US FINANCIAL MARKET
Stock Markets Waver Ahead of Fed Minutes – Wall Street Journal, 7/6/2022
- U.S. stocks wobbled ahead of minutes from the Federal Reserve that will be scrutinized for insights into the state of the economy and the central bank’s efforts to tame inflation through interest-rate increases.
- The S&P 500 fell 0.2% early Wednesday after futures on the index oscillated between small gains and losses. The broad benchmark notched a 0.2% gain on Tuesday.
- The Nasdaq Composite Index turned lower after an initial burst, slipping 0.1%. The Dow Jones Industrial Average lost 0.2%.
- Markets are beginning to price in a pivot on policy from the Federal Reserve, despite inflation still being at a more than four-decade high.
- The Federal Reserve is expected to release minutes from its last policy meeting at 2 p.m. ET. In morning data releases, hiring demand remained strong and the services sector unexpectedly maintained growth momentum.
- A well-known recession indicator flashed in the bond market again, as the U.S. yield curve inverted. That happens when shorter-dated yields such as for the two-year bond are higher than for longer-dated debt such as the 10-year.
- The two-year yield was at 2.862% on Wednesday compared with 2.775% for the 10-year. Prices fall when yields rise.
- Oil prices moved lower after their biggest plunge since March on Tuesday. Global benchmark Brent crude was down 3.5% at $99.22 a barrel.
- The U.S. equivalent, WTI, fell 3.8% to $95.70 a barrel after falling below $100 the day before for the first time in about two months.
- Overseas, the pan-continental Stoxx Europe 600 rose 1.7%. The Norwegian government intervened to end an oil workers strike on Tuesday evening that threatened to more than halve the country’s gas exports, a key source of energy for the region.
- Dutch food delivery firm Just Eat Takeaway surged 20% after its subsidiary Grubhub struck a deal with Amazon.com to be added to Prime services in the U.S.
- The e-commerce giant also has the option to take a small equity stake. In premarket trading in New York, Grubhub competitor DoorDash fell 8%.
- In Asia, most major benchmarks declined. The Shanghai Composite Index fell 1.4% and Hong Kong’s Hang Seng Index lost 1.2%. Japan’s Nikkei 225 also retreated 1.2%.
Rivian Jumps After Boosting EV Output, Reaffirming Annual Goal – Bloomberg, 7/6/2022
- Rivian Automotive’s shares surged after the electric-vehicle maker reaffirmed its annual production target and revealed accelerated output in the second quarter, buoying the company as it works to overcome parts shortages and other supply-chain snags.
- The EV startup built 4,401 vehicles in the period, according to a statement Wednesday, up from 2,553 in the first quarter.
- The manufacturer, backed by founder and Chief Executive Officer R.J. Scaringe, also delivered 4,467 vehicles to customers in the second quarter.
- That keeps Rivian on track to produce 25,000 units this year across its three products.
Walmart Tells Suppliers New Fuel and Pickup Fees Are Coming – Wall Street Journal, 7/6/2022
- Walmart said it would charge some of its suppliers a new fee to transport goods to its warehouses and stores, according to a memo viewed by The Wall Street Journal, the latest example of how businesses are looking to offset rising costs for things such as transportation and fuel.
- Companies that use Walmart to transport goods to the retailer’s warehouses and stores will be charged a fuel surcharge and a “collect pickup charge” starting Aug. 1, said the memo.
- The collect pickup charge is calculated as a percentage of the cost of goods received by Walmart, the memo said. The fuel surcharge is based on the cost of fuel to transport the goods.
- Some suppliers criticized Walmart for not sharing the expected charges more precisely and not giving them more time to account for the added cost.
- “I have an unknown expense and nothing I can do about it,” said one supplier who received the email. “This is, for all intents and purposes, a retroactive charge,” since many suppliers already have product order agreements in place with Walmart for the coming year, said this person.
Amazon and Grubhub Strike Deal to Bring Restaurant Delivery to Prime Members – Wall Street Journal, 7/6/2022
- Amazon.com agreed to add Grubhub to its suite of Prime services in the U.S., in a deal that also gives the e-commerce giant the option to acquire a small stake, the parent of the food-ordering company said.
- Grubhub’s parent, Netherlands-based Just Eat Takeaway.com, said Amazon has an initial option to take a 2% stake in U.S.-based Grubhub, and U.S. Prime members can have their delivery fees waived from select restaurants.
