- Barry Adams
- 23 Jun, 2023
- New York City
Stocks extended weekly decline after tech rebound in Thursday's session fizzled.
The S&P 500 index and the Nasdaq Composite index extended weekly losses on the rate hikes worries following the comments from Federal Reserve Chairman Jerome Powell.
Powell stressed inflation is still too high and the Fed is not done raising rates in his comments to the Senate committee on finance and banking.
Inflation has halved since reaching a peak of 9% last August but much of the easing is driven by the sharp fall in energy prices and normalizing of supply chains.
The Federal Reserve has limited impact on goods prices and supply chain driven inflation, but the central bank has a greater influence on service sector inflation.
Service sector inflation has shown no sign of easing and Powell suggested that the full impact of multiple rate hikes has not been fully felt.
Market indexes also traded lower on the worries that the Fed is likely to raise rates at least one or two times this year and keep rates higher longer to cool down inflation,
But in order to cool inflation to 2%, the Fed may be forced to dip the economy into a recession.
European markets are set to close the week down with a loss of 2% and tech heavy Hang Seng index in Hong Kong plunged more than 3% this week.
The Nikkei index in Tokyo dropped 2.3% after Consumer price inflation in May declined to 3.2% from a three-month high of 3.5% in April.
U.S. Indexes & Yields
The S&P 500 index increased 0.8% to 4,347.88 and the Nasdaq Composite declined 1.1% to 13,479.05.
The yield on 2-year Treasury notes increased to 4.71%, 10-year Treasury notes inched lower to 3.70% and 30-year Treasury bonds edged down to 3.80%.
Crude oil decreased $1.37 to $68.13 a barrel and natural gas prices decreased 5 cents to $2.54 a thermal unit.
U.S. Stock Movers
CarMax, Inc increased 9% to $85.37 after the used car retailer reported better-than-expected quarterly results.
Starbucks Corporation declined 2.4% to $98.42 after a union representing workers said about 150 stores are ready to strike beginning Friday after the company disallowed Pride month decor in its stores.
Accenture Plc declined 1.9% to 301.38 a day after the information technology services provider reported better-than-expected sales and earnings but trimmed its annual revenue growth outlook slightly.
- Bridgette Randall
- 23 Jun, 2023
- New York City
U.K. home builders fell on the worries that rising mortgage rates will impact demand for new homes in the second-half of the year when more than 800,000 mortgages are set to repriced at sharply higher interest rates.
Taylor Wimpey plc decreased 2.4% to 110.30 pence, Persimmons dropped 3.5% to 1,064.50 pence and Barratt Developments Plc fell 2.5% to
Siemens Energy AG plunged 34% to €15.38 after the company withdrew its annual earnings outlook citing a significant rise in wind turbine component failures built by Siemens Gamesa.
GSK plc increased 5.6% to 1,435.40 pence after the company said it settled a lawsuit related to its discontinued drug Zantac that was alleged to contain chemicals that increased risk of cancer.
The confidential settlement avoids the case going to a trial next month in California and the drugmaker said it spent £45 million in legal fees last year.
Eni SpA declined 0.4% to €12.84 after the Italian energy company agreed to acquire private-equity owned Neptune Energy for $4.9 billion.
The Eni-Neptune deal is believed to be the largest deal in the European energy sector in about a decade.
Capgemini SE declined 0.1% to €169.75 after the French IT service company agreed to acquire Japan-based cloud computing services provider BTC Corp for undisclosed terms.
ThyssenKrupp AG increased 0.2% to €6.86 on reports that its Nucera hydrogen division is looking to list the company in a public offering and raise as much as €566 million.
- Bridgette Randall
- 23 Jun, 2023
- Frankfurt
European markets extended weekly losses and investors reacted to mixed economic data in the region.
Eurozone bond yields edged lower and the euro and the pound weakened after preliminary business activity growth index showed a decline in May.
The Purchasing Managers' Composite Index in June eased to 50.3 from 52.8 in May.
At the eod of the week, benchmark indexes in Frankfurt declined 2.5%, Paris fell 2.2% and in London dropped 2.1%
Inflation and interest rate jitters drove market sentiment all week and investors sold stocks after the central bank in the UK, Norway, Switzerland and Turkey raised rates.
The Turkish Lira declined to a new low of 25.10 against the U.S. dollar after the central bank in a monetary policy U-turn lifted interest rates by 650 basis points to 15%.
The sharp reversal in monetary approach lifted rates to the level last seen in January 2021 but fell short of investors expectations of higher rates of 21%.
UK Retail Sales Advanced In May
UK retail sales unexpectedly rose in May after warm weather and bank holidays boosted demand for summer clothes and outdoor-living related goods.
Retail sales in May increased 0.3% from the previous month but slower than 0.5% in April, the Office for National Statistics reported Friday.
On an annual basis, sales declined 2.1% from a year ago after falling at a 3.4% rate in April.
Europe Indexes & Yields
The DAX index decreased 0.6% to 15,890.66, the CAC-40 index declined 0.3% to 7,183.85 and the FTSE 100 index dropped 0.2% to 7,490.85.
The yield on 10-year German Bunds inched lower to 2.37%, French bonds traded lower to 2.91%, the UK gilts edged down to 4.27% and Italian bonds decreased to 4.01%.
The euro edged lower to $1.08, the British pound to $1.271 and the U.S. dollar fetched 89.91 Swiss cents.
Brent crude decreased $0.55 to $73.85 a barrel and the Dutch TTF natural gas increased €1.70 to €32.40 per MWh.
Europe Stock Movers
U.K. home builders fell on the worries that rising mortgage rates will impact demand for new homes in the second-half of the year when more than 800,000 mortgages are set to repriced at sharply higher interest rates.
Taylor Wimpey plc decreased 2.4% to 110.30 pence, Persimmons dropped 3.5% to 1,064.50 pence and Barratt Developments Plc fell 2.5% to
Siemens Energy AG plunged 34% to €15.38 after the company withdrew its annual earnings outlook citing a significant rise in wind turbine component failures built by Siemens Gamesa.
