North American Morning Briefing: Equity Futures Rise, Focus on Bond Yields


To watch:

New Home Sales for July; Flash manufacturing PMI for August; Flash Services PMI for August; Richmond Fed Business Activity Survey for August; Federal Reserve Bank of Minneapolis President Neel Kashkari speaks at the Wharton Club of Minnesota event.

Opening call:

Equity futures rose slightly on Tuesday, signaling stocks were on track to make up lost ground after Monday saw the worst day for the market in months as investor sentiment was hammered by concerns over the global economic outlook and the likelihood of central bank policy tightening.

This week, Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole economic conference on Friday should bring more clarity to the market on the central bank’s policy path.

The recent selloff was partly driven by concerns that the Fed will not ease its aggressive monetary policy tightening – including the biggest interest rate hikes in decades – as it battles inflation. to 40-year highs.

“Yesterday was a sea of ​​red for risk assets and sovereign bonds as the energy crisis intensified in Europe, contributing to the specter of global central bank tightening already weighing on asset markets. said Tim Wessel, an analyst at Deutsche Bank.

“Looking ahead, US stock futures point to a slight rebound with the S&P 500 and NASDAQ 100 contracts moving higher.”

Bond yields remained in focus amid changing investor expectations regarding inflation and monetary policy.

The yield on the 2-year Treasury bill, which tries to predict the benchmark lending rate a few years from now, rose again on Monday to above 3.3%.

It remains well above the yield on the 10-year note – which was down slightly on Monday at 3.01% – in a phenomenon known as the inverted yield curve, which is an established indicator of a future recession.

Overseas, the pan-European Stoxx 600 was flat and Asian indices ended lower, taking inspiration from the earlier selloff on Wall Street.

Economic overview:

Barring a tangible recession, central banks in developed markets should continue to raise interest rates through inflation cuts, JPMorgan said.

“DM CB [developed market central banks] are unlikely to see the inflationary threat receded by lower commodity prices alone, and moderating recessionary risks actually warrant higher policy rates,” the bank said.

At the upcoming Jackson Hole symposium, to be held Thursday through Saturday, Fed Chairman Jerome Powell is expected to push back against the idea that a dovish policy pivot is coming soon, JPM said.


The dollar hit two-decade highs against a basket of currencies and the euro on expectations that Fed Chairman Jerome Powell will signal further interest rate hikes on Friday and safe-haven demand then. that risk aversion is driving stock markets down, ING said.

At the same time, further increases in gasoline prices are worsening the outlook for countries outside the United States, particularly the euro zone, the Dutch bank said. “The dollar remained in good demand at the start of the week, benefiting from a rather ideal combination,” ING said.


Oil prices edged higher after Saudi Arabia’s energy minister said OPEC+ could cut production amid “harmful volatility” in the market. Prince Abdulaziz bin Salman told Bloomberg that OPEC+ has “the commitment, the flexibility and the means” in its agreements to deal with market challenges, including cutting production “at any time and under different shapes”.

The minister was pointing to the disconnect between volatile and illiquid markets and underlying fundamentals, Deutsche Bank said. The comments halted recent declines in oil prices, which have fallen about 20% from June highs. The next OPEC meeting is scheduled for September 5.


Copper was down ahead of Jerome Powell’s speech in Jackson Hole on Friday and is shaking around a gloomier macro picture.

Risk aversion sentiment and reports last week of higher inflation in Germany and Japan reinforced the weak global macroeconomic picture ahead of the key Fed meeting when Powell is expected to point to further rate hikes and comment on the inflation, RBC Capital Markets said.

China has also cut its benchmark lending rate in a bid to ease the housing crisis hitting consumption, RBC added.

Copper supply risks will remain high as production growth for 2022-2031 will shift to riskier countries, including Chile, the Democratic Republic of Congo and Argentina, Fitch Solutions said.

The company named the industrial metal, which is increasingly in demand due to the accelerating global energy transition, as a troublesome commodity due to a mix of historically high prices and expectations of a strong growth in demand.

