North American Morning Briefing: UPDATE: Stocks will fall as recession fears to grip markets


To watch:

Personal income and expenses for May; Weekly unemployment claims; Chicago Business Barometer – ISM Chicago Business Survey – Chicago PMI for June; Canada’s GDP for June

Opening call:

Equity futures fell more than 1% on Thursday as familiar fears of further interest rate hikes and the risk of recession continued to weigh on investors.

Worries about the Federal Reserve’s path to containing decades-high inflation with aggressive interest rate hikes — and the attendant risk of recession — dominated the market narrative in 2022.

“If everything remains unchanged today, we are currently on the verge of ending [the first of the year] with the S&P 500 having its worst first half since 1970 in terms of total return,” said Deutsche Bank analyst Henry Allen.

“A big reason for this is investors’ fear that ongoing rate hikes to deal with inflation will eventually lead to a recession,” Allen said.

Overseas, the pan-European Stoxx 600 fell 1.7% and Tokyo’s Nikkei 225 lost 1.5%.

“We’re at the end of the month and the quarter. We’re likely to see significant rebalancing flows from institutional investors across multiple asset classes,” said Jeffrey Halley, analyst at brokerage OANDA. “It can skew price movements and generate a few false positives in markets today.”

A catalyst in the day ahead could be the personal consumption expenditure price index. The data will be watched closely, as the PCE is the Fed’s preferred inflation indicator.

Economic overview:

Global consumer confidence in June rose to levels seen only in economic recessions, according to JPMorgan’s Global Headline Indicator, which excludes China.

The magnitude of the current shock to consumer confidence is about 85% of the decline seen during the initial Covid-19 outbreak and about three-quarters of the shock during the 2008 global financial crisis, JPM said. The decline from last year’s peak was widespread, though it was larger in developed markets than in emerging markets, the data showed.

The fall in confidence is largely due to worries about inflation, although consumers are likely also reacting to the sharp decline in stock markets and broader worries about the outlook for the economy, JPM said.

Regional manufacturing survey data in the United States shows supply chain shortages have improved in recent months, Capital Economics said.

Easing bottlenecks will likely help dampen core goods inflation in the second half of the year, with core producer price inflation expected to fall to 5% in the coming months , compared to 8.3% in May.

“The fact that supply chain pressures are already easing is an encouraging sign, the Fed’s inflation problem may soon seem less daunting.”


The dollar fell slightly in Europe, but the USD index remained above 105.00 after the dollar’s strong gains on Wednesday.

Recession fears appear to have strengthened, CMC Markets said, after the final US GDP reading was revised down while the GDP deflator rose further, indicating a marked slowdown in economic growth.

Read: Sweden becomes latest to raise interest rates, with 50 basis point policy change


Oil prices rose slightly in Europe ahead of an OPEC+ meeting where member states will discuss production levels

Despite growing concerns over a tighter market, cartel members and allied oil-producing nations are expected to stick to a plan outlined at a previous meeting to boost oil supply by just under 650 000 barrels per day in August.

Whatever production levels the group commits to, the oil market fears that the group will be behind on its quotas due to a lack of available capacity.

“The headache in the oil market is the inability of OPEC+ to deliver the promised volumes,” said DNB Markets.


Gold futures were flat in early trading despite the fall of other recession hedges acting as headwinds for the precious metal this year.

“Gold is still an underperformer, catching a drop in the deflated commodity super cycle on the back of anticipated Fed hikes,” SPI Asset Management said.

Base metal prices were lower in London as a lack of Asian buying outweighed positive sentiment from decent PMI data from China.

“While we had a very decent Chinese PMI showing a V-shaped recovery from April lows, metals in general barely reacted to this,” Marex’s Asian team said. “Asia has not been a buyer of metals in general,” keeping prices lower.




Aerojet Rocketdyne CEO set to win proxy fight against executive chairman

The chief executive of defense contractor Aerojet Rocketdyne Holdings Inc. is poised to prevail in an unusual proxy battle against its executive chairman, people familiar with the matter have said.

Shareholders appear set to elect CEO Eileen Drake’s proposed slate of eight board members based on votes that took place ahead of Thursday’s shareholder meeting, the people said. The company’s executive chairman, Warren Lichtenstein, had come up with his own slate after the pair got embroiled in a bitter internal battle.


