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North American Morning Briefing: Stock Futures Wobble on Worries Over Global Economy


Watch For:

Texas Manufacturing Outlook Survey for September; Federal Reserve Bank of Boston President Susan Collins speaks at Greater Boston Chamber of Commerce event; Washington Post Live event with Federal Reserve Bank of Atlanta President Raphael Bostic; Federal Reserve Bank of Cleveland President Loretta Mester speaks at Massachusetts Institute of Technology event

Opening Call:

Stock futures wavered early Monday, with risk assets extending their selloff, as fears over inflation and the likelihood of a global recession mounted.

In Europe, stock markets struggled for momentum, with London's FTSE 100 edging into positive territory as sterling continued to plunge.

The projected victory of a far-right party in Italy added to market uncertainties about rising interest rates and recession fears.

Read: Italian Right Is On Course to Win Elections

Other Markets News:

U.K. assets slid further after Chancellor of the Exchequer Kwasi Kwarteng said in weekend interviews that the government would cut taxes again.

Investors sold the pound and dumped government bonds, sending two- and 10-year yields soaring.

Italian bond markets were steady, while the FTSE MIB stocks benchmark rose 1.1%, outperforming European markets.


The euro fell to a 20-year low against the dollar as the greenback strengthened across the board and as investors digested Sunday's Italian general election.

Far-right leader Giorgia Meloni claimed victory after exit polls gave her coalition a clear majority.

The "biggest concern for investors" is whether the new far-right Italian government will deviate from reforms under Mario Draghi that helped Italy get the EU on its side, Swissquote Bank said.

EUR/USD could remain under pressure as Italian government bond yields will rise further, widening the gap with other eurozone yields, Swissquote said.

In terms of GBP/USD, Swissquote said parity is now "seen as almost certain," after sterling continued its slide against the dollar as investors reacted very negatively to Friday's announcement of sweeping U.K. tax cuts and a cap on energy price rises.

"What the market is hearing is: who will finance this spending? The only hope here is to see at least a sugar rush in the British economy to help investors digest information, but the next couple of years will probably be harsh for the U.K.," Swissquote said.

Read: Dollar Could Extend Gains if Pound Plummets Further

Read British Pound Sinks to Record Low Against the Dollar


Oil prices fell to the lowest levels since January following a week of central bank interest-rate hikes that refreshed worries about the strength of the world economy.

The stronger dollar was also weighing on oil. The ICE Dollar index is at a fresh 20-year high, weakening demand for dollar-denominated oil among holders of other currencies.


Gold and base metals moved lower in early London trade as investors still looked toward risk-off assets with the macro sentiment remaining weak.


Any future aluminum-price surges on fresh production cuts are likely to be brief, as demand fears outweigh tightening supply, Citi said.

"The aluminum market has become reluctant to price in power-related curbs, having switched its focus to concerns of demand destruction amid supply-chain destocking."

Investors worry about a Europe-led recession amid increased energy prices, tighter liquidity and China's pandemic-related restrictions, Citi said.

But in the coming months, "any sizable power-related curbs in Yunnan, China, or Europe may see transitory spikes in prices," while there is also the risk the London Metal Exchange may delist or halt inflows of Russian metal, Citi added.




Credit Suisse Says Strategic Review is on Track

Credit Suisse Group AG on Monday said its comprehensive strategic review is on track, including potential divestitures and asset sales.

The Swiss bank said it will provide further updates when it reports its third-quarter results on Oct. 27.


Amazon, Berkshire Hathaway Could Be Among Top Payers of New Minimum Tax

WASHINGTON-A handful of large companies, such as Berkshire Hathaway Inc. and Inc., could bear most of the burden from a 15% corporate minimum tax President Biden signed into law last month.

Researchers at the University of North Carolina Tax Center analyzed securities filings to determine what companies would have paid if the tax had been in place last year. They found fewer than 80 publicly traded U.S. companies would have paid any corporate minimum tax in 2021, and just six-including Amazon and Warren Buffett's conglomerate-would have paid half of the estimated $32 billion in revenue the levy would have generated.


Covid-19 Vaccine Rollout Carries Lessons for Pharma Supply Chains, Says Pfizer Executive


Russia's War in Ukraine to Cost Global Economy $2.8 Trillion, OECD Says

Russia's invasion of Ukraine will cost the global economy $2.8 trillion in lost output by the end of next year-and even more if a severe winter leads to energy rationing in Europe-the Organization for Economic Cooperation and Development said Monday.