- Amazon could bump up its total stake to 15% of Grubhub based on performance terms focused on adding new customers, Just Eat said.
- Just Eat will still own Grubhub and will continue exploring a full or partial sale of Grubhub, it said.
U.K. Flexes New Muscle in Antitrust Probes Over Microsoft and Amazon – Wall Street Journal, 7/6/2022
- The U.K’s antitrust agency opened probes into Microsoft’s proposed takeover of Activision Blizzard and into Amazon.com’s business practices, solidifying the U.K. as a new regulatory power that Silicon Valley must reckon with.
- The U.K. Competition and Markets Authority said Wednesday that it was investigating whether Microsoft’s $75 billion bid for Activision, the videogame giant behind “Call of Duty” and “World of Warcraft,” would reduce competition in Britain.
- In a statement, Microsoft vice president and general counsel Lisa Tanzi said the company would cooperate with the investigation and that the merger would benefit both videogame players and the wider industry.
- The CMA also said Wednesday that it was investigating whether Amazon unfairly uses its size and data-collection practices to boost its business at the expense of independent merchants that sell on its marketplace.
- It said its investigation follows a current EU probe over similar issues, which doesn’t cover concerns in the U.K. now that it has left the bloc.
FDA Suspends Ban on Juul While Vaping Company Appeals – Wall Street Journal, 7/6/2022
- The Food and Drug Administration said it would suspend its ban on Juul Labs’ products while the e-cigarette maker appeals the agency’s decision.
- In messages posted on Twitter late Tuesday, the FDA said it had stayed its marketing denial order. “The agency has determined that there are scientific issues unique to the JUUL application that warrant additional review,” the FDA said.
- The administrative stay temporarily suspends the order during the additional review but doesn’t rescind it, the agency said.
- The FDA initially rejected Juul’s request for a stay, prompting Juul to seek a stay of the ban in court, according to Juul’s court filings.
- Juul alleged in court filings that the FDA had mishandled its application. In the court filings, Juul said the agency had overlooked more than 6,000 pages of data that the company had submitted to the FDA on the aerosols that users inhale.
- Juul also said in court filings that the FDA’s decision was influenced by political pressure. The FDA had until July 7 to respond to Juul’s motion in federal court.
Oil Extends Its Decline as Growth Concerns Stoke Mammoth Drop – Bloomberg, 7/6/2022
- Oil extended its drop below $100 a barrel as fears of a global slowdown outweighed continued supply disruptions and market tightness.
- West Texas Intermediate fell as much as 4.4% with Brent dropping below $100 a barrel.
- While the drop was borne out of concern of a global recession and technical selling, there’s been little change to market fundamentals.
- Nearby Brent futures are trading at a giant premium to later months — indicating market strength — while disruption to global oil production has been mounting, amid a risk to Kazkahstan’s oil exports.
Copper Crash Deepens as Recession Fears Dominate Metals Trading – Bloomberg, 7/6/2022
- Copper plunged below $7,500 a ton as fears of a global economic slowdown piled pressure on industrial metals and deepened their retreat from record highs just months ago.
- After a 4.2% slump on Tuesday to its lowest close in 19 months, copper fell almost 5% on Wednesday, before paring some losses. Aluminum, nickel and tin also tumbled.
- A fresh round of mass virus testing in Shanghai underscored concerns that China’s Covid Zero policy will complicate the recovery for the world’s second-biggest economy. The country was seen as one of the brighter spots for demand, given government pledges to reboot growth this half.
US ECONOMY & POLITICS
US Job Openings Dip Slightly to 11.3 Million, Remain Near Record – Bloomberg, 7/6/2022
- US job openings dipped slightly in May, though remained near a record, indicating resilient demand for labor even as optimism about the economy’s prospects grow more uncertain.
- The number of available positions decreased to 11.3 million in the month from an upwardly revised 11.7 million in April, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Wednesday.
- The median forecast in a Bloomberg survey of economists called for 11 million openings.
- There were about 1.9 jobs for every unemployed person in May, little changed from April.
- Some 4.3 million Americans quit their jobs in May, little changed from the prior month. The quits rate, a measure of voluntary job leavers as a share of total employment, dipped to 2.8%, a four-month low. Meantime, hiring also held steady.
- Layoffs in May were similar to the prior month at 1.4 million, well below pre-pandemic levels and consistent with employers’ desire to hold onto workers.
