July 14, 2023
- Crude oil prices headed for a third weekly gain, with Russia’s shipments starting to decline and supply disruptions in Africa. Gold edged lower, but is set for its best week since April as swap traders bet the Federal Reserve is nearing an interest-rate peak. Ahead Friday, Statistics Canada will report May manufacturing sales at 8:30 a.m. Ottawa time. Existing home prices and sales data comes at 9 a.m.
- European stocks are set for the biggest weekly advance since March on rising bets that the Federal Reserve’s monetary tightening cycle is nearing an end, while the start of a challenging earnings season poses a threat to the rally in the second half of the year. The Stoxx Europe 600 Index was little changed 10:50 a.m. in London but poised for a weekly gain of 3%. Telecoms, miners and energy were among the biggest underperformers. European equities and other risk assets have rallied this week as US inflation eased, fueling optimism that the Fed is close to ending rate hikes. Investors are now focusing on the earnings season, with today being the first major day of reporting, which will show whether profits and margins can withstand economic headwinds and slowing consumer demand.
- It’s been a week when almost everything rallied — from emerging markets to global bonds and the S&P 500 — all buoyed by faith that the Federal Reserve is finally winning the fight against inflation. While trading was subdued on Friday as second-quarter earnings started to roll in, the week is ending with blockbuster gains across asset classes. The first batch of results from big US banks underscored the economy’s resilience. The bullish trades reflect hope that the US is heading toward a “Goldilocks scenario” with inflation quickly easing while the economy avoids a recession. To be sure, the Fed is still likely to lift its benchmark rate later this month and central bankers continue to warn that more than one rate increase may still be necessary after that.
- Asia’s key stock gauge is on course to mark its best week since November, with Chinese equities advancing and peak-rate bets on the Federal Reserve boosting risk sentiment. The MSCI Asia Pacific Index climbed as much as 1%, with gains for the week nearing 5%. Stocks in Korea, Taiwan and Thailand led the advance on Friday. Japan’s stock benchmarks were the worst performers in the region this week, as the yen strengthened amid speculation the Bank of Japan will tweak policy later this month. Chinese equities have been at the center of the risk rally in Asia, as traders increasingly see an end to years of regulatory crackdowns on technology firms. Other than gains in tech bellwethers such as Alibaba Group Holding Ltd., the broader market also advanced on hopes of more policy stimulus. An index of Chinese companies in Hong Kong recorded the biggest weekly gain since January.
- Oil headed for a third weekly gain as supply disruptions in Africa and a reduction in shipments from Russia tightened the market. West Texas Intermediate futures traded near $77 a barrel, up around 4% this week, even as they fluctuated Friday. Protesters shut a major Libyan oil field, Sharara, after output from the smaller El Feel field was already halted Thursday. Meanwhile, flows from the Forcados oil terminal in Nigeria have been suspended to check for a possible leak. That follows signs that resilient Russian flows are finally starting to decline, four months after the country was due to slash output.
- Gold is headed for its best week since April on bets that the Federal Reserve is approaching an interest-rate peak after key US data showed inflation slowing. Bullion edged lower on Friday, but remains up almost 2% this week, buoyed by sliding Treasury yields and a drop from the dollar to a 15 month low. Cooling inflation boosted optimism the Fed’s tightening cycle is close to the end. Spot gold declined 0.2% to $1,957.24 an ounce at 9:10 a.m. in London, near a five-week high. The Bloomberg Dollar Spot Index was flat. Silver dipped but remained up nearly 8% for the week, while platinum and palladium slipped.
- The world’s riskiest borrowers are starting to run out of easy-money era financing and feeling the pinch as they return to a tougher market shadowed by aggressive central banks. Junk-rated companies staring down a $785 billion maturity wall are in a race against time to replace debt that they secured when major central banks across the world slashed rates and boosted quantitative easing programs to keep economies afloat in 2020. On average, these companies now have 4.7 years to put fresh financing in place, the least amount of time ever, according to a Bloomberg global index. After sitting out the public markets for the better part of the past two years, some of the biggest issuers are back. Italy’s flagship phone carrier Telecom Italia SpA headlines this month’s expensive refinancings.
