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North American Morning Briefing: Investors Seek Fed Rates Guidance


Watch For:

Retail Sales for July; EIA Weekly Petroleum Status Report; earnings from Target, Cisco Systems

Opening Call:

Stock futures crept lower on Wednesday as investors awaited more key retail earnings.

While earnings reports from Target and Lowe's are scheduled for Wednesday, the focus for investors will be on minutes from the Federal Reserve's last meeting at the end of July. At that meeting, the FOMC boosted interest rates by 0.75 a percentage point for the second straight month.

Recent signs of cooling inflation at both the consumer and wholesale levels have led investors to bet on a less aggressive Fed.

"Investors will be looking for any clues in the minutes report that suggest the Fed may slow its pace of rate hikes now that the inflation data are starting to decelerate," said Geetu Sharma, founder and investment manager of Minneapolis-based AlphasFuture.

"The next FOMC meeting is not for another five weeks, which is a long way away, and it's too early to tell if one decelerating inflation report will cool the Fed's tightening efforts. We need more inflation data."

OANDA said the Fed minutes "will confirm the Fed's dependency with the next round of inflation data, which should suggest that another massive 75-basis point rate hike is very much still on the table."

In Europe, the Stoxx Europe 600 was flat with most regional indexes easing lower, while shares in Asia mostly climbed. Japan's Nikkei index closed up 1.2% at a 7-month high.

Stocks to Watch:

Citigroup has appointed Aveline San to helm its operations in Hong Kong and Macau, as the bank pushes to grow its wealth-management business in the region.

Read more here.


The dollar could rise if the Fed's latest meeting minutes push back against market expectations for the central bank to pivot towards interest-rate cuts next year, ING said.

Rhetoric from Fed officials since the July meeting suggest this is likely to be the case, particularly since the Fed funds future price the policy rate being cut from 3.6% to 3.2% in the second half of 2023, ING said.

"A further rejection of this market pricing should help the dollar" and could help the DXY Dollar Index rise to around 107.00, ING said.

Sterling and U.K. Inflation:

Sterling stayed higher on the day after data showed U.K. inflation accelerated by more than expected in July.

Inflation rose to a four-decade high of 10.1% in July from 9.4% in June, exceeding the 9.8% expected by analysts in a WSJ survey.

"Inflation printing above forecasts adds to the mounting pressure on the Bank of England to tighten monetary policy and continue to raise interest rates," Silicon Valley said.

"Expect sterling to remain volatile in response as markets grapple with a cost of living crisis, a fall in real wages, rampant price growth and a bleak outlook for economic activity."

Ebury said the inflation data has both positive and negative implications for sterling.

Higher inflation should trigger a more aggressive policy response from the BOE, which is a "bullish signal" for sterling, Ebury said.

"On the other hand, however, higher prices present a clear downside risk to economic activity, and raises the possibility of a potentially prolonged U.K. recession, which is clearly bearish for GBP."


Oil prices ticked lower in Europe, reversing earlier modest gains, with Brent remaining close to its lowest level since just before Russia's invasion of Ukraine.

"The crude demand outlook is taking a big hit" after a raft of disappointing Chinese economic data and as Germany's economy struggles, OANDA said.

Meanwhile, developments relating to a draft Iran nuclear deal will be closely watched.


Base metals were mixed, "chopping sideways with weak supply meeting weak demand," Marex said, referring to earlier trading in Asia.

Zinc was down 1% after shooting higher Tuesday following Nyrstar's announcement that it will be moving its Dutch zinc operations into "care and maintenance." Marex said zinc inventories were "close to record lows" at 75,000 ton.

It added that aggregate demand for base metals "has been dipping and coupled with poor PMI and global inflation as a gauge, it has been impacting sentiment for commodities and base metals consumption in general."




Elon Musk Tweets He's Buying Manchester United, Then Calls It a Joke

Elon Musk said on Twitter he was buying English soccer team Manchester United only to say hours later it was a joke, the latest example of the Tesla Inc. chief executive's using the platform to drop confusing statements about his intentions.

Mr. Musk's initial tweet on Tuesday came as a reply to a post he'd made five minutes earlier about politics, in which he said: "To be clear, I support the left half of the Republican Party and the right half of the Democratic Party!" Mr. Musk then tweeted: "Also, I'm buying Manchester United ur welcome."


