is increasing noise that OPEC+ will be looking to agree on an oil production cut at their meeting next week, given the broader pressure that we have seen on oil prices," ING said.
Other News:
European energy ministers are expected to approve the main tenets of a EUR140 billion plan to counter Moscow's efforts to deprive the continent of natural gas and hobble its economy, diplomats said.
The meeting of senior officials in Brussels comes just days after leaks were detected along the Nord Stream pipeline in the Baltic Sea-damage that NATO said was the result of sabotage.
Read more here.
Metals:
Base metals moved higher again after the LME said it was considering launching a consultation on whether it should continue accepting Russian metal on its trading system.
The exchange said a discussion paper to be shared with market participants was an option "under active consideration," but stressed that no decision had been made.
The consultation would seek to take on the views of traders and other users of the exchange and would consider the possible options to be taken regarding metals of Russian origin.
Read more here.
TODAY'S TOP HEADLINES
Twitter Co-Founder Dorsey Tried to Smooth the Way for Musk, Agrawal, Messages Show
Twitter Inc. co-founder Jack Dorsey tried to facilitate Elon Musk's relationship with Twitter's chief executive officer a day after the social-media platform accepted the billionaire's $44 billion takeover bid, according to text messages made public Thursday.
The messages, disclosed as part of a lawsuit in Delaware Chancery Court over Mr. Musk's stalled deal to take the social-media company private, show Mr. Dorsey praising CEO Parag Agrawal ahead of a proposed meeting at the end of April.
Congress Votes to Suspend Tariffs on Baby Formula Ingredient to Boost Supply
WASHINGTON-Seeking to boost supplies of infant formula, the House and Senate voted unanimously Thursday to temporarily suspend import tariffs on powder used to manufacture the product.
The legislation would lift tariffs through the end of the year and now goes to President Biden for his signature. The White House didn't immediately say whether he would sign the bill.
Former eBay Executive Sentenced to Prison for Cyberstalking Campaign
A former eBay Inc. executive at the center of a harassment campaign against two bloggers was sentenced in a Massachusetts federal court Thursday to four years and nine months in prison, authorities said.
The former executive, James Baugh, pleaded guilty in April to participating in a series of attacks on the bloggers, David and Ina Steiner. The Steiners ran a niche e-commerce blog that eBay executives perceived as critical of the company, according to court documents.
EU Is Expected to Approve Sweeping Energy-Market Intervention
BRUSSELS-European energy ministers are expected to approve the main tenets of a EUR140 billion plan to counter Moscow's efforts to deprive the continent of natural gas and hobble its economy, diplomats said.
The meeting of senior officials in Brussels comes just days after leaks were detected along the Nord Stream pipeline in the Baltic Sea-damage that NATO said was the result of sabotage.
China's Service Sector Slows in Latest Economic Warning Sign
HONG KONG-Chinese economic activity remained feeble in September, with the services sector slipping into contraction, offering fresh evidence of the damage that Beijing's Covid-prevention measures and a deepening real estate slide are inflicting on the country's economy.
Activity in the service sector, which includes the retail, catering and transport industries, were hammered as authorities across China tightened Covid-19 restrictions ahead of a key political gathering in October.
China's Central Bank Gives Cities Room to Lower Mortgage Rates
China's central bank is giving local governments leeway to lower mortgage rates for first-time home buyers, in a bid to shore up the nation's slumping real-estate market.
The People's Bank of China said late Thursday that cities that have recorded month-on-month and year-over-year drops in home prices between June and August can relax the floor on mortgage rates for first-time buyers.
India's Central Bank Calls Aggressive Monetary Policy a Shock to Global Economy
India's central bank raised its key interest rate by half a percentage point, as efforts to rein in inflation and protect an economic recovery have been complicated by its currency's decline against the U.S. dollar.
On Friday, the Reserve Bank of India raised its overnight lending rate to 5.90% from 5.40%, the fourth increase since it began raising rates following an unscheduled meeting in May, prompted by global inflationary pressures exacerbated by Russia's invasion of Ukraine.
Talking Markets: Taiwan Dollar More Prone to Risks Than Most Other Asian Currencies
The Taiwan dollar, which fell to five-and-a-half-year lows against the U.S. dollar in the third quarter, is likely staring at more potential volatility and weakness till the end of this year.
Vulnerability to geopolitical risks and potential equity outflows are likely to weigh on the currency in the fourth quarter, analysts say.
LME Considering Consultation on Banning Russian Metal
The London Metal Exchange said late Thursday that it was considering launching a consultation on whether to allow Russian metal to be traded and stored in its system.
The exchange said a discussion paper to be shared with market participants was an option "under active consideration," but stressed that no decision had been made.
Congress Votes to Suspend Tariffs on Baby Formula Ingredient to Boost Supply
WASHINGTON-Seeking to boost supplies of infant formula, the House and Senate voted unanimously Thursday to temporarily suspend import tariffs on powder used to manufacture the product.
The legislation would lift tariffs through the end of the year and now goes to President Biden for his signature. The White House didn't immediately say whether he would sign the bill.
Trump Gets Reprieve on Lodging Objections to FBI's Mar-a-Lago Inventory
(MORE TO FOLLOW) Dow Jones Newswires
09-30-22 0530ET