- BlackRock Inc.’s assets under management rose to $9.4 trillion as the stock market rallied and investors poured money into ETFs and cash-management products. Net flows into all of the firm’s funds totaled $80 billion for the second quarter, BlackRock said Friday in a statement. Long-term investment products, which include mutual funds and ETFs, added $57 billion, missing the $81 billion average estimate of analysts surveyed by Bloomberg. Clients added $48 billion to the firm’s ETFs, including $35 billion to fixed-income investments, and $23 billion to the company’s cash management products. Still, investors yanked $4.3 billion overall from equity products, missing analysts’ estimates of $21 billion of inflows.
- JPMorgan Chase & Co. is among banks preparing to sell around €1 billion ($1.12 billion) of debt backing a takeover offer for Software AG as soon as next week as they rush to offload one of the largest European syndicated loan deals of the year ahead of the summer lull. The US lender, which was sole underwriter on the loan facilitating Silver Lake Management’s acquisition of the German software developer, has now also been joined by Citigroup Inc. and Banco Santander SA, according to people familiar with the matter who asked not to be identified because the matter is private. Mindful that markets remain volatile, the banks are keen to tap investor appetite for paper after a dearth of new loans this year before trading activity loses momentum going into the August holiday period. Above all, they’re keen to avoid a repeat of last year when lenders were left nursing big losses after being forced to hold on to huge chunks of debt as markets stalled in the wake of Russia’s invasion of Ukraine and a global surge in interest rates.
- Burberry Group Plc reported a decline in sales from the Americas as US consumption weakens, a negative signal for the luxury-goods industry on one of its key markets. Revenue from the Americas dropped 8% at comparable stores on a constant exchange rate basis in the 13 weeks ended July 1, the British company said Friday. Total same-store sales rose 18%, the fastest pace in two years, helped by a rebound in China. The company reiterated its guidance for low double-digit sales growth this year. Burberry Chief Executive Officer Jonathan Akeroyd has been trying to boost the appeal of the brand. He’s hoping Daniel Lee, the new designer who unveiled his debut collection in February, can reinvigorate the popularity of the label by going back to its British roots.
- Credit Suisse is one of a handful of global banks publicly disclosing some loans to poor countries, as most of the rest of the industry instead clings to secrecy, according to a fresh study. The Swiss bank, which was absorbed by UBS Group AG in a government-engineered takeover earlier this year, stands out for its relative transparency around such lending, according to research by UK nonprofit Debt Justice, which looked at multiple data sets spanning the past half decade and through the first half of 2023. The only other bank found to provide similar disclosures was Mitsubishi UFJ Financial Group, the analysis showed. Since 2021, global banks have kept a lid on about $37 billion of loans to sovereigns in the developing world, according to researchers at Debt Justice. The lack of visibility follows 2019 guidelines, known as the Voluntary Principles for Debt Transparency, which were backed by global banks and ushered through by the Institute of International Finance.
- Concern about aspartame’s health risks was reawakened after one unit of the World Health Organization classified the artificial sweetener as a possible carcinogen and another agency cleared the substance for consumption at common levels. Aspartame was labeled Friday as a possible cause of cancer in a report from the WHO’s International Agency for Research on Cancer, based on limited evidence. The controversy escalated as a joint committee between the WHO and the Food and Agriculture Organization of the United Nations said the same day that the safety of aspartame isn’t a major concern at current levels of recommended consumption. The food and beverage industry immediately countered the first claim, and the U.S. Food and Drug Administration took the rare step of showing public disagreement with the WHO. The conflicting statements by health authorities and the food industry are bound to confuse consumers over a sweetener that’s ubiquitous in diet drinks, yogurt, ice cream, breakfast cereals and even toothpastes and medicines.