GSK plc increased 5.6% to 1,435.40 pence after the company said it settled a lawsuit related to its discontinued drug Zantac that was alleged to contain chemicals that increased risk of cancer.
The confidential settlement avoids the case going to a trial next month in California and the drugmaker said it spent £45 million in legal fees last year.
Eni SpA declined 0.4% to €12.84 after the Italian energy company agreed to acquire private-equity owned Neptune Energy for $4.9 billion.
The Eni-Neptune deal is believed to be the largest deal in the European energy sector in about a decade.
Capgemini SE declined 0.1% to €169.75 after the French IT service company agreed to acquire Japan-based cloud computing services provider BTC Corp for undisclosed terms.
ThyssenKrupp AG increased 0.2% to €6.86 on reports that its Nucera hydrogen division is looking to list the company in a public offering and raise as much as €566 million.
- Barry Adams
- 22 Jun, 2023
- New York City
Stocks turned around from the morning losses and tech stocks led the gainers after falling for four days in a row.
Market averages traded in a tight range and investors remained divided about the future rate path.
Major averages turned lower in the morning a day after Federal Reserve Chairman Powell stressed the need to continue the central bank's monetary tightening after last week's rate pause.
Chairman Powell reiterated his views on the economy and said fighting inflation is a long battle and rates have to be raised to cool inflation to 2% target rate.
The central bank's chief highlighted stubborn inflation for the second day in his Semiannual Monetary Policy Report to the U.S. Senate Banking Committee on Thursday.
Crude oil plunged 4% and dropped to a new 18-month after Powell's hawkish comments raised the prospects of higher rates for longer, adding more pressures on demand weakness.
Tech stocks rebounded in the afternoon after investors snapped up stocks that suffered losses last week.
Tesla Inc, Microsoft Corp and Alphabet Inc jumped more than 1% and Amazon.com, Inc jumped 3%.
In other economic news, initial claims of jobless benefits for the week ending on June 17 were unchanged at 264,000 and continuing claims declined to 1.759 million from 1.772 at the end of the previous week.
Existing home sales in the U.S. increased 2.3% from the previous month to 4.3 million annual rate in May, the National Association of Realtors reported Thursday.
Higher mortgage rated and elevated home prices have kept demand weak and fewer homes for sales also negatively impacted overall sales volume.
The median existing home price for all home types declined 3.1% from a year ago to $396,100.
U.S. Indexes & Yields
The S&P 500 index increased 0.3% to 4,375.82 and the Nasdaq Composite advanced 0.6% to 13,583.55.
The yield on 2-year Treasury notes increased to 4.73%, 10-year Treasury notes inched lower to 3.71% and 30-year Treasury bonds edged down to 3.83%.
Crude oil decreased $3.36 to $69.17 a barrel and natural gas prices increased 1 cent to $2.60 a thermal unit.
U.S. Stock Movers
Darden Restaurants, Inc declined 2.7% to $161.80 after the parent of Olive Garden and Longhorn Steakhouse reported better-than-expected quarterly results but forecasted mixed annual outlook.
Overstock.com Inc increased 7% to $22.66 after the company acquired digital assets and intellectual property of Bed Bath & Beyond at the floor price of $21.5 million in an auction.
Spirit AeroSystems Holdings Inc dropped 9.2% to $26.95 after the company stopped production at its Kansas plant following workers voting to strike from Saturday.
Spirit is one of the key parts suppliers to aviation company Boeing.
Boeing Co declined 2.7% to $206.25 following the strike news Spirit AeroSystems.
Rate Hikes In Europe Put Investors On Alert
European markets remained under pressure on rate path and economic slowdown worries.
Major averages in Frankfurt, Paris and London traded down for the fourth day in a row this week.
Market sentiment soured after the Federal Reserve Bank Chairman Jerome Powell hinted more rate hikes ahead to cool inflation down to 2% in his presentation to the U.S. lawmakers.
Powell's comments brought back the rate hike worries to the center after last week's rate pause suggested to some investors that the central bank is nearing its rate tightening cycle.
In addition, the central banks in the UK, Norway and Switzerland hiked rates.
The Swiss National Bank held out for more rate hikes in the year and the Norges Bank also hikes its estimate of peak rates citing stubborn inflation.
Bank of England Hikes Rates Again
The Bank of England lifted its key rate by 50 basis points to tackle inflation that is hovering near 9%.
After the thirteenth rate hike, the Bank of England's key lending rate was revised higher to 5.0% following the consumer price inflation held at 8.7% in May and core inflation accelerated to 7.1%.
The Monetary Policy Committee in a 7-2 vote decided to revise the rate higher by a larger-than-expected amount as the central bank struggled to bring down sky high inflation rate to 2%.
The policy rates are now at their highest levels since the 2008 financial crisis and financial markets are now forecasting rates to rise to 6.0% by the year's end.
Higher interest rates spell difficult times ahead for millions of mortgage borrowers.
About 2 million homeowners are likely to face sharply higher monthly payments upon refinancing in the next two years, as most mortgages in the UK are variable length less than five years.
Switzerland Slowed Rate Hike
The Swiss National Bank lifted its rate but at a slower pace and held out for more rate hikes in future.
The Swiss central bank lifted its policy rate by 25 basis points to 1.75% effective June 23.
The SNB lifted its rate for the fifth time in a row after hiking the rate by 50 basis points in March and December 2022, and by 75 basis points in September 2022.
The central bank also lowered its inflation estimate to 2.2% from the previous estimate of 2.6% but lifted the estimate for the next year to 2.2% from the earlier forecast of 2.0%.
Norway Accelerated Rate Increase
The Norges Bank lifted its deposit rate by 50 basis points to 3.75% and forecasted more than hikes may be necessary in the remainder of the year.