US Services Gauge Slips to Lowest Level in More Than Two Years – Bloomberg, 7/6/2022
- Growth in the US services sector eased in June to a more than two-year low as orders softened amid ongoing hiring challenges and capacity constraints.
- The Institute for Supply Management’s gauge of services slipped to 55.3 from May’s 55.9, according to data released Wednesday.
- While the ISM’s index of new orders dropped two points, a measure of business activity — which parallels the ISM’s gauge of factory production — strengthened.
- A measure of prices paid by service providers for materials slipped in June to a still-elevated 80.1.
- A gauge of services employment fell almost 3 points to 47.4, the weakest since July 2020 and signaling contraction.
- After slumping the prior two months, the ISM’s measure of unfilled orders jumped 8.5 points in June, the largest one-month advance in more than four years.
Mortgage demand sinks even as rates drop – CNBC, 7/6/2022
- Mortgage rates dropped for the second week in a row, but that didn’t revive demand from homeowners or potential buyers.
- Rates fell 10 basis points last week and have declined 24 basis points in the last two weeks, but total mortgage demand dropped 5.4% from one week ago, according to data from the Mortgage Bankers Association.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell to 5.74% from 5.84%, with points increasing to 0.65 from 0.64, including the origination fee, for loans with a 20% down payment.
- Those concerns showed up in applications to refinance a home loan, which dropped 8% for the week and were down 78% from the same week one year ago. The refinance share of mortgage activity decreased to 29.6% of total applications from 30.3% the previous week.
- Home purchase applications also fell for the week and the year – down 4% and 17%, respectively.
Biden Administration Proposes Easing Student Loan Forgiveness Process for Defrauded Students – Wall Street Journal, 7/6/2022
- The Biden administration released a proposal that will make it easier for students who claim they were defrauded by for-profit colleges to get their federal student loans forgiven, moving to reverse Trump administration limits.
- The proposal would update the borrower defense to repayment regulation, a rule initiated by the Obama administration, that has allowed hundreds of thousands of students who attended for-profit colleges to obtain relief if the government determines that schools misled them about job prospects or otherwise committed fraud.
- The updated rule announced Wednesday would change the criteria for forgiveness in a number of ways opposed by for-profit schools, such as extending time limits for submitting claims and making it easier for borrowers to show evidence of fraud and by creating a group-claims process in which borrowers with similar experiences of being misled by a school could team up to allege they were defrauded.
- In addition, the rule would allow borrowers to stake their claims for relief on determinations made by state attorneys general rather than just the Education Department.
- In addition to the borrower defense proposal, the Education Department also released a planned regulation to revamp the Public Service Loan Forgiveness program, which was created by Congress in 2007 to encourage students to enter professions such as teaching, nursing and public-interest law.
EUROPE & WORLD
Shanghai Spike, Subvariant’s Spread Tests China Covid Policy – Bloomberg, 7/6/2022
- China’s Covid Zero strategy is being tested anew after a jump in infections across Shanghai raised the specter of another lockdown, while a highly infectious subvariant started spreading in the country for the first time.
- Shanghai reported 24 infections for Tuesday, the most in three weeks, with health officials announcing separately on Wednesday that two additional cases were found outside quarantine. While a small number, the detection of infected people outside isolation and across several city districts raises concerns that the virus could already be spreading widely.
- That’s prompted a ramp up of mass testing, with 10 districts and parts of two others — out of the financial hub’s total of 16 — conducting two PCR tests over three days to stamp out transmission.
- Meanwhile, outbreaks in Beijing, which reported six infections for Tuesday, and part of the country’s west have been linked to a highly infectious omicron subvariant, adding to concerns that the virus has been spreading undetected.
- The western city of Xi’an reported 11 cases and ordered entertainment venues to close and restaurants to suspend dine-in services for a week, while schools will start their summer vacation early, following the detection of BA.5.
- The eastern province of Anhui reported 222 cases for Tuesday, most of them coming from the two small counties already under lockdown.
- In the north, Tianjin, which boasts Airbus SE’s plane assembly line, also saw a fresh flareup. Nationwide, a total of 353 infections were reported from at least 11 provinces for Tuesday.
Macau’s Casino Lockdown Catches 500 People as Covid Flares – Bloomberg, 7/6/2022
- Macau locked down SJM Holdings’ Grand Lisboa, trapping 500 people inside, as the city’s worst Covid-19 outbreak led to the closure of a flagship gaming venue for the first time in more than two years.
