Fed and Bank of Japan in the spotlight of traders today, corporate and international reviews

Market Reviews

• Ahead of Powell's speech at Jackson Hall today, the US stock market experienced a correction yesterday. The rebound was too fast and sharp. Treasury yields rose for the week after new data eased fears of a recession.
In general, we are preparing for the calm summer to pass.

• The main story today was the yen rising 0.5% in Asia as Bank of Japan Governor Kazuo Ueda disappointed some by saying the central bank still plans to raise interest rates if the economy and inflation turn out as forecast. Fair enough. The market crash that prompted politicians to become more dovish three weeks ago remains in the rearview mirror. In some modest reaction to Ueda's comments, the Nikkei fluctuated between gains and losses but was last up 0.4% and domestic yields rose 2 basis points. Supporting the governor's view was inflation data released earlier today, which showed core inflation in Japan accelerated for the third month in a row to 2.7% in July. The core index, which excludes food and energy costs, fell to 1.9%, but that's still around the Bank of Japan's 2% target. Traders still rate the likelihood of a rate hike in October as very low, but the likelihood of a December hike is now estimated at 70%.

• Trader sentiment turned cautious ahead of Federal Reserve Chairman Jerome Powell's speech in Jackson Hole. All major stock markets fell, led by a pullback in technology stocks, although Wall Street futures rose slightly. Europe is set to open mixed, with EUROSTOXX 50 futures down 0.2% and FTSE futures up 0.2% on little key data for the region.

• Powell's speech could move markets significantly or be overhyped. After all, his colleagues on Thursday were already hinting at a rate cut in September, voicing support for a “slow and methodical” approach. With polls showing the U.S. economy still growing at a healthy pace, markets slightly lowered the odds of a significant half-point rate cut in September to 24%, down from 38% the day before. The quarter point reduction is fully included in the price. Regardless of the size of the cut, Democrats will be happy to see the Fed finally begin its easing cycle ahead of the presidential election in November. Vice President Kamala Harris just officially accepted her party's nomination on the final day of the Democratic National Convention.

• Business activity indices in Europe are mixed.
Great Britain - improvement above expectations.
France is weak in industry, strong in services.
Germany - fall more than expected.
Business activity in the US was also mixed in August.
In the services sector, growth unexpectedly accelerated - here the business activity index (PMI) rose from 55 to 55.2, although a decrease to 54 was expected.
But in manufacturing the decline accelerated - the business activity index fell from 49.6 to 48 (an expected decrease to 49.5).
As a result, the S&P Global composite business activity index fell from 54.3 to 54.1 (forecast 53.2).
US completed home sales rose for the first time in five months.
Existing Home Sales (MoM) (July) 1.3% (forecast 1.3%; before -5.4%)
This suggests that the housing market is poised to stabilize as mortgage rates decline.

• A debt fund managed by the British company Arkaim Advisors, thanks to investments in securities of Ukrainian companies, received the highest return on the market. The Arkaim Advisors fund has investments in bonds of Naftogaz of Ukraine, Ukrzaliznytsia and Metinvest with the highest returns in emerging markets - approximately 73%, 52% and 19%, respectively. The average for peers with non-investment grade ratings is 9.4%.

• 94% of all BTC Bitcoins have already been mined, leaving 1.26 million BTC to be mined. This will take more than 110 years. It is expected that 99.9% of all Bitcoins will be mined by 2140.

• Tether will launch a stablecoin pegged to the dirham. Tether, the issuer of the USDT stablecoin, announced plans to develop a stablecoin pegged to the UAE dirham (AED). Each stablecoin will be fully backed by the UAE's liquid reserves.

• McDonald's account was hacked by hackers and scammed subscribers for $700,000 in one evening. In the description they included a link to buy their cryptocurrency, which collapsed almost instantly. Even layered cryptans were bought - someone lost $10 thousand at a time.

• Fed's Schmid: Need to see more data before backing rate cut. Asked about the revision to the employment baseline, he says it doesn't change much. El-Erian says the market is pricing in too many Fed rate cuts.

• China has decided to punish a Big Four company for failing to audit the developer Evergrande - FT. PwC has told clients it expects Chinese authorities to impose a six-month ban on doing business in the country, starting as early as September. The pressure on PwC comes after China's securities regulator said in March that Evergrande overstated its earnings by nearly $80 billion over two years before defaulting on its debts in 2021.

• BP shares fell to their lowest level in two years as investors punish the company for exiting the oil and gas business.

• Baidu's sales have stalled as the company tries to make money on AI. Which reflects the difficulty of transitioning from search advertising to artificial intelligence during the economic downturn in China.

• Italy's industry minister said on Thursday he expected a firm commitment from Stellantis "within a few hours" on a plan to build a battery plant in the country. Otherwise, the government will direct public funds for this project elsewhere - Reuters.

• Chinese company WeRide has postponed its plan for an initial public offering in the United States. A few days before the expiration of the Chinese regulator's permit.

• Peloton Interactive reported its first sales increase in nine quarters and beat estimates. Which shows that the fitness equipment maker's years-long efforts to get back on track are working. PTON shares soared 35%.

• New US ETFs launch at record pace in 2024. The number of new exchange-traded funds entering the US market could set another record in 2024. On average, 50 ETFs will debut each month, according to Morningstar Direct.

• Walmart members can enjoy discounts at Burger King. Including 25% off any digital order every day. Plus, starting in September, members can receive a free Whopper every three months with any Burger King purchase.

• Starting in 2025, Uber customers will have the opportunity to ride in GM's self-driving Cruise car based on the Chevrolet Bolt. For now in a limited number of places. Since last year, UBER has been offering a similar offering to Google's Waymo. Waymo announced earlier this week that it has surpassed 100,000 paid rides per week, doubling the number from May.

• Tesla was set to unveil its own robotaxi earlier this month, but delayed the launch until early October. RBC Capital Markets estimates that the US robotaxi market could generate up to $500 billion annually by 2040. BMW has overtaken Tesla in monthly deliveries for the first time in Germany. TSLA shares fell 5.7%.

Shares after reports:
- WDAY up 11%.
- BILL grows by 5%.
- INTUs fall by 1%.

 Key events that may affect markets on Friday:
- Unemployment rate in Sweden for July.
- Retail sales in Canada for June.
- Sales of new homes in the USA.
- Speech by Fed Chairman Jerome Powell in Jackson Hole.

International reviews

• Canada's two main freight railways have come to a complete standstill - AP. Businesses and consumers across Canada and the United States could suffer significant economic damage after Canada's major freight railroads came to a complete halt Thursday due to a contract dispute with their workers.
But freight trains are expected to start running again soon in Canada after the government forced the country's two largest train companies into arbitration with their union on Thursday, averting potentially dire economic fallout across the country and in the United States.
A prolonged disruption could impact trade between Canada and the United States. That would push up fertilizer prices as well as transportation costs, a potential source of inflation concern ahead of the U.S. presidential election in November.
Canada is the second largest exporter of potash fertilizers in the world after the Russian Federation, and the United States is one of its main trading partners.

• Elon Musk expressed confidence that Western countries will face a civil war due to the situation around migrants.
“War is becoming inevitable,” he wrote, commenting on a post by a Lebanese-Canadian professor who argued that “the path the West has taken will lead to civil war.”

• Hungary has come up with a way out for the transit of Lukoil oil. According to Hungarian Prime Minister Gergely Gulyas, it is proposed to move the oil transfer point from the western border of Ukraine to the eastern. In this case, the Hungarian MOL will be responsible for transit, and oil prices will rise by about $1.5 per barrel. Gulyash said that the Ukrainian side does not seem to be against this option.

• India has become the world's largest importer of Russian oil. The share of Russian oil in total Indian imports in July amounted to a record 44%, increasing to 2.07 million barrels per day. This is 4.2% more than in June, and 12% more year-on-year and more than the July volume of Chinese oil imports from the Russian Federation, which amounted to 1.76 million barrels per day. In July, Chinese refiners began buying less crude due to lower profits from fuel production.

• Gas storage facilities in the EU are 90% full - two months ahead of schedule. The EU is “ready for next winter,” the European Commission reported amid the publication of data on the Gas Infrastructure Europe portal. According to the agreements of the EU member states, the community’s gas storage facilities, against the backdrop of the Russian Federation’s invasion of Ukraine and the so-called “gas blackmail,” had to be filled by 90% by November 1.

• Niki Haley arrived in Taiwan to attend a conference on security issues in the Indo-Pacific region. She called for Taiwan to be made a "full member of the UN."
The Taiwanese president, at a meeting with Haley, spoke of the need to “prepare for war in order to prevent it.”

• Over the past ten years, about 60% of newly commissioned nuclear reactors (48 out of 80) were in the Russian Federation and China - Nikkei.

• The Supreme Court of Venezuela recognized Maduro as the elected president for 2025-2031 - media.