Market Snapshot
Asia: Japan -0.4% to 20519. Hong Kong -0.1% to 23991. China +0.3% to 3965. India +1.9% to 28067.
Europe: London -0.2%. Paris -0.6%. Frankfurt -0.4%.
Futures: Dow -0.2%. S&P -0.3%. Nasdaq -0.3%. Crude -0.7% to $41.93. Gold +0.2% to $1118.
Ten-year Treasury Yield -2 bps to 2.16%
Economic News
8:30 Producer Price Index
U.S. data showed the producer-price index rose 0.2% in July after climbing 0.4% in June, a sign inflation has stabilized following months of historically weak readings. Economists had expected an increase of 0.1%.
9:15 Industrial Production
10:00 Reuters/UofM Consumer Sentiment
Markets
U.S. stocks were poised to pull back slightly on Friday as investors continued to assess the pace of global growth.
Investors “continue to re-evaluate the importance of the move in the yuan,” said Peter Kenny , chief market strategist at Clearpool Group . The sharp moves during trading on Wednesday and Thursday, in which stocks ended little changed, illustrate the uncertainty among investors about the direction of the market in the short term, he added.
The Greek parliament has approved a new €86B bailout agreement, which is said to include sweeping economic reforms and budget cuts mandated by the country’s creditors. Any delay in signing off on the bailout, however, risks a chance the package won’t be passed before a €3.2B payment falls due to the ECB on Aug. 20. The deal is expected to be cleared by eurozone finance ministers today, but may face a harder challenge when Germany votes on it next week (likely to take place on Tuesday).
Trading in Asian markets was cautious at the end of a shaky week as China allowed its currency to strengthen mildly for the first time in four days, setting its reference rate at 6.3975 per dollar. The currency had weakened by 3% against the greenback until Friday morning. While that percentage may be small for other global currencies, it was enough to wipe out four years of gains for China’s renminbi.
The eurozone’s economic recovery unexpectedly slowed in the second quarter, as expansion in its three largest economies fell short of estimates. Gross domestic product in the 19-nation region rose 0.3%, missing forecasts that showed Q1’s 0.4% pace would be maintained. Germany’s economy grew 0.4%, Italy’s 0.2%, while France stagnated. With market jolts coming from China, and Greece on the verge of a new bailout program, the euro area’s promising revival may still see difficulties ahead.
Ukraine and a group of its largest creditors have agreed to continue debt discussions after holding two days of negotiations in San Francisco. “Talks are ongoing,” they said in a joint statement without giving further details. Kiev previously billed the meetings as a make-or-break chance to secure a restructuring deal for $19B of debt.
Brazil President Dilma Rousseff is poised to face another key test as allegations of corruption and incompetence swamp her government, and plummeting commodity prices sap the country’s economy. Hundreds of thousands of angry citizens are expected to descend on central squares on Sunday, marking this year’s third mass protest calling for her impeachment. A strong showing could help support an ouster and deepen a selloff in the financial markets. Brazil’s benchmark Ibovespa stock index has plunged 17.2% since she was re-elected last October.
Crude prices have returned to more-than six-year lows as huge stockpiles and refinery shutdowns add to concerns about oversupply, while China’s devalued yuan heaps pressure on commodity markets. Oil futures slid earlier to $41.35 a barrel, a level last seen on March 4, 2009, but are now trading down 0.7% at $41.93/bbl. Later today, Baker Hughes will publish the latest U.S. oil drilling rig count, which many see as a proxy for activity in the booming shale industry.
Fifteen U.S. states, led by coal-producing West Virginia, have launched an effort to halt President Obama’s landmark climate policy while they prepare a legal challenge to have it overturned. The states are first seeking a stay order, or injunction, because they say Obama administration deadlines mean the demand to cut emissions is effective immediately. The Clean Power Plan calls for the U.S. power sector to slash carbon emissions 32% (from 2005 levels) in 2030.
Stocks
Goldman Sachs is buying GE Capital’s U.S. online deposit platform, along with a $16B deposit book, as the latter continues its push away from finance. Coupled with the upcoming spinoff of Synchrony Financial (SYF), this deal will nearly mark a complete exit from U.S. banking operations and eliminate the exposure to U.S. deposit insurance, said GE (GE) Capital CEO Keith Sherin.
Five more banks have agreed to settle U.S. investor lawsuits tied to a global currency-rigging scandal, which claimed the institutions conspired to manipulate the $5.3T-a-day foreign-exchange market. HSBC (HSBC), Barclays (BCS), Goldman Sachs (NYSE:GS), BNP Paribas (BNPZY) and Royal Bank of Scotland (RBS) now join a list of nine firms which previously settled the class actions, bringing the total amount investors have recovered to $2B.
EU antitrust regulators will decide by Jan. 13 instead of Dec. 8 whether to clear FedEx’s (FDX) €4.4B bid for Dutch rival TNT (TNTEY) after the logistics companies asked for more time. In 2013, the European Commission rejected a TNT bid to merge with UPS (UPS) arguing it would diminish competition in 15 EU countries.
Several U.S. manufacturers are already feeling a pinch from the Tianjin explosion, as Chinese authorities continue their investigation into the cause of the disaster. Among them is John Deere (DE). The company reported that a few of its local employees have “sustained serious injuries and some are in critical condition.” Deere has also suspended operations in the area until it can complete an assessment of the damage.
BP manipulated the Texas natural gas market in 2008 and then conducted an inadequate internal investigation, a U.S. administrative law judge has ruled, opening the possibility of more fines against the company. BP (BP) is also facing troubles at its massive Whiting refinery in Indiana, which closed on Saturday after holes were discovered in the plant’s piping. BP’s not the only one affected. Drivers in Chicago and the Midwest saw gasoline costs skyrocket this past week and prices are continuing to climb higher.
Looking to capitalize on rising demand, General Motors (GM) has increased its rate of production on larger trucks and SUVs, and added Saturday overtime shifts at a Texas plant. The move could see 48,000 to 60,000 additional vehicles for the 2016 model year.
After previously aiming for a fall launch, Apple (AAPL) is now looking to bring its Web TV service to market in 2016, Bloomberg reports. The delay is blamed on slow-moving licensing talks with TV networks and the need for capacity upgrades. Sources suggest Apple wants to charge about $40/month for its service, in comparison to Dish’s (DISH) Sling TV (which provides a limited number of channels) for $20/month and Sony’s (SNE) more expansive PlayStation Vue service for $50-$70/month.