- Investors including General Atlantic and Goldman Sachs Asset Management agreed to make a 17.2 billion kroner ($1.7 billion) recommended all-cash offer for Norwegian educational technology company Kahoot! ASA. The voluntary offer of 35 kroner a share was made by a group of investors that also includes the fund controlling the wealth of the Lego billionaire family, Kirkbi Invest, and Glitrafjord AS, according to a statement Friday. The bid represents a premium of 53.1% to the closing price in Oslo on May 22, the last trading day before the investors shareholdings were disclosed. The move comes after Bloomberg reported in November that General Atlantic was exploring ways to boost its control of the Oslo-based company, according to people with knowledge of the matter. General Atlantic agreed in September to buy SoftBank Group Corp.’s entire 15% stake in the digital learning platform.
- Bank of Japan officials will likely raise their inflation forecast above 2% for this fiscal year at their July meeting, but their view for the following year is largely unchanged and may even be nudged down, according to people familiar with the matter. While the likely upgrade will reflect stronger-than-expected price growth this year, the forecasts will show inflation slowing in the year starting April 2024. The BOJ’s latest projection for next fiscal year is 2%. The bank will finalize its new price projections after assessing economic data and financial markets up to the last minute, the people said. The BOJ will release its new quarterly outlook report on July 28 at the end of its policy meeting.
- Nippon Telegraph & Telephone Corp. raised 380 billion yen ($2.75 billion) selling corporate green bonds in the biggest issue of its type in Asia. Demand from institutional investors, including banks, was about 1.2 times the amount it offered, according to Mizuho Securities Co, one of the underwriters. The proceeds will be used for research and development of NTT’s fifth-generation communications technology and renewable energy-related investments, the company said in a document to Japan’s financial authority. While the world’s major central banks are raising interest rates, Japanese companies like NTT are busy raising funds in a market that is benefiting from continued loose monetary policy at home. As the government plans its first bond dedicated to decarbonization financing, yen-denominated ESG bond issuance from Japan Inc. is increasing this year, at a faster pace than the rest of the world.
- Microsoft Corp. and Activision Blizzard Inc. are considering giving up some control of their cloud-gaming business in the UK as a way to appease regulators so they can complete their $69 billion merger by the July 18 deadline, according to people familiar with the matter. That could involve selling off the cloud-based market rights for games in the UK to a telecommunications, gaming or internet-based computing company, said the people, who asked not to be identified discussing confidential planning. A private equity company might also be interested, said one person. Both companies still think it’s possible to close the deal, which would be the largest ever in the video-game industry, before next week’s deadline, the people said. Regulators in the US and UK have come out against the deal, which would combine one of the biggest video game publishers with one of the largest console makers into an industry behemoth.
- President Joe Biden will finally reveal how much money he’s raised for his reelection bid, ending the suspense of supporters concerned that his campaign has raised less than expected. The Federal Election Commission reports due Saturday for the second quarter of 2023 will also show which Republicans are mounting a serious challenge to former President Donald Trump for the GOP nomination. “These FEC deadlines during the early primary season are important for the candidates because they can help them brag how about how big their war chest is,” said Abby Wood, a professor specializing in law and politics at the University of Southern California Gould School of Law.
- Wells Fargo & Co. earned more net interest income than analysts expected in the second quarter and lifted its guidance for the full year as big US banks continue to benefit from the Federal Reserve’s rate hikes. The San Francisco-based firm reported $13.2 billion in NII — revenue collected from loan payments minus what depositors are paid — for the three months through June, up 29% from a year ago, according to a statement Friday. Executives now see Wells Fargo’s NII haul rising roughly 14% for the full year, more than the 10% jump they had earlier projected. “Our strong net interest income continued to benefit from higher interest rates, and we remained focused on controlling expenses,” Chief Executive Officer Charlie Scharf said in the statement. “The US economy continues to perform better than many had expected.”