- The shutdown started Tuesday and is expected to last until July 11. It comes after authorities in the world’s biggest gambling hub found 13 infections linked to the resort.
- Authorities are still assessing the Covid situation in the city and will make an announcement at an appropriate time if a lockdown will be imposed over the weekend, said Cheong Kin Ian, a representative from police force.
- There are no current plans to impose stricter measures, officials said, urging residents not to hoard necessities.
Gas and Nuclear Power Can Be ‘Green’ Under New EU Plan – Wall Street Journal, 7/6/2022
- Lawmakers in the European Union voted to include nuclear power and natural gas in the bloc’s list of investments deemed sustainable, a move it hopes will trigger more funding of those sectors but that critics said would slow down the EU’s shift to greener energy sources.
- Opponents of the plan failed to gather enough support for a veto during a vote in the European Parliament on Wednesday, clearing the way for the two energy sources to be included in the EU’s so-called green taxonomy if they meet a series of conditions such as limits on greenhouse gas emissions.
- The taxonomy, which will affect a range of industries beyond energy, is meant to help funnel more money into projects that the bloc considers to be sustainable and is part of a larger push to slash greenhouse gas emissions.
- It doesn’t bar investments in projects that aren’t on the list or prevent European countries from making decisions about their own energy mix.
Russia’s Tactical Shift in Ukraine Raises Prospect of Protracted War – Wall Street Journal, 7/6/2022
- Russia’s steady advances in eastern Ukraine, relying on superior firepower and larger numbers of troops, are grinding down Ukraine’s military and setting the stage for a protracted war of attrition in which Kyiv needs more Western weapons and help training new soldiers to turn the tide.
- Russia is massing “a very heavy concentration of artillery and armor in every square kilometer that we are unable to cope with,” Oleksiy Danilov, secretary of Ukraine’s National Security and Defense Council, told The Wall Street Journal. “This is giving them the advantage.”
- Russia seized the city of Lysychansk at the weekend, completing the takeover of the Luhansk region, and is now bombarding Ukraine’s remaining strongholds in neighboring Donetsk.
- Despite narrowing its immediate objectives to taking Ukraine’s east, Russia’s strategic goal of controlling Ukraine remains unchanged.
- The secretary of the Russian Security Council, Nikolai Patrushev, said Tuesday that Russia is aiming to demilitarize Ukraine and force it to adopt neutral status, according to Russian state news agency RIA.
Accelerating Inflation in Asia Puts Pressure on Central Banks to Raise Rates – Wall Street Journal, 7/6/2022
- Accelerating inflation is rippling through the Asia-Pacific, stoking expectations that policy makers will need to keep ratcheting up borrowing costs to cool climbing prices.
- Cautioning that inflation was yet to peak, Australia’s central bank on Tuesday raised its interest rate by half a percentage point for the second straight month.
- The Reserve Bank of Australia increased the official cash rate to 1.35% from 0.85%—adding to June’s 0.50 percentage-point hike and a 0.25 percentage-point increase in May—as Gov. Philip Lowe said higher rates would help create a more sustainable balance between supply and demand.
- Inflation in the Philippines accelerated to an annual rate of 6.1% in June, while in Thailand last month consumer prices rose 7.66% on the year, the fastest pace of inflation since 2008, data showed Tuesday.
- South Korea’s inflation rate hit its highest in more than two decades in June, its statistical office said Tuesday, raising the likelihood of a bigger-than-usual interest-rate increase by its central bank to curb surging prices.
- The benchmark consumer-price index rose 6.0% from a year earlier—the fastest since November 1998—following a 5.4% increase in May. That beat a median market forecast for a 5.9% increase for June.
- The Asean+3 Macroeconomic Research Office, or Amro, raised its inflation forecast for the region that includes 10 Asean member states, China, Hong Kong, Japan and Korea, while trimming its short-term growth expectation.
- The softer outlook reflected tighter global fiscal conditions, as well as the effects of China’s Covid-19 outbreak and the war in Ukraine, it said.
- Annual inflation in June hit 21.32% in Pakistan and 23.6% in Laos, data earlier this month showed, while in Sri Lanka it was 45.3% in May.
- Sir Thomas More was beheaded after refusing to join Henry VIII’s Church of England. (1535)
- Louis Pasteur successfully treated a patient with a rabies vaccine. (1885)
- Anne Frank and her family sought refuge from the Nazis in Amsterdam. (1942)
- The Mars rover Sojourner rolled onto the Martian surface. (1997)