The policy rate is now at a 15-year high and the central bank is set to increase its rate again in August.
The central bank also revised higher its peak rate forecast to 4.25%, significantly higher than the previous estimate of 3.5% in March.
The Norwegian crown jumped to 11.55 from 11.687 against the euro and 10.52 from 10.67 against the U.S. dollar before the announcement respectively.
“If we do not raise the policy rate, prices and wages could continue to rise rapidly and inflation become entrenched. It may then become more costly to bring inflation down again”, Governor Ida Wolden Bache said in a statement released by the central bank.
Turkey Monetary Policy U-turn
Turkey in a surprise monetary policy U-turn decided to lift rates by a whopping 650 basis points.
Turkey's central bank lifted its policy rate to 15% from 8.5% as the new administration of the re-elected prime minister Recep Tayyip Erdogan tackled 40% inflation in May.
The Turkish lira fell 2.5% to 24.11 against the U.S. dollar and dropped to a new low because investors feared that the interest rate hike did not go far enough .
Many investors were hoping for rates to rise to as much as 21%.
“The Committee decided to begin the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior," the newly appointed Governor Hafize Gaye Erkan said in a statement.
Erdogan appointed Mehmet Simsek as the new Treasury and Finance Minister to arrest surging inflation and cost of living crisis after the Turkish lira lost 80% of its value in the last five years.
Europe Indexes & Yields
The DAX index decreased 0.2% to 15,988.16, the CAC-40 index declined 0.8% to 7,203.28 and the FTSE 100 index dropped 0.8% to 7,502.03.
The yield on 10-year German Bunds inched higher to 2.41%, French bonds traded higher to 2.99%, the UK gilts edged down to 4.41% and Italian bonds decreased to 4.09%.
The euro edged lower to $1.10, the British pound to $1.278 and the U.S. dollar fetched 89.27 Swiss cents.
Brent crude decreased $3.05 to $74.08 a barrel and the Dutch TTF natural gas declined €2.65 to €34.10 per MWh.
Europe Stock Movers
Ocado Group jumped 28.7% to 553.80 pence and surged as much as 42% on a speculation that the company may be an acquisition target according to a report in the newspaper the Times.
Whitbread declined 1% to 3,362.0 pence after the owner of Premier inn reported its trading update.
Novo Nordisk AS dropped 1.9% to DKK 1,072.60 after the Danish drug company said the European Union's drug regulator had last month raised thyroid cancer safety alert for several of its drugs.
SES SA increased 4.9% to €5.09 in Paris trading after the Luxembourg-based company confirmed it has terminated its merger talks with Intelsat.
- Scott Peters
- 22 Jun, 2023
- New York City
The S&P 500 index futures decreased 0.3% to 4,355.13 and the Nasdaq Composite futures declined 0.4% to 13,532.17.
The yield on 2-year Treasury notes increased to 4.73%, 10-year Treasury notes inched lower to 3.71% and 30-year Treasury bonds edged down to 3.83%.
Darden Restaurants, Inc declined 3.8% to $160.0 after the parent of Olive Garden and Longhorn Steakhouse reported better-than-expected quarterly results but forecasted mixed annual outlook.
Revenue in the fiscal fourth quarter ending in May increased 6.4% to $2.8 billion, driven by same-store sales increase of 4.0% and sales from 47 net new restaurants.
Same store sales at Olive Garden restaurants increased 4.0% and Longhorn Steakhouse surged 7.1%.
Net income in the quarter increased to $315.1 million from 281.7 million and diluted earnings per share advanced to $2.58 from $2.44 a year ago.
Total sales in the fiscal year 2023 increased to $10.5 billion from $9.6 billion and net income soared to $981.9 million from $952.8 million and diluted earnings per share increased to $7.99 from $7.39 a year ago.
The company increased its quarterly dividend by 8% to $1.31 a share payable on August 1 to shareholders on record on July 10.
During the quarter, Darden repurchased 0.2 million shares for a total of $35.2 million and at the end of the quarter the company had $652 million available under its $1.0 billion stock repurchase program.
Overstock.com Inc increased 7% to $22.66 after the company acquired digital assets and intellectual property of Bed Bath & Beyond at the floor price of $21.5 million in an auction.
Spirit AeroSystems Holdings Inc dropped 9.2% to $26.95 after the company stopped production at its Kansas plant following workers voting to strike from Saturday.
Spirit is one of the key parts suppliers to aviation company Boeing.
Boeing Co declined 2.7% to $206.25 following the strike news Spirit AeroSystems.
- Barry Adams
- 22 Jun, 2023
- New York City
Stocks continued to slide for the fourth day in a row and third day this week on persistent rate path worries and looming economic slowdown.
Major averages turned lower a day after Federal Reserve Chairman Powell stressed the need to continue the central bank's monetary tightening after last week's rate pause.
Chairman Powell is set to offer his views on the economy in his Semiannual Monetary Policy Report to the U.S. Senate Banking Committee on Thursday.
Investors are looking forward to hearing Powell's view on interest rates and inflation.
In other economic news, initial claims of jobless benefits for the week ending on June 17 were unchanged at 264,000 and continuing claims declined to 1.759 million.
Across Europe, central banks lifted rates and held out for more rate hikes in the remainder of the year.
The Bank of England lifted its policy rate by higher-than-expected 50 basis points to 5% to tackle inflation hovering at 8.7%.
The Norges Bank lifted its key lending rate by 50 basis points to 3.75% and the Swiss National Bank slowed its rate hike by 25 basis points to 1.75%.
Turkey also lifted its rate by a whopping 8.5% to 15% in a policy U-turn as the nation battles 40% inflation rate.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.3% to 4,355.13 and the Nasdaq Composite futures declined 0.4% to 13,532.17.
The yield on 2-year Treasury notes increased to 4.73%, 10-year Treasury notes inched lower to 3.71% and 30-year Treasury bonds edged down to 3.83%.
