North American Morning Briefing: Nvidia Steadies Premarket, Helps Nasdaq

OPENING CALL

Stock futures were mixed on Tuesday and bond yields fractionally firmer as investors continued to parse comments from Federal Reserve officials and looked ahead to crucial inflation data later in the week.

Deutsche Bank said recent talk from Fed officials maintained the cautiously optimistic tone from the Federal Open Market Committee around the inflation outlook, leaving the door open for a September rate cut.

"That said, such an outcome likely requires the next few months to show tame inflation readings similar to May and as Powell indicated, possibly some softening in the growth and labor market data. We continue to see the first rate cut in December followed by two more in the in the first half of 2025," Deutsche Bank added.

To that end, traders will be paying close attention to the personal consumption expenditure price index data due for release on Friday.

Elsewhere, the Nvidia drama continues.

The AI chip maker's shares were volatile premarket in heavy trading volumes, after a three-session selloff that wiped nearly 13%, or some $430 billion, off its gargantuan market cap.

Other Premarket Movers

FedEx was down 0.2% ahead of its fiscal fourth-quarter earnings scheduled for after the closing bell Tuesday. Analysts forecast FedEx will report earnings of $5.34 a share on sales of $22 billion.

Merck's Frankfurt-listed shares fell 10% after the pharmaceutical giant said it had decided to call off a Phase III trial of its cancer drug Xevinapant, in an unexpected turn that threatens to undermine confidence in the company's research abilities.

SolarEdge Technologies declined 13% after the company said it planned to offer $300 million in convertible senior notes due in 2029 in a private placement and separately, in a filing, said PM&M Electric, a customer that owes SolarEdge about $11.4 million under a secured promissory note, recently filed for Chapter 7 bankruptcy.

Super Micro Computer was up 1.1% after falling 8.7% Monday. It was the worst performance for shares of the server maker since they fell 14% on May 1.

Shares of Trump Media & Technology were up 10%. The stock gained 21% on Monday, marking the second-largest percent increase since Trump Media's merger with shell company, Digital World Acquisition, in late March.

Postmarket Movers

Enerpac Tool Group posted a decline in third-quarter sales and narrowed its outlook for fiscal 2024. Shares fell 11%.

Pool guided for significantly lower-than-expected earnings per share this year amid weak demand for new pool construction. Shares dropped 11% and also weighed on shares of Leslie's, which fell 4.4%.

Watch For:

S&P CoreLogic Case-Shiller Home Px Index for April; Conference Board - Consumer Confidence for June; Canada CPI for May; Economic Club of New York event with Fed's Lisa Cook; FedEx earnings

Today's Headlines/Must Reads:

- The Clock Is Ticking on Jane Fraser's Citigroup Turnaround

- Hidden Markups at Mail-Order Pharmacies Make Drugs More Costly for Employers

- In Rare Rebuke, U.S. Ambassador Accuses China of Undermining Diplomacy

- Historic Moon Mission Moves China Ahead in Space Race With U.S.

MARKET WRAPS

Forex:

The dollar was holding steady ahead of key events this week, most notably Friday's U.S. PCE inflation data as well as Thursday's first . presidential debate between Biden and Trump, ING said.

The PCE data is the Federal Reserve's preferred measure of inflation and a weak reading could take the dollar lower.

"Should it meet expectations of a 0.1% month-on-month reading, we suspect the short-end of the U.S. curve can come lower and take the dollar with it."

The dollar would hold up against the euro, however, due to caution ahead of the first round of snap French elections on Sunday.

Allianz Global Investors continues to prefer the dollar, maintaining overweight on the currency versus the euro, as "any reminder of the European sovereign debt crisis is a red flag for many international investors."

The euro may struggle to sustain any gains over the coming weeks given the potential for further French bond market stress due to risks stemming from French elections, ING said.

There are still "many possibly bearish chapters to play out" in the French elections such as the leftist alliance doing better than expected, ING added.

While bond investors might welcome the far-right National Rally saying it will respect the nation's budget rules, it is probably too early for the party to be making significant concessions to its manifesto, ING said.

"EUR/USD may therefore struggle to break to the topside of its 1.0660-1.0760 range."

The pound looks set to fall as U.K. interest-rate expectations could be repriced lower later this summer following a likely rate cut by the Bank of England in August, ING said.