“Despite the number of projects that exist on paper, significant barriers remain for investment in supply to keep pace with demand,” Fitch said.

“The growing disconnect between strategies focused on acquiring major miners will come under greater pressure due to lack of investment in supply.”




When does the Tesla stock split take place and what does it mean for investors?

Tesla Inc. will split its shares this week, the latest megacap company to split its high-priced shares this year in a bid to make them more accessible to investors.

Stock splits have waned in popularity over the years, but Inc. and Google parent Alphabet Inc. also split their shares in 2022. Investors often interpret these plans as confidence signals from the part of management.


Wireless carriers want to be your home ISP and vice versa

A budding battle between US cable companies and telephone companies has created new competition for services typically dominated by a few large companies.

Wireless carriers are using the excess capacity of next-generation networks to win over customers who used traditional high-speed Internet service providers, while those same cable companies are promoting new, cheaper cell phone plans.


Elon Musk lawyers seek documents from former Twitter chief Jack Dorsey

Elon Musk’s lawyers have issued a subpoena to Jack Dorsey, the first indication that the co-founder and former chief executive of Twitter Inc. will be officially involved in the legal battle over the stalled $44 billion deal. dollars from Mr. Musk.

Mr. Musk is seeking documents from Mr. Dorsey regarding the effect of fake or spam accounts on the activities of the social media platform. The CEO of Tesla Inc. is also looking for information on Twitter’s use of Monetizable Daily Active Users, or MDAU, as an important metric and any other metrics the company might use to describe user or customer engagement. advertisers.


A group of Apple employees protest the company’s three-day-a-week office policy

A group of Apple Inc. employees are calling for a more flexible work environment after the tech giant recently told employees they will need to be in the office at least three days a week.

The group, AppleTogether, said it represents current Apple employees. He wrote a petition following Apple’s announcement that employees must work from the office three days a week starting next month.


Adidas management change may not be enough to fuel share price rally

Adidas AG‘s decision to change chief executive should be welcomed, analysts say, although some warn that a rally in the share price may not come without more clarity on medium-term targets that look set to improve. increasingly out of reach.

The German sportswear major surprised the market on Monday by announcing that its boss, Kasper Rorsted, would step down next year. He will remain in office until then to ensure a smooth transition to his successor, the company said. The move was unexpected but positive given recent challenges, RBC Capital Markets analyst Piral Dadhania said in a note.


Flash warning for global economies of a sharp slowdown

Business activity in Europe and Japan fell in August, indicating a sharp slowdown in global economic growth, with rising prices weakening consumer demand and the war in Ukraine disrupting supply chains, according to new surveys.

Second month of decline in activity in Europe comes amid further rise in energy prices amid uncertainty over Russia’s willingness to maintain its already tight supply of natural gas ahead of the heating season .


Endless demand pushes U.S. natural gas prices to shale-era highs

The 14-year highs reached this week by natural gas futures in the United States show the relentless demand for American shale gas across the Atlantic and likely indicate higher prices ahead.

The latest price spike came in response to Russian plans to shut down one of Europe’s main oil arteries for a few days at the end of the month. The closure announced on Friday is either the latest episode of unplanned maintenance along the vital Nord Stream gas pipeline or an act of economic warfare by Russia in retaliation for Western European support for Ukraine.


Chinese yuan slips to two-year low as economy stumbles and dollar soars

HONG KONG-CHINA’s currency fell to its weakest level against the US dollar in two years. It is likely to depreciate further as the country’s central bank struggles to combat the slowing economy and deep housing slump.

On Tuesday, the yuan was trading at over 6.86 to the dollar in the tightly controlled Chinese market, reaching levels last seen in August 2020, according to FactSet. The currency weakened past 6.88 in the more freely traded offshore market, taking its year-to-date decline against the dollar to more than 8%.


The US office glut began decades before the pandemic

A surplus of empty offices threatens to empty American business districts. Don’t blame the pandemic.

(MORE TO BE FOLLOWED) Dow Jones Newswires

August 23, 2022 06:27 ET (10:27 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.

James T. Quintero