Crude oil decreased $1.46 to $71.07 a barrel and natural gas prices increased 1 cent to $2.60 a thermal unit.
U.S. Stock Movers
Darden Restaurants, Inc declined 3.8% to $160.0 after the parent of Olive Garden and Longhorn Steakhouse reported better-than-expected quarterly results but forecasted mixed annual outlook.
Overstock.com Inc increased 7% to $22.66 after the company acquired digital assets and intellectual property of Bed Bath & Beyond at the floor price of $21.5 million in an auction.
Spirit AeroSystems Holdings Inc dropped 9.2% to $26.95 after the company stopped production at its Kansas plant following workers voting to strike from Saturday.
Spirit is one of the key parts suppliers to aviation company Boeing.
Boeing Co declined 2.7% to $206.25 following the strike news Spirit AeroSystems.
- Bridgette Randall
- 22 Jun, 2023
- Frankfurt
The DAX index decreased 0.6% to 15,927.63, the CAC-40 index declined 1.3% to 7,167.14 and the FTSE 100 index dropped 0.9% to 7,494.51.
The yield on 10-year German Bunds inched higher to 2.41%, French bonds traded higher to 2.99%, the UK gilts edged down to 4.41% and Italian bonds decreased to 4.09%.
The euro edged lower to $1.10, the British pound to $1.278 and the U.S. dollar fetched 89.27 Swiss cents.
Ocado Group jumped 28.7% to 553.80 pence and surged as much as 42% on a speculation that the company may be an acquisition target according to a report in the newspaper the Times.
Whitbread plc declined 1% to 3,362.0 pence after the owner of Premier inn reported its trading update.
Novo Nordisk AS dropped 1.9% to DKK 1,072.60 after the Danish drug company said the European Union's drug regulator had last month raised thyroid cancer safety alert for several of its drugs.
SES SA increased 4.9% to €5.09 in Paris trading after the Luxembourg-based company confirmed it has terminated its merger talks with Intelsat.
- Bridgette Randall
- 22 Jun, 2023
- Frankfurt
European markets remained under pressure on rate path and economic slowdown worries.
Major averages in Frankfurt, Paris and London traded down for the fourth day in a row this week.
Market sentiment soured after the Federal Reserve Bank Chairman Jerome Powell hinted more rate hikes ahead to cool inflation down to 2% in his presentation to the U.S. lawmakers.
Powell's comments brought back the rate hike worries to the center after last week's rate pause suggested to some investors that the central bank is nearing its rate tightening cycle.
In addition, the central banks in the UK, Norway and Switzerland hiked rates.
The Swiss National Bank held out for more rate hikes in the year and the Norges Bank also hikes its estimate of peak rates citing stubborn inflation.
Bank of England Hikes Rates by 50 Basis Points
The Bank of England lifted its key rate by 50 basis points to tackle inflation that is hovering near 9%.
After the thirteenth rate hike, the Bank of England's key lending rate was revised higher to 5.0% following the consumer price inflation held at 8.7% in May and core inflation accelerated to 7.1%.
The Monetary Policy Committee in a 7-2 vote decided to revise the rate higher by a larger-than-expected amount as the central bank struggled to bring down sky high inflation rate to 2%.
The policy rates are now at their highest levels since the 2008 financial crisis and financial markets are now forecasting rates to rise to 6.0% by the year's end.
Higher interest rates spell difficult times ahead for millions of mortgage borrowers.
About 2 million homeowners are likely to face sharply higher monthly payments upon refinancing in the next two years, as most mortgages in the UK are variable length less than five years.
Switzerland Slowed Rate Hike
The Swiss National Bank lifted its rate but at a slower pace and held out for more rate hikes in future.
The Swiss central bank lifted its policy rate by 25 basis points to 1.75% effective June 23.
The SNB lifted its rate for the fifth time in a row after hiking the rate by 50 basis points in March and December 2022, and by 75 basis points in September 2022.
The central bank also lowered its inflation estimate to 2.2% from the previous estimate of 2.6% but lifted the estimate for the next year to 2.2% from the earlier forecast of 2.0%.
Norway Accelerated Rate Increase
The Norges Bank lifted its deposit rate by 50 basis points to 3.75% and forecasted more than hikes may be necessary in the remainder of the year.
The policy rate is now at a 15-year high and the central bank is set to increase its rate again in August.
The central bank also revised higher its peak rate forecast to 4.25%, significantly higher than the previous estimate of 3.5% in March.
The Norwegian crown jumped to 11.55 from 11.687 against the euro and 10.52 from 10.67 against the U.S. dollar before the announcement respectively.
“If we do not raise the policy rate, prices and wages could continue to rise rapidly and inflation become entrenched. It may then become more costly to bring inflation down again”, Governor Ida Wolden Bache said in a statement released by the central bank.
Turkey Lifts Rate by 650 basis Points in a Policy U-turn
Turkey in a surprise monetary policy U-turn decided to lift rates by a whopping 650 basis points.
Turkey's central bank lifted its policy rate to 15% from 8.5% as the new administration of the re-elected prime minister Recep Tayyip Erdogan tackled 40% inflation in May.
The Turkish lira fell 2.5% to 24.11 against the U.S. dollar and dropped to a new low because investors feared that the interest rate hike did not go far enough .
Many investors were hoping for rates to rise to as much as 21%.
“The Committee decided to begin the monetary tightening process in order to establish the disinflation course as soon as possible, to anchor inflation expectations, and to control the deterioration in pricing behavior," the newly appointed Governor Hafize Gaye Erkan said in a statement.
Erdogan appointed Mehmet Simsek as the new Treasury and Finance Minister to arrest surging inflation and cost of living crisis after the Turkish lira lost 80% of its value in the last five years.
Europe Indexes & Yields
The DAX index decreased 0.6% to 15,927.63, the CAC-40 index declined 1.3% to 7,167.14 and the FTSE 100 index dropped 0.9% to 7,494.51.