Amazon Workers File to Hold Union Election in Upstate New York

A labor organization that earlier this year became the first to unionize an Inc. warehouse in the U.S. has filed to hold an election at a company facility in upstate New York near Albany.

A group of workers affiliated with the Amazon Labor Union, which in April won the right to represent workers in Staten Island, on Tuesday filed to hold an election at a company warehouse near Albany, according to a spokeswoman with the National Labor Relations Board.


J&J Unit Tells Appeals Court Only Bankruptcy Can Settle Talc Claims

A Johnson & Johnson subsidiary urged a federal appeals court to uphold the controversial legal strategy it used to move to bankruptcy roughly 38,000 lawsuits linking its talc-based products to cancer.

The subsidiary, LTL Management LLC, said in court papers filed on Monday that chapter 11 is the only option for compensating all claimants relatively quickly.


3M Share Buybacks Questioned in Earplug Bankruptcy Testimony

Personal injury lawyers suing 3M Co. for allegedly defective earplugs criticized it for repurchasing shares while seeking to shield itself from mass lawsuits based on a corporate subsidiary's bankruptcy filing.

Financial researcher J.B. Heaton said in a bankruptcy-court hearing that 3M's share repurchase program gives away money without getting anything back for it and could hurt 3M's ability to fund the chapter 11 case of its Aearo Technologies LLC unit.


GenapSys Founder Loses Fight to Have Chapter 11 Bankruptcy Dismissed

A GenapSys Inc. founder was denied his request to have the gene sequencing business's bankruptcy case dismissed after he alleged the company filed its chapter 11 case without proper corporate authority.

In a rare challenge to a company's authority to file for bankruptcy, Hesaam Esfandyarpour said GenapSys didn't give enough advance notice of a July 11 meeting, at which the bankruptcy was authorized.


Santos Approves $2.6 Billion Oil-Field Development in Alaska

SYDNEY-One of Australia's largest energy companies said it would proceed with the $2.6 billion development of a large oil field in Alaska, illustrating how the Ukraine war is providing impetus to alternative sources of supply to Russian crude.

Santos Ltd., which has a market value of more than $16 billion, said the first phase of the Pikka oil project on Alaska's North Slope would add an estimated 80,000 barrels per day of crude oil to the market after it starts up in 2026.


GSK Says First US Plaintiff to Drop Zantac Case

GSK PLC said late Tuesday that the plaintiff's counsel in the first of the U.S. lawsuits over discontinued heartburn drug Zantac plans to file a notice of voluntary dismissal.

The pharmaceutical giant said that it didn't settle Joseph Bayer's claim and hasn't made any payment for the dismissal.


Citi Appoints Aveline San to Head Hong Kong and Macau Operations

Citigroup Inc. has appointed Aveline San to helm its operations in Hong Kong and Macau, as the U.S. bank pushes to grow its wealth-management business in the region.

As Chief Executive Officer for Hong Kong and Macau, Ms. San's responsibilities include fostering key client and regulatory relationships, Citi said in a statement on Wednesday.


U.K. Inflation Tops 10%, Underlining Gloomy Outlook for Europe

The U.K.'s annual rate of inflation moved into double digits in July and is set to rise even higher by the end of the year, heaping greater pressure on stretched household budgets and threatening a lengthy economic contraction.

That pickup in inflation has been replicated in other parts of Europe, even as consumer prices have started to slow in the U.S. That is because energy prices have continued to accelerate across Europe as Russia withholds supplies of natural gas, with the continent facing a possible crunch this winter.


New Zealand Central Bank Raises Cash Rate, Sees More Tightening

WELLINGTON, New Zealand-The Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points for a fourth consecutive time and said more monetary tightening is needed to control high inflation.

The central bank's decision on Wednesday increased the official cash rate to 3.0% from 2.5%. The RBNZ's cash rate is now at its highest in seven years and has been raised by 275 basis points since October, when it was at a record-low 0.25%.


Glynn's Take: Australia Not yet Gripped by Wage-Price Spiral

SYDNEY-The wages of Australian workers grew at their fastest pace since 2014 in the second quarter, but the country is still well short of facing a damaging wages blowout.

When the Reserve Bank of Australia began raising interest rates in May, the first tug on the monetary policy reins in over a decade, it justified the decision in part by citing concerns that surging inflation might trigger a 1970s-style wage-price surge.


Japan Exports Grew for 17th Consecutive Month in July

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August 17, 2022 05:11 ET (09:11 GMT)

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