The estimate by the Paris-based club of advanced economies lays bare the magnitude of the economic fallout from Moscow's invasion of its neighbor seven months ago, the worst military conflict on the continent since World War II, which is Russia's attempt to redraw the map of Europe by force.


Central Banks May Stoke Risks by Raising Interest Rates Together

Central banks around the world are raising their key interest rates in the most widespread tightening of monetary policy on record. Some economists fear they may go too far if they don't take into account their collective impact on global demand.

According to the World Bank, the number of rate increases announced by central banks around the world was the highest in July since records began in the early 1970s. On Wednesday, the Federal Reserve delivered its third 0.75 percentage-point increase in as many meetings. This past week its counterparts in Indonesia, Norway, the Philippines, South Africa, Sweden, Switzerland, Taiwan and the U.K. also upped rates.


China PBOC Raises Forex Risk Reserve Ratio for Forward Trading

China's central bank said Monday that it would increase the risk reserve requirement ratio for financial institutions when conducting foreign-exchange forward trading, as the yuan faces increasing depreciation pressure.

The People's Bank of China said the risk reserve requirement for forward foreign-exchange sales will be raised to 20% from currently zero. The move, which the central bank said is aimed at stabilizing expectations in the foreign-exchange market, will take effect Wednesday.


Japan's Intervention to Buy Yen Was Appropriate, BOJ Governor Says

OSAKA -- Bank of Japan Gov. Haruhiko Kuroda said Monday that the Ministry of Finance's decision to intervene in the currency market last week by buying yen and selling dollars was an appropriate move.

The recent weakening of the yen was "rapid and one-sided," Mr. Kuroda said at a news conference after meeting with business leaders in Osaka.


Buying the Stock-Market Dip Is Backfiring. Investors Keep Piling In Anyway.

It is the worst year for buying the stock-market dip since the 1930s.

Instead of rebounding after a tumble, stocks have continued to fall, burning investors who stepped in to buy shares on sale. The S&P 500 has dropped 1.2% on average this year in the week after a one-day loss of at least 1%, according to Dow Jones Market Data. That is the biggest such decline since 1931.


British Pound Sinks to Record Low Against the Dollar

The British pound tumbled to a record low of $1.0349 against the U.S. dollar early Monday as the U.K. government's planned tax cuts continued to spook traders.

The pound also fell against all major global currencies, slipping below EUR1.08 against the euro - its lowest level since September 2020. The currency has recovered some ground, last trading at $1.0721 and EUR1.1064.


German Business Sentiment Slumps Amid Energy Concerns

Business confidence in Germany worsened considerably in September as companies turned more pessimistic due to the energy crisis.

The Ifo business-climate index fell to 84.3 points in September from a revised figure of 88.6 points in August, data from the Ifo Institute showed Monday. This is its lowest value since May 2020. Economists polled by The Wall Street Journal had expected the index to come in at 87.1.


Slide in Transportation Stocks Flashes Warning About Economy

Shares of transportation companies are falling twice as fast as the hard-hit U.S. stock market, reflecting investors' expectations that a recession is likely ahead.

The Dow Jones Transportation Average, which tracks 20 large U.S. companies ranging from airlines to railroads to truckers, has declined 12% this month. The S&P 500 and the Dow Jones Industrial Average are down about half that much.


Beating Inflation Is Easy Online-Except for Sellers

On the internet, inflation isn't a problem for shoppers. Instead, it is one for the companies that sell there, with a reputation for offering bargains.

Prices are rising much more slowly online than in the wider consumer economy. During the pandemic, e-commerce businesses were able to charge a bit more when shops were closed and demand surged, but their pricing power is wearing off.


Carbon-Credit Surplus Could Soon Turn to Shortage

Hundreds of companies plan to achieve their climate goals using carbon credits to offset the emissions they can't eliminate on their own. Soon there might not be enough of the credits to go around.

Despite record demand for carbon credits last year, supply of new offsets has still outpaced demand. That has created a surplus that has has kept most carbon credits cheap.


Crypto Investors Got Burned by Celsius. Then They Battled Back.

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September 26, 2022 05:35 ET (09:35 GMT)

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