The yield on 10-year German Bunds inched higher to 2.41%, French bonds traded higher to 2.99%, the UK gilts edged down to 4.41% and Italian bonds decreased to 4.09%.
The euro edged lower to $1.10, the British pound to $1.278 and the U.S. dollar fetched 89.27 Swiss cents.
Brent crude decreased $1.30 to $75.85 a barrel and the Dutch TTF natural gas increased €0.16 to €36.90 per MWh.
Europe Stock Movers
Ocado Group jumped 28.7% to 553.80 pence and surged as much as 42% on a speculation that the company may be an acquisition target according to a report in the newspaper the Times.
Whitbread declined 1% to 3,362.0 pence after the owner of Premier inn reported its trading update.
Novo Nordisk AS dropped 1.9% to DKK 1,072.60 after the Danish drug company said the European Union's drug regulator had last month raised thyroid cancer safety alert for several of its drugs.
SES SA increased 4.9% to €5.09 in Paris trading after the Luxembourg-based company confirmed it has terminated its merger talks with Intelsat.
- Barry Adams
- 21 Jun, 2023
- New York City
Stocks struggled on Wall Street and Treasury yields traded volatile following comments from Fed Chairman Powell.
In his prepared remarks for his testimony to be delivered to the House Financial Services Committee, Powell said that the latest rate pause is likely to be followed by rate hikes as inflation remains too high for the central bank's comfort.
"Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go," Chairman Powell noted in his prepared remark for lawmakers.
"Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets," highlighted Powell while reviewing the current economic situation.
Nearly all FOMC participants expect that "it will be appropriate to raise interest rates somewhat further by the end of the year."
The Federal Reserve's hawkish stance has failed to bring down inflation to its target rate of 2% despite the increase in rates by five percentage points over the last fifteen months.
Overall inflation has cooled in the last six months but that is largely because of the sharp fall in crude oil and natural gas prices but housing prices are still 50% to 150% above the pre-Covid 2019 levels in the most urban areas.
Crude oil traded in a tight range not far from its 15-month low as demand growth following the ending of China's "zero Covid" remains uncertain and weaker-than-expected.
Tech stocks took a breather from the previous week's market rally fueled by optimism surrounding the new business cycle driven by AI spending.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.1% to 4,382.73 and the Nasdaq Composite futures declined 0.7% to 13,574.97.
The yield on 2-year Treasury notes increased to 4.72%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds edged up to 3.84%.
Crude oil decreased $0.02 to $71.54 a barrel and natural gas prices decreased 1 cent to $2.45 a thermal unit.
U.S. Stock Movers
FedEx Corp declined 3% to $224.01 after the parcel delivery company grounded additional planes because of lack of demand.
FedEx reported weaker-than-expected quarterly revenue but adjusted earnings were ahead of market expectations.
Rivian Automotive Inc increased 1.6% to $15.70 after the company announced that its customers will be able to charge vehicles made by the company using Tesla electric charging stations next year.
Winnebago Industries, Inc declined 8.1% to $59.01 after the maker of RVs reported sales declined 38% in its latest quarter because of heavier discounting and macroeconomic headwinds.
Cryptocurrencies linked stocks advanced after Bitcoin continued to scale higher.
Coinbase Global increased 2.5% to $58.41, MicroStrategy advanced 3.3% to $323.31 and Riot Platforms Inc surged 4.4% to $11.79.
Rate Worries Keep European Markets In Check
European markets traded down for the third day in a row on valuation worries and economic uncertainties.
Benchmark indexes in Frankfurt and Paris edged lower but traded near record highs.
The benchmark index in London declined after the latest inflation data reinforced additional tightening by the Bank of England and core inflation accelerated to a 31-year high.
The latest inflation data also led many to forecast that the Bank of England may lift interest rates by 50 basis points rather than 25 basis points as had been expected on Thursday.
Higher interest rates are expected to affect 800,000 mortgages due for refinancing in the second half of this year, according to the financial service industry association UK Finance.
Higher UK mortgage rates will force most borrowers to cut spending elsewhere, affecting overall household spending and GDP growth.
Automakers were in focus after new car registration rose for the tenth month in a row.
UK Inflation Held Steady at 8.7%
The consumer price inflation in May matched the April level of 8.7%, the Office for National Statistics reported Wednesday.
Core inflation, which excludes food, energy, alcohol and tobacco, accelerated to 7.1%, the highest level since March 1992.
The inflation remained at a 13-month low but significantly above the 2% target set by the Bank of England, adding more urgency to policymakers' tightening campaign.
Food inflation slowed to 18.3% from 19.0% and energy price decline increased to 13.1% from 8.9% offsetting air travel inflation to 31.4% from 12.6% and recreational and cultural goods and services to 6.7% from 6.3%.
EU Passenger Car Registration Up 18.5% in May
Passenger car registration in the European Union increased for the tenth month in a row, the European Automobiles Manufacturers Association reported Wednesday.
Passenger car registration increased 18.5% to 938,950 units, and all four largest markets reported an increase.
Registration in Italy increased 23.1%, in Germany 19.2%, in France 14.8% and in Spain 8.3%.
Battery powered cars soared 70.9% to 129,847 units, lifting its market share by four percentage points from a year ago to 13.8%.
Automobile registration in the first five months increased 18% to 4.4 million but still 23% below 5.7 million in the period a year ago.
Europe Indexes & Yields
The DAX index decreased 0.6% to 16,023.13, the CAC-40 index declined 0.5% to 7,260.97 and the FTSE 100 index increased 0.1% to 7,559.18.
The yield on 10-year German Bunds inched lower to 2.41%, French bonds traded lower to 2.96%, the UK gilts edged down to 4.41% and Italian bonds decreased to 4.05%.
The euro edged lower to $1.09, the British pound to $1.27 and the Swiss franc to 89.75 cents.
