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North American Morning Briefing: Stock Futures Nudge Lower; Traders Wary of Looming Jobs Data


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Stock futures inched lower on Thursday as traders reflected on several volatile sessions and eyed looming jobs data.

The prospect of the Federal Reserve adopting a less restrictive monetary stance in the wake of some soft data and recent market turmoil--most notably in U.K. bonds--had been a catalyst for a sharp equity rebound, according to Henry Allen, strategist at Deutsche Bank.

"But over the last 24 hours, solid U.S. data releases have created a pushback against that narrative, since they were seen as giving the Fed more space to keep hiking rates over the coming months," Allen added.

Indeed, Fed speakers, such as Raphael Bostic, have continued to affirm the need for more rate hikes. On Thursday, Loretta Mester is due to speak at 8:50 a.m. and again at 6:30 p.m. In between, at 1 p.m., Fed governor Lisa Cook will deliver her first speech in her new role.

One crucial factor impacting Fed thinking is the health of the jobs market. Consequently, the looming nonfarm payrolls report, due on Friday, may be encouraging a period of cautious reflection among investors after the latest rally, said analysts.

The market had been arguably excessively bearish at the end of last week, with the S&P 500 at its lowest since November 2020, and the benchmark's 14-day relative strength index, a momentum gauge, at 28, where a number below 30 is considered in oversold territory. The subsequent recovery, up 5.5% since Friday's close, leaves the RSI at 46.

"There is nothing to suggest that the market will move out of range trade mentality ahead of Friday's major risk event, [the] NFP," said Stephen Innes, managing partner at SPI Asset Management.

"However, the fly in the ointment could be higher [oil] prices, as the knock-on inflation throughput, especially if $100 a barrel is tested, could keep the Fed higher for longer if energy inflation picks up again, " Innes added.


The dollar has recovered some ground after recent falls and is likely to continue to do so ahead of the weekend, potentially around Friday's jobs report in particular, ING said.

"As we had expected, the dollar downtrend has started to prove unsustainable," ING said, adding that markets probably aren't yet ready to bet heavily on the Fed slowing the pace of interest-rate rises.

The jobs data has the potential to lift the DXY to around 112-113, ING said.


Government bond yields face opposing pressures from hawkish central banks and weak economic growth, Amundi said, maintaining an active and tactical approach.

Amundi is slightly cautious on duration--a measure of the sensitivity of bonds to changes in interest rates--mainly through Treasurys and core Europe, but it is positive on China and neutral on the U.K. amid the recent sharp movements, it said.


Gilt yields rose after Fitch cut its outlook on the U.K. to negative from stable, following on from S&P's recent decision to reduce the country's outlook to negative.

Fitch said the reduction in the outlook reflected the "large and unfunded fiscal package announced as part of the new government's growth plan," which could "lead to a significant increase in fiscal deficits over the medium term."

Fitch affirmed the U.K. credit rating at AA-.


Oil prices held modest gains post-OPEC, with SPI Asset Management saying the market is already tight and is expected to tighten further when an EU embargo on Russian oil comes into force later this year.

Other News: Shell warned that a steep fall in refining margins will have a negative impact of between $1 billion and $1.4 billion on its third-quarter adjusted earnings, while it also expects lower results from its Integrated Gas business.

Read more here.


Metals prices rose across the board as traders once again pivot to risk assets on tepid signs of a macroeconomic recovery.

"The macro environment is on the bullish side of the ledger for the first time in four weeks," Peak Trading Research said.




Shell Braces for Profit Hit From Volatile Natural-Gas Prices, Rising Costs

Shell PLC said it expects its third-quarter earnings to be hit by "significantly lower" profit from trading gas because of market volatility as well as higher costs for delivering fuel amid a global scramble for energy supplies.

The London-based company said Thursday that the pricing and cost swings from shortfalls of liquefied natural gas will likely cut into profit from its huge gas business, typically its biggest cash generator. But Shell said its overall marketing profits from trading oil and other products were higher in the third quarter compared with the previous quarter. The comments came in a preview of Shell's full third-quarter earnings, scheduled for later this month.