Spirit Air Board pushes shareholder meeting on Frontier offer for second time

Spirit Airlines Inc. is postponing a vote on a merger with Frontier Group Holdings Inc. that was scheduled for Thursday to continue talks with Frontier and JetBlue Airways Corp., a rival suitor.

Spirit said Wednesday evening that it plans to hold the vote on July 8.


Cyberattack prevents Macmillan from shipping its books to retailers

Macmillan, one of the largest book publishers in the United States, said it was the victim of a cyberattack, and booksellers in the country said they were unable to place new orders with the ‘editor.

Macmillan “recently experienced a security incident, which involved the encryption of certain files on our network,” the publisher said on Wednesday. “As a precaution, we immediately took the systems offline to avoid any further impact on our network.”


Niantic lays off 8% of its workforce and stops certain projects

Niantic Inc. has laid off about 8% of its workforce and halted production on several projects, the company announced Wednesday, as the creator of the popular “Pokémon Go” game strives to produce another hit.

Tightly held Niantic said it would devote its attention to games such as “NBA All-World,” a recently announced title featuring augmented reality technology, or AR, that it is developing in partnership with the National. Basketball Association. He will also work on his app development platform called Lightship and “Pokémon Go,” the groundbreaking AR game for smartphones that exploded in popularity after its launch in 2016.


Justice Department sues to block merger of national security contractors

WASHINGTON — The Justice Department has filed an antitrust lawsuit challenging the proposed acquisition by Booz Allen Hamilton Holding Corp. of rival EverWatch, alleging that a merger would drive up prices for the US government and create a monopoly supplier for an essential national security service.

In its lawsuit, filed Wednesday in federal court in Maryland, the Justice Department said the tie-up would hurt the National Security Agency, which is expected to award a multi-year contract that Booz Allen and EverWatch were the only companies to win. Booz Allen decided to purchase EverWatch in March, just months before the NSA began the selection process, according to the Justice Department.


Xerox CEO John Visentin has died

Giovanni “John” Visentin, the chief executive of Xerox Holdings Corp., died after running the print and copy business for about four years.

Mr. Visentin, 59, died on Tuesday “as a result of an ongoing illness”, the company said on Wednesday. Steve Bandrowczak, chief operating officer and president of Xerox, will serve as interim CEO.


US blacklists five Chinese companies for allegedly aiding Russian military

The US Commerce Department has added five Chinese companies to an export blacklist for allegedly aiding the Russian military despite efforts by the US and its allies to cut off Russia’s access to technology after its invasion from Ukraine.

Trade officials said the companies had supplied items to Russian entities of concern before the Feb. 24 Russian invasion and “continued to subcontract to supply” sanctioned Russian entities. They did not provide details on the technology involved.


Nexstar nears deal to acquire majority control of CW network

Nexstar Media Group Inc., the nation’s largest owner of local television stations, is set to reach an agreement to acquire majority control of the CW network from co-owners Warner Bros. Discovery Inc. and Paramount Global, according to people familiar with the matter.

Under terms being discussed, Nexstar would acquire 75% of The CW, a broadcast network primarily aimed at teens and young adults, Paramount and Warner Bros. Discovery each retaining 12.5% ​​of the shares, the people said.


US agrees to pay $3.2 billion for more Pfizer Covid vaccines

The Biden administration has agreed to pay $3.2 billion for 105 million doses of Pfizer Inc’s Covid-19 vaccine.

The deal would provide supplies for the federal government’s planned fall recall campaign, which administration officials are designing to mitigate a potential surge in cases, possibly caused by variants of the spreading Omicron strain. currently in the United States.


China’s economy returns to growth mode as Covid lockdowns are lifted

SINGAPORE – Economic activity in China rose in June after three consecutive months of contraction, official surveys of businesses and factories show that point to a modest recovery after the easing of Covid-19 restrictions in the second-largest economy. world.

However, economists are optimistic about the prospects for a major recovery, given the darkening global backdrop and the risk of further Covid outbreaks.


Riksbank raises policy rate, signals slower pace of asset purchases

(MORE TO BE FOLLOWED) Dow Jones Newswires

June 30, 2022 05:30 ET (09:30 GMT)

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