Brent crude increased $1.32 to $77.30 a barrel and the Dutch TTF natural gas decreased €1.97 to €36.79 per MWh.
Europe Stock Movers
Automakers were in focus after new passenger car registration in May increased 18.5% following a 17.2% rise in April.
BMW AG increased 0.6% to €111.20, Stellantis NV added 1.1% to €15.55 and Renault SA jumped 2.6% to €36.44.
Banks traded higher in the region after UK inflation was ahead of expectations and bond yields advanced on the hopes of a rate hike cycle to continue.
Deutsche Bank AG increased 1.6% to €9.48, Commerzbank advanced 1.8% to €10.38, BNP Paribas jumped 1.1% to €57.34, Barclays inched lower 0.9% to 152.88 pence and HSBC Holdings Plc advanced 0.4% to 617.50 pence.
Deutsche Lufthansa AG increased 1.1% to €9.37 after the German airline sold its travel solution business Lufthansa AirPlus Servicekarten GmbH to Sweden-based SEB Kort Bank AB for €450 million.
VEON Ltd declined 1.4% to 72 euro cents after the company announced its plan to invest $600 million in its Ukrainian subsidiary Kyivstar, the largest mobile telecom network in Ukraine.
- Scott Peters
- 21 Jun, 2023
- New York City
FedEx Corp declined 3% to $224.01 after the parcel delivery company grounded additional planes because of lack of demand.
FedEx reported weaker-than-expected quarterly revenue but adjusted earnings were ahead of market expectations.
Revenue in the fiscal fourth quarter ending in May declined 10% to $21.9 billion from $24.3 billion and net income increased to $1.5 billion from $558 million and diluted earnings per share rose to $6.05 from $2.13 a year ago.
For the fiscal year 2023, revenue declined 4% to $90 billion from $93.5 billion and net income increased 8% to $3.9 billion from $3.8 billion and diluted earnings per share increased to $15.48 from $14.33 a year ago.
The company forecasted capital spending of $5.7 billion in the fiscal 2024 and estimated diluted earnings per share between $15.0 and $17.0 before accounting for mark-to-market retirement plans adjustments and estimated revenue percentage growth between "flat to low single digit" from the previous year.
Rivian Automotive Inc increased 1.6% to $15.70 after the company announced that its customers will be able to charge vehicles made by the company using Tesla electric charging stations next year.
Winnebago Industries, Inc declined 8.1% to $59.01 after the maker of RVs reported sales declined 38% in its latest quarter because of heavier discounting and macroeconomic headwinds.
Revenue in the fiscal third quarter ending in May declined 38.2% to $900.8 million from $1.5 billion and net income declined 49% to $59.6 million from $117.2 million and diluted earnings per share fell to $1.71 from $3.57 a year ago.
On May 17 the company declared a quarterly cash dividend of 27 cents per share payable on June 28 to shareholders on record June 14.
The company completed repurchases of $20 million shares during the third quarter.
Cryptocurrencies linked stocks advanced after Bitcoin continued to scale higher.
Coinbase Global increased 2.5% to $58.41, MicroStrategy advanced 3.3% to $323.31 and Riot Platforms Inc surged 4.4% to $11.79.
Pandora AS increased 2.7% to DKK 580.80 after the Danish jewelry designer launched a DKK 2.6 billion or $381 million stock buyback plan following the ending of DKK 2.4 billion.
- Brian Turner
- 21 Jun, 2023
- New York City
Treasury yields perked up and stocks on Wall Street turned lower after the Fed Chairman Powell sounded an alarm on inflation.
In his prepared remarks for his testimony to be delivered to the House Financial Services Committee, Powell said that the latest rate pause is likely to be followed by rate hikes as inflation remains too high for the central bank's comfort.
"Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go," Chairman Powell noted in his prepared remark for lawmakers.
"Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets," highlighted Powell while reviewing the current economic situation.
Nearly all FOMC participants expect that "it will be appropriate to raise interest rates somewhat further by the end of the year."
The Federal Reserve's hawkish stance has failed to bring down inflation to its target rate of 2% despite the increase in rates by five percentage points over the last fifteen months.
Overall inflation has cooled in the last six months but that is largely because of the sharp fall in crude oil and natural gas prices but housing prices are still 50% to 150% above the pre-Covid 2019 levels in the most urban areas.
- Barry Adams
- 21 Jun, 2023
- New York City
Stocks on Wall Street remained under pressure for the second day this week after Fed Chairman Powell sounded an alarm on inflation.
In his prepared remarks for his testimony to be delivered to the House Financial Services Committee, Powell said that the latest rate pause is likely to be followed by rate hikes as inflation remains too high for the central bank's comfort.
"Nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go," Chairman Powell noted in his prepared remark for lawmakers.
"Despite elevated inflation, longer-term inflation expectations appear to remain well anchored, as reflected in a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets," highlighted Powell while reviewing the current economic situation.
Nearly all FOMC participants expect that "it will be appropriate to raise interest rates somewhat further by the end of the year."
Crude oil drifted lower to a 15-month low as demand growth following the ending of China's "zero Covid" remains uncertain and weaker-than-expected.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.4% to 4,373.83 and the Nasdaq Composite futures declined 0.4% to 13,619.85.
The yield on 2-year Treasury notes increased to 4.72%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds edged up to 3.84%.
Crude oil decreased $0.02 to $71.54 a barrel and natural gas prices decreased 1 cent to $2.45 a thermal unit.
U.S. Stock Movers
FedEx Corp declined 3% to $224.01 after the parcel delivery company grounded additional planes because of lack of demand.
FedEx reported weaker-than-expected quarterly revenue but adjusted earnings were ahead of market expectations.
Rivian Automotive Inc increased 1.6% to $15.70 after the company announced that its customers will be able to charge vehicles made by the company using Tesla electric charging stations next year.