Brookfield Bets $2 Billion on Music in Deal With Primary Wave

Brookfield Asset Management Inc. is joining with independent publisher Primary Wave Music in a $2 billion deal to invest in music copyrights, the companies said.

The asset manager, which hasn't previously invested in music catalogs, will take a significant minority interest in Primary Wave, and commit $1.7 billion to fund a permanent capital vehicle focused on acquiring music rights from top acts.


Elon Musk and Twitter at Odds Over Terms of Agreement to Close Deal

Representatives of Elon Musk and Twitter Inc. are still grappling with terms of an agreement that would enable his purchase of the social-media company to proceed, continuing a monthslong drama surrounding the fate of the blockbuster deal.

The discussions are the latest the two sides have held as a courtroom clash draws nearer. They quietly held unsuccessful talks about a possible cut to the price of $44 billion for the social-media platform before Mr. Musk reversed course Monday and said he would return to the original agreement's terms, people familiar with the matter said.


Ford's Electric F-150 Lightning Truck Gets Higher Starting Price-Again

Ford Motor Co. is raising the starting price of its all-electric truck for the second time in recent months.

The new price tag for the 2023 F-150 Lightning Pro is $51,974, the company said. The increase is expected to affect only the Pro, its most affordable trim level.


U.S. Looks to Ease Venezuela Sanctions, Enabling Chevron to Pump Oil

The Biden administration is preparing to scale down sanctions on Venezuela's authoritarian regime to allow Chevron Corp. to resume pumping oil there, paving the way for a potential reopening of U.S. and European markets to oil exports from Venezuela, according to people familiar with the proposal.

In exchange for the significant sanctions relief, the government of Venezuelan President Nicolás Maduro would resume long-suspended talks with the country's opposition to discuss conditions needed to hold free and fair presidential elections in 2024, the people said. The U.S., Venezuela's government and some Venezuelan opposition figures have also worked out a deal that would free up hundreds of millions of dollars in Venezuelan state funds frozen in American banks to pay for imports of food, medicine and equipment for the country's battered electricity grid and municipal water systems.


Credit Suisse's Woes Don't Make for a Lehman Moment -- Analysis

European banks aren't at risk of facing a Lehman-style crash.

That's according to multiple analysts reacting to the stream of negative stories and market turmoil hitting Swiss banking giant Credit Suisse Group AG.


Talking Markets: China Likely Needs More Than October Meetings to Exit Zero-Covid

Some China watchers are hoping that political meetings this month will signal an end to strict anti-Covid-19 policies that have cast a gloomy spell on the world's second-largest economy. They are likely to be disappointed and left waiting well into next year, analysts say.

Chinese businesses have slowed investments and consumers have cut spending amid citywide lockdowns, mass testing and years of border closures stemming from Beijing's pandemic controls. These factors played a role in slower-than-expected GDP growth in the second quarter, as well as in several equity market selloffs. Both the CSI 300 and the Shanghai Composite Index have fallen to multimonth lows, while the MSCI China Index has hit a six-year low.


German Factory Orders Fell Sharply in August

New orders in Germany's manufacturing sector fell sharply in August, more than forecast, reflecting weakening demand for goods in a context of rising input costs and high energy prices.

Factory orders decreased 2.4% on month, data from the German statistics office Destatis showed Thursday. The decrease is much larger than forecast by economists polled by The Wall Street Journal, who expected orders to fall by 0.5%.


Bank of Japan Maintains View on Most of Japan's Regional Economies

The Bank of Japan on Thursday maintained its view that most of Japan's local economies were growing moderately, citing improvements in supply shortages

The bank's assessment for eight of the nine local economies was unchanged, and it raised its assessment for one region in the western part of the nation's main island.


Saudi Sovereign-Wealth Fund Joins 100-Year Bond Club

Saudi Arabia braved turbulent markets to join the small club of issuers that have borrowed for 100 years from investors, with its sovereign-wealth fund selling the ultralong debt as part of a $3 billion bond-market debut.

The three-part sale of green bonds tapped global investors for funds that will help support projects at the heart of Crown Prince Mohammed bin Salman's national economic transformation.


Europe Has the Strength to Sail Through a Recession

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October 06, 2022 05:28 ET (09:28 GMT)

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