MARKET WRAPS
Watch For:
CPI data for EU, France, Italy; U.K. Nationwide house price index; Germany employment; trading updates from Credit Agricole, Holcim, Clariant, AXA, Pearson, Puma, OMV, NatWest, Siemens Healthineers, Engie, IMI, IAG, ITV, Rightmove, Intertek, Taylor Wimpey
Opening Call:
European stock futures were higher in tandem with broad gains in Asian stock benchmarks. U.S. Treasury yields edged lower, the dollar strengthened. Oil futures and gold fell.
Equities:
Stock futures in Europe were higher on renewed enthusiasm over spending related to the artificial-intelligence boom. Strong earnings from major U.S. tech companies have eased investor concerns over the viability of huge data-center investments.
"Stronger results from a leading e-commerce and cloud service provider after the close [Thursday] reinforced the view that AI-related capital expenditure continues to generate robust demand and attractive returns," Commerzbank Research analysts said, referring to Amazon.com's results.
However, a team of Truist Wealth strategists led by Keith Lerner, chief investment officer and chief market strategist, cautioned that "the bull market remains intact, but the bumpier second-half path we've anticipated is unfolding as AI/tech uncertainty, geopolitical tensions and higher interest rates converge."
Forex:
The sterling could underperform as most Bank of England policymakers remain reluctant to raise interest rates, HSBC said.
"The BOE still sees the growth downside as the more immediate risk, and the inflation upside as potentially temporary." If the BOE stays sidelined while external shocks and domestic policy uncertainty persist, sterling looks vulnerable, particularly against currencies with firmer rate or growth support, it added.
Bonds:
Treasury yields edged lower. U.S. GDP slowed in the second quarter and PCE inflation cooled in June, as expected. U.S. consumer sentiment, due later in the day, is expected to tick higher, according to WSJ consensus.
Markets are pricing an interest rate increase in September, following the Fed hold with three hike dissents. But Chairman Warsh's comments are being perceived by many observers as an indication that it won't take much to convince the FOMC to hold again.
Christopher Sullivan, chief investment officer at the United Nations Federal Credit Union, said that if economic data shows a need for the Fed to act and the central bank doesn't, "that's tantamount to disaster for the long end of the market."
Energy:
Oil futures traded higher early Wednesday but turned lower. Recent attacks on tankers at the Caspian Pipeline Consortium terminal have once again led to operations being halted in the Black Sea, just days after operations were restarted, TD Securities' Macro Research said.
"This will continue to see Russian crude exports reduced" by 1 million-2 million barrels per day compared with June averages, it said. Also, this "could become a more prolonged outage as drone attacks persist."
Metals:
Gold fell. The precious metal appears to be trading largely within its consolidation range of the last few weeks, said Empire FX's Crispus Nyaga. Markets were likely reacting to the Federal Reserve's decision to hold its interest rates steady.
Traders seem to be pricing in a rate hike at the next meeting, but the probability for another hold has likely increased after the latest U.S. price index of personal-consumption expenditures, he said. Still, major central banks are expected to tighten policy in coming months, he added. A higher interest-rate environment typically drags down the non-interest yielding yellow metal.
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Copper edged higher. Sentiment across the base metal sector was boosted by the Fed leaving rates unchanged, while signs of short-term tightness also provided some support, the ANZ Research team said. Tightening supply may be due to ongoing concerns that the Trump administration may impose tariffs on copper imports, it added.
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Iron ore futures were lower. The fall was likely due to dampened expectations of Chinese stimulus that would lend support to steel demand, said Commonwealth Bank of Australia's Ryan Felsman. China's Politburo on Thursday signaled little appetite for major stimulus in the second half of the year. Iron-ore demand is typically influenced by steel, as the ferrous metal is a key input for steel production.
TODAY'S TOP HEADLINES
China's Factory Activity Gauge Unexpectedly Signals Contraction
A closely watched indicator of Chinese manufacturing unexpectedly signaled a contraction in activity for the first time in five months as factories were hit by extreme weather, raising pressure on Beijing to support growth.
The official manufacturing purchasing managers index dived to 49.2 in July from June's 50.3, according to data released Friday by the National Bureau of Statistics.
Iran War Piles on Inflation Pressure But BOE Follows the Fed
The Bank of England kept interest rates unchanged on Thursday, as was widely expected, with inflation still running close to policymakers' 2% target. This was despite fighting in the Middle East driving up energy costs.
The BOE's policy decision came a day after the Federal Reserve held borrowing costs steady.
U.S. Says Hamas Has Agreed to Broad Plan to Disarm
Hamas and other Palestinian militant groups agreed to a plan that, if followed, would see the groups disarm and lose power in the Gaza Strip as long as Israel withdraws from the enclave, U.S. officials said.
The officials, speaking to reporters Thursday evening, said the agreement is the start of an indefinite, multiphase process to end Hamas's rule in Gaza and rebuild the enclave. The officials acknowledged many challenges ahead, such as verifying the Palestinian groups' compliance and ensuring that a skeptical Israeli government doesn't scuttle any progress.
Tesla Weighs Sale of China Business to Pave Way for Potential SpaceX Merger
Elon Musk designed Tesla's China business to be easily separated from its U.S. business because of geopolitical tensions. It might also come in handy if he proceeds with a SpaceX merger.
Musk in recent years instructed Tesla executives to organize the company with a "laser" between its U.S. and China businesses, according to people familiar with the planning. He wanted to ensure that in the event of geopolitical strife between the two countries, at least the U.S. half of Tesla would survive.
Anthropic AI Models Hacked Three Companies During Tests
Anthropic said Thursday that software it was testing got onto the internet and hacked unsuspecting companies without the AI-maker's knowledge in three separate incidents dating back to April.
The artificial-intelligence vendor didn't say which companies had been hit, but all three were notified of the incident on Monday, Anthropic said.
Apple Expects Slower Growth After AI Boom Drives Up Costs
Apple forecast for its September quarter fell short of Wall Street's expectations, overshadowing strong iPhone and Mac sales that the company reported for its June period.
The company said sales growth in the September quarter would come in between 9% and 11%, below analyst estimates of roughly 12%. Gross profit margins will also fall just short of estimates. Apple shares fell 7% in after-hours trading.
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Expected Major Events for Friday
04:30/NED: Jul Flash Estimate CPI
05:00/FIN: Jun Retail sales
06:00/UK: Jul Nationwide House Price Index
06:00/NOR: Jun Credit Indicator C2
06:30/HUN: Jun PPI
06:30/SWI: Jun Retail Sales
06:45/FRA: Jun PPI
06:45/FRA: Jul Provisional CPI
07:00/TUR: Jun Foreign Trade
07:55/GER: Jul Labour market statistics (incl unemployment)
08:00/ITA: Jul Consumer Confidence Survey
08:00/ITA: Jul Business Confidence Survey
09:00/LUX: Jun PPI
09:00/CYP: Jun PPI
09:00/GRE: May Turnover Index in Retail Trade
09:00/ITA: Jul Cities CPI
09:00/ITA: Jul Provisional CPI
09:00/EU: Jul Flash Estimate euro area inflation
09:00/MLT: Jun Registered Unemployed
09:30/BEL: Jun PPI
10:00/POR: Jun Industrial production index
16:59/SWI: 1Q Locational & Consolidated banking statistics, preliminary data
16:59/SPN: Jun Budget deficit
16:59/SPN: May Monthly Balance of Payments
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