Winnebago Industries, Inc declined 8.1% to $59.01 after the maker of RVs reported sales declined 38% in its latest quarter because of heavier discounting and macroeconomic headwinds.
Cryptocurrencies linked stocks advanced after Bitcoin continued to scale higher.
Coinbase Global increased 2.5% to $58.41, MicroStrategy advanced 3.3% to $323.31 and Riot Platforms Inc surged 4.4% to $11.79.
- Bridgette Randall
- 21 Jun, 2023
- Frankfurt
Automakers were in focus after new passenger car registration in May increased 18.5% following a 17.2% rise in April.
BMW AG increased 0.6% to €111.20, Stellantis NV added 1.1% to €15.55 and Renault SA jumped 2.6% to €36.44.
Banks traded higher in the region after UK inflation was ahead of expectations and bond yields advanced on the hopes of a rate hike cycle to continue.
Deutsche Bank AG increased 1.6% to €9.48, Commerzbank advanced 1.8% to €10.38, BNP Paribas jumped 1.1% to €57.34, Barclays inched lower 0.9% to 152.88 pence and HSBC Holdings Plc advanced 0.4% to 617.50 pence.
Deutsche Lufthansa AG increased 1.1% to €9.37 after the German airline sold its travel solution business Lufthansa AirPlus Servicekarten GmbH to Sweden-based SEB Kort Bank AB for €450 million.
VEON Ltd declined 1.4% to 72 euro cents after the company announced its plan to invest $600 million in its Ukrainian subsidiary Kyivstar, the largest mobile telecom network in Ukraine.
- Bridgette Randall
- 21 Jun, 2023
- Frankfurt
European markets traded down for the third day in a row on valuation worries and economic uncertainties.
Benchmark indexes in Frankfurt and Paris edged lower but traded near record highs.
The benchmark index in London declined after the latest inflation data reinforced additional tightening by the Bank of England and core inflation accelerated to a 31-year high.
The latest inflation data also led many to forecast that the Bank of England may lift interest rates by 50 basis points rather than 25 basis points as had been expected on Thursday.
Higher interest rates are expected to affect 800,000 mortgages due for refinancing in the second half of this year, according to the financial service industry association UK Finance.
Higher UK mortgage rates will force most borrowers to cut spending elsewhere, affecting overall household spending and GDP growth.
Automakers were in focus after new car registration rose for the tenth month in a row.
UK Inflation Held Steady at 8.7%
The consumer price inflation in May matched the April level of 8.7%, the Office for National Statistics reported Wednesday.
Core inflation, which excludes food, energy, alcohol and tobacco, accelerated to 7.1%, the highest level since March 1992.
The inflation remained at a 13-month low but significantly above the 2% target set by the Bank of England, adding more urgency to policymakers' tightening campaign.
Food inflation slowed to 18.3% from 19.0% and energy price decline increased to 13.1% from 8.9% offsetting air travel inflation to 31.4% from 12.6% and recreational and cultural goods and services to 6.7% from 6.3%.
EU Passenger Car Registration Up 18.5% in May
Passenger car registration in the European Union increased for the tenth month in a row, the European Automobiles Manufacturers Association reported Wednesday.
Passenger car registration increased 18.5% to 938,950 units, and all four largest markets reported an increase.
Registration in Italy increased 23.1%, in Germany 19.2%, in France 14.8% and in Spain 8.3%.
Battery powered cars soared 70.9% to 129,847 units, lifting its market share by four percentage points from a year ago to 13.8%.
Automobile registration in the first five months increased 18% to 4.4 million but still 23% below 5.7 million in the period a year ago.
Europe Indexes & Yields
The DAX index increased 0.1% to 16,132.61, the CAC-40 index declined 0.04% to 7,289.96 and the FTSE 100 index increased 0.1% to 7,575.18.
The yield on 10-year German Bunds inched lower to 2.41%, French bonds traded lower to 2.96%, the UK gilts edged down to 4.41% and Italian bonds decreased to 4.05%.
The euro edged lower to $1.09, the British pound to $1.27 and the Swiss franc to 89.75 cents.
Brent crude increased $0.30 to $76.20 a barrel and the Dutch TTF natural gas decreased €0.82 to €37.89 per MWh.
Europe Stock Movers
Automakers were in focus after new passenger car registration in May increased 18.5% following a 17.2% rise in April.
BMW AG increased 0.6% to €111.20, Stellantis NV added 1.1% to €15.55 and Renault SA jumped 2.6% to €36.44.
Banks traded higher in the region after UK inflation was ahead of expectations and bond yields advanced on the hopes of a rate hike cycle to continue.
Deutsche Bank AG increased 1.6% to €9.48, Commerzbank advanced 1.8% to €10.38, BNP Paribas jumped 1.1% to €57.34, Barclays inched lower 0.9% to 152.88 pence and HSBC Holdings Plc advanced 0.4% to 617.50 pence.
Deutsche Lufthansa AG increased 1.1% to €9.37 after the German airline sold its travel solution business Lufthansa AirPlus Servicekarten GmbH to Sweden-based SEB Kort Bank AB for €450 million.
VEON Ltd declined 1.4% to 72 euro cents after the company announced its plan to invest $600 million in its Ukrainian subsidiary Kyivstar, the largest mobile telecom network in Ukraine.
- Barry Adams
- 20 Jun, 2023
- New York City
Stocks lacked direction and market indexes declined after advancing for weeks.
U.S. market indexes opened lower and spent today's session in red following the Juneteenth holiday on Monday.
Investors also digested the unexpected surge in housing starts in May despite elevated home prices and rising mortgage rates.
For weeks, markets extended rally on the expectations that the Federal Reserve is more likely to pause rate hikes and continued to rally after the Fed's decision.
The rally continued on the hopes that the central bank is nearing the end of its monetary tightening cycle despite the Fed Chairman Jerome Powell saying future rate path is data dependent.
At the end of last week, the S&P 500 index advanced for the fifth week in a row by 2.6% and the Nasdaq Composite index gained for the eighth week and added 3.2%.
