North American Morning Briefing: New China Stimulus Pledge to Lift Stocks, Sentiment

OPENING CALL

Stock futures gained as investors awaited a slew of economic data, with Nasdaq futures boosted by Micron's premarket advance.

Micron Technology said late Wednesday that robust artificial-intelligence demand gave its earnings and outlook a lift. Its shares jumped 15% premarket.

Other chip players including Nvidia, Advanced Micro Devices and ASML also rose.

"At a time of real growth fears, positive company estimates on future earnings are welcome news and can easily boost equity prices further," Nordea said.

Elsewhere, indexes in mainland China and Hong Kong jumped, with property stocks some of the biggest gainers, after China's top leaders pledged stronger policy support for the economy, just days after a blitz of measures from the central bank.

U.S. economic data could be a bigger focus over the remainder of the week. Weekly jobs data and durable-goods orders are due Thursday, plus a third estimate of GDP for last quarter.

On Friday, there is closely watched data on personal income and spending trends, plus the Federal Reserve's preferred inflation gauge.

Premarket Movers

Pfizer is voluntarily withdrawing sickle-cell treatment Oxbryta from markets, two years after acquiring its developer in a $5.4 billion deal.

Postmarket Movers

Concentrix's earnings missed Wall Street estimates. Shares dropped 14%.

H.B. Fuller cut its outlook after slowing demand resulted in lower-than-expected adjusted per-share earnings and revenue. Shares fell 10%.

Telesis Bio and Beckman Coulter Life Sciences said they are collaborating to create efficient and scalable biofoundries, as well as offer solutions for sustainable and rapid on-premise synthesis of DNA. Shares more than doubled.

Watch For:

GDP, final 2Q Estimate; Durable Goods for August; Weekly Jobless Claims; Pending Home Sales for August

MARKET WRAPS

Forex:

The dollar traded steady ahead of Jerome Powell's speech and more economic data.

The Swiss franc rose after the Swiss National Bank cut rates by 25 basis points to 1.0% and although the decision was largely expected, market participants had anticipated a possibility of a bigger reduction.

Energy:

Crude futures fell more than 2% on signs that supply disruptions in Libya could ease and reports that Saudi Arabia might abandon its oil price target.

According to the U.N., representatives from Libya's rival administrations agreed on the process to appoint a central bank governor--a step that could help resolve a crisis over the control of the country's oil revenue and revive production.

Meanwhile, Saudi Arabia is ready to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output, the Financial Times reported, citing people familiar with the matter.

A firmer dollar and prospects of a potential temporary ceasefire between Israel and Hezbollah are also weighing on prices.

Metals:

Gold continued to edge higher as the latest data bolstered the case for another aggressive rate cut and heightened geopolitical tensions in the Middle East drove safe haven demand.

"U.S. consumer confidence unexpectedly fell in August--by the most in three years--raising concerns about the labour market," