In the early hours of today's trading, E-Mini S&P 500 futures (ESU23) saw a 0.31% surge, paralleled by Sep Nasdaq 100 E-Mini futures (NQU23) rising 0.22%.
Stock index futures exhibited moderate gains this morning. The boost comes after China implemented a 25 basis point reduction in the reserve requirement rate for banks, landing at 10.50%. European markets also lent support, responding to the ECB's 25 basis point interest rate hike, though the bank hinted at a temporary pause.
However, these futures retreated from their peak levels as robust U.S. economic data hinted at the Fed's intent to maintain higher interest rates.
Initial unemployment claims in the U.S. surged by 3,000 to 220,000, surpassing expectations set at 225,000, indicating a robust labor market.
The U.S. Aug final-demand PPI accelerated to 1.6% year-on-year, marking the highest in four months, slightly surpassing the anticipated 1.3%. Conversely, Aug PPI ex-food and energy eased to +2.2% year-on-year, aligning with forecasts.
August retail sales saw a 0.6% month-on-month rise, outperforming predictions of 0.1%. This trend extended to retail sales excluding autos, which also experienced a 0.6% month-on-month increase, surpassing the projected 0.4%.
Market projections currently sit at a 2% probability of a 25 basis point rate hike at the September 20 FOMC meeting, with a 42% likelihood for the same increase at the November 1 FOMC meeting.
Turning to bond markets, global yields displayed a mixed picture. The 10-year T-note yield dipped 1.0 basis point to 4.239%, while the 10-year German bund yield decreased by 6.7 basis points to 2.584%. The 10-year UK gilt yield reached a 1.5-month low at 4.277%, declining by 6.4 basis points to 4.283%.
Overseas stock markets demonstrated an upward trend. The Euro Stoxx 50 climbed 0.37%, China’s Shanghai Composite Index closed 0.11% higher, and Japan’s Nikkei Stock Index concluded with a 1.41% gain.
The Euro Stoxx 50's rise was driven by strength in mining stocks, buoyed by surging iron ore and copper prices. However, European automakers faced a setback after China expressed discontent with the EU's scrutiny of Chinese electric vehicle subsidies. The Global Times warned of potential consequences on Europe's economy if protectionist measures against China's EV industry were pursued.
European markets prolonged their gains following the ECB's decision to raise its main refinancing rate to 4.50% from 4.25%, signaling a proactive stance in controlling inflation.
The ECB underscored that this tightening measure would substantially contribute to reining in inflation. Additionally, it communicated its intention to maintain current rates for an extended period, stating that key ECB interest rates had reached levels conducive to a timely return to target inflation.
In terms of forecasts, the ECB adjusted its Eurozone 2023 GDP projection down to +0.7% from the previous +0.9% estimate, while revising the 2023 inflation forecast up to +5.6% from +5.4%.
China’s Shanghai Composite Index saw a slight uptick. Notably, steelmakers and mining stocks drove this increase, stimulated by elevated iron ore prices. However, a decline in property stocks countered these gains, attributed to Moody’s negative outlook on China’s property sector. Furthermore, Chinese electric vehicle manufacturers faced a second day of losses after the EU initiated an investigation into Chinese EV subsidies.
Post-closure of trading in China, the People’s Bank of China (PBOC) opted for a 25 basis point reduction in the reserve requirement ratio to 10.50% from 10.75%, offering more liquidity to banks for extended lending.
Japan’s Nikkei Stock Index concluded on a moderately higher note. The surge was led by a robust performance in technology stocks following the August U.S. CPI report. Japanese life insurance firms and energy producers also experienced gains. However, a downside was observed in July core machine orders, which fell more than anticipated.
Japan's July industrial production figures were revised upward by +0.2 to -1.8% month-on-month, deviating slightly from the initial -2.0% report.
July core machine orders in Japan saw a -1.1% month-on-month and -13.0% year-on-year drop, surpassing predictions of -0.8% and -10.3% respectively. This marks the largest year-on-year decline in nearly three years.
Pre-Market U.S. Stock Movers
In pre-market trading, cruise line operators experienced an upswing after Redburn Atlantic upgraded Carnival and Norwegian Cruise Line Holdings Ltd from neutral to buy. Consequently, Norwegian Cruise Line Holdings Ltd (NCLH) rose by over 2%, while Carnival (CCL) and Royal Caribbean Cruises Ltd (RCL) each gained over 1%.
MetLife (MET) saw a 1% increase in pre-market trading following Jeffries' upgrade from hold to buy, with a price target set at $72.
Etsy (ETSY) surged over 3% in pre-market trading after Wolfe Research raised the stock from peer perform to outperform, setting a price target of $100.
Yum China Holdings (YUMC) experienced a more than 4% jump in pre-market trading after announcing an anticipated high-single to double-digit sales growth in the coming three years, coupled with a target of 1,400 to 1,600 new-store openings this year, up from a prior estimate of 1,100 to 1,300.
Visa (V) saw a 1% decline in pre-market trading, attributing it to its move to allow major U.S. banks to potentially divest their shares in the company, alongside adjustments to its share structure established before Visa’s 2008 IPO.
HP Inc (HPQ) experienced a more than 1% drop in pre-market trading following Warren Buffet’s Berkshire Hathaway's revelation of selling $158.5 million worth of its HP stake.
Semtech (SMTC) faced a tumble of over 5% in pre-market trading after projecting Q3 net sales of $190 million to $210 million, substantially below the consensus of $247.6 million.
Vital Energy (VTLE) dropped over 6% in pre-market trading after announcing three agreements for Permian Basin assets, amounting to a total transaction consideration of approximately $1.7 billion.
RTX Corp (RTX) witnessed a decline of over 1% in pre-market trading after Bank of America's downgrade from neutral to underperform.
Earnings Reports (9/14/2023)
Scheduled earnings reports for today include Adobe Inc (ADBE), Copart Inc (CPRT), eGain Corp (EGAN), Ispire Technology Inc (ISPR), Lennar Corp (LEN), Mitek Systems Inc (MITK), Urban One Inc (UONEK), and Veradigm Inc (MDRX).