Tech stocks rally powered the two-month rally on the expectations of AI fueled demand for semiconductor chips and software platforms.
The narrow rally of the last two months has relied on the hopes of rising sales and earnings at tech companies in the belief that demand for AI services will kick off a new business and consumer spending cycle.
Investors are hoping that the latest rate-pause is likely to be extended at the next policy meeting in July and the U.S. economy is resilient enough to avoid recession this year, two large assumptions that may not prove to be correct.
In addition, market gains are muted because of the decline in energy prices.
In overseas news, China trimmed its loan prime rate by 10 basis points for 1-year to 3.65% and 5-year to 4.2%.
Despite the expected marginal rate cuts, market indexes in Hong Kong and Shanghai declined after the government did not announce deeper structural reforms to revive the weak economic recovery.
The Hang Seng index declined 1.5% and the Shanghai Composite index dropped 0.5% after a cabinet meeting on Friday failed to provide additional stimulus measures.
U.S. Indexes & Yields
The S&P 500 index futures decreased 0.3% and the Nasdaq Composite futures declined 0.4%.
The yield on 2-year Treasury notes increased to 4.70%, 10-year Treasury notes edged up to 3.75% and 30-year Treasury bonds eased to 3.85%.
Crude oil increased $1.30 to $70.68 a barrel and natural gas prices increased 1 cent to $2.66 a thermal unit.
U.S. Stock Movers
Alibaba Group Holding Ltd declined 2.2% to $90.10 after the company announced management shakeup.
Co-founder Eddie Wu will succeed Daniel Zhang as chief executive of the company.
European Markets Extend 2-day Losses
European markets eased and investors focused on the region's economic health and digested the latest news from China.
Benchmark indexes in Frankfurt, London and Paris declined for the second day this week after the widely anticipated rate cut in China failed to mist market sentiment.
The Peoples' Bank of China lowered its loan prime rate by 10 basis points for 1-year to 3.65% and 5-year to 4.2%.
Investors are also anticipating a 25-basis points rate hike by the Bank of England on Thursday.
Closer to home, producer price inflation in Germany declined for the eighth month in a row 1.0% and dropped to the level last seen in January 2021.
The European Central Bank said adjusted current account surplus of 20-nation dropped to Є4 billion in April from Є31 billion in the previous month.
German Producer Price Inflation Slowed to 28-month Low
Producer price inflation on an annual basis eased to 1% in May from 4.1% in April, the Federal Statistics Office or Destatis reported Tuesday.
The inflation rate was the slowest since January 2021, after energy prices declined 3.3% from a year ago and fell 3.5% from the previous month.
The sharp fall in energy prices by 34% since September 2022, helped to cushion price increases in capital goods and intermediate goods.
On a monthly basis, inflation from April decreased 1.4%
Prices for non-durable consumer goods were 10.1% higher in May and rose 0.1% from the previous month. Food prices were 11.9% from a year ago.
Prices of durable consumer goods increased 7.9% compared to May 2022, mainly driven by an 8.8% increase in furniture prices and domestic appliances by 9.1%.
The 10.9% decline in metals prices drove down intermediate goods prices by 2.3% in May from a year ago.
Swiss Trade Surplus Advanced to 15-month High
Swiss trade surplus rose to CHF 4.3 billion in May from the revised 2.1 billion surplus in April, the Federal Customs Administration said Tuesday.
The trade surplus was the largest since February 2022 because exports rose 7.8% to CHF 22.3 billion and imports declined 3.1% to a 17-month low of CHF 18.0 billion.
Exports of chemicals and pharmaceuticals increased 15.1%, machinery and electronics 0..2%, watches 3.8%, food and beverages 5.6% and vehicles by 9.1%.
Exports to the U.S. increased 7% to CHF 4.2 billion, China jumped 11% to CHF 1.4 billion, Germany 4% to CHF 3.5 billion and Slovenia soared 39% to CHF 1.5 billion and to India decreased 2.5% to CHF 152 million.
Imports from Germany declined 5.1% to CHF 4.6 billion, Italy increased 0.3% to CHF 1.8 billion, declined 1.6% to CHF 1.5 billion, the U.S. jumped 9.8% to 1.2 billion and declined 12.9% to CHF194 billion.
Europe Indexes & Yields
The DAX index decreased 0.6% to 16,111.30, the CAC-40 index declined 0.4% to 7,294.18 and the FTSE 100 index dropped 0.3% to 7569.31.
The yield on 10-year German Bunds inched higher to 2.49%, French bonds traded lower to 3.00%, the UK gilts edged down to 4.46% and Italian bonds increased to 4.08%.
The euro edged lower to $1.09, the British pound to $1.27 and the Swiss franc to 89.70 cents.
Brent crude decreased $0.80 to $75.25 a barrel and the Dutch TTF natural gas decreased €2.28 to €37.19 per MWh.
Europe Stock Movers
Stellantis NV declined 2.2% to €15.39 after the Italian vehicle maker struck a 50:50 partnership with Foxconn to design and sell semiconductors for the automotive industry from 2026.
Braemar Plc dropped 3.5% to 278.0 pence after the company said chief finance officer Nick Stone will step down on July 31.
Abrdn Plc declined 1.1% to 213.20 pence after the company sold its 10% stake or 21.8 million shares in the India-based HDFC Asset Management Company.
Monks Investment Trust Plc declined 0.1% to 994 pence after the company posted a smaller loss in the fiscal year 2023.
Renault SA declined 3.9% to €35.45 and the company assigned additional responsibilities to group chief executive Luca de Meo as chairman and CEO of its electric vehicle unit Ampere.
Renault is still considering listing Ampere on the stock market.
Sanofi SA increased 3.5% to €97.75 after the company won an international arbitration case related to claims by Boehringer Ingelheim in connection with cancer lawsuits linked to Zantac in the U.S.