"Looking at forward curves, it is remarkable that U.K. interest rates remain priced so close to the U.S.," ING said.

For both the U.K. and the U.S., about 45 basis points of rate cuts are priced this year with policy easing cycles expected to end around 3.30%-3.40%, ING added.

Following the July 4 U.K. general election, some BOE members could signal rate cuts, ING said.

Bonds:

Deutsche Bank Research has switched its short position view in 10-year French government bonds against Bunds to an outright short in 10-year OATs.

It has set an indicative target of 3.40% for the 10-year OAT benchmark and a stop level at 3.10%; the current level is 3.15%, according to Tradeweb.

Deutsche Bank said the 10-year OAT yield is only 5 basis points higher than it was before the EU election and the 10-year Bund has only reversed 30% of its post-EU election selloff.

"We acknowledge that in tail risk scenarios the OAT-Bund widener will outperform versus a short 10-year OAT outright but still this should lead to higher OAT yields eventually."

Allianz Global Investors has retained its long position on 10-year Treasurys in its multi-asset portfolios, being vigilant to market concerns over the outcome of upcoming French elections.

Energy:

Oil prices were broadly steady after rising 1% in the previous trading session on prospects of stronger demand over the summer and heightened geopolitical risks in Eastern Europe and the Middle East.

Further gains are capped by investors' cautiousness ahead of this week's PCE data and concerns over the demand outlook in China.

Meanwhile, Ukrainian missile strikes on Russian oil infrastructure and fears of a full-scare war between Israel and Iran-backed militia group Hezbollah continue to uphold prices.

According to ANZ, the market also remains on edge ahead of elections in Iran later this week, as a "more hard-line" president could result in more direct confrontations with the U.S., Israel and Saudi Arabia.

Metals:

Metal prices were mixed as investors wait for more insights into the possible timing of the Federal Reserve's first interest-rate cut this year.

"Currently, forward swaps are pricing in nearly a 75% chance of a rate cut in September," Sucden Financial said.

"Markets are already anticipating two 25 basis point cuts."

In base metals, analysts said the market is torn between sluggish demand signals in China and persistent issues on the supply side.

TODAY'S TOP HEADLINES

Airbus Sheds More Than $10 Billion in Market Value After Slashing Guidance

Airbus lost more than $10 billion in market value after the group lowered its commercial aircraft delivery goal and cut financial targets for the year due to supply-chain hurdles and an impairment related to its space activities.

Airbus shares in Paris slumped more than 9% on Tuesday, giving the group a market value of around 107.86 billion euros ($115.79 billion), according to FactSet. The group's market value stood at about EUR118 billion on Monday.

Boeing Talks to Buy Back Spirit AeroSystems Have Last-Minute Twist

Boeing has proposed funding its acquisition of partsmaker Spirit AeroSystems with stock rather than cash, according to people familiar with the matter, a last-minute twist in deal talks that comes as the jet maker burns through more than $1 billion a month.

Boeing and Spirit, a jet fuselage maker it split off two decades ago, were closing in on an all-cash deal this weekend when Boeing switched to an offer consisting largely of company stock.

Brookfield to Takeover France's Neoen in $6.5 Billion Deal

Brookfield Asset Management agreed to buy a majority stake in France's Neoen, the first step toward a full acquisition in a deal that values the renewables company as a whole at 6.09 billion euros ($6.54 billion).

With the deal, Brookfield aims to bolster exposure to renewables and battery-storage technology and to accelerate Neoen's portfolio expansion.

Singh's Take: Housing Sector Slump Persists, With Little Relief in Sight

The housing market's tough year isn't getting any easier.

Economic data last week showed that the sector is still reeling from the impact of higher interest rates. Sales of U.S. existing homes slipped for the third month in a row in May as prices climbed to a new high amid low inventory. Housing starts and building permits came in significantly below what economists polled by The Wall Street Journal expected. Plus, a measure of U.S. home-builder confidence recently showed that sentiment in May declined to the lowest level since December.

Debate in Atlanta Puts Spotlight on Georgia, Where Trump Has the Edge

ATLANTA-Republican operatives here are betting Georgia's popular governor and his stewardship of the state's robust economy will help former President Donald Trump undercut President Biden's significant early investments in the state.

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June 25, 2024 06:11 ET (10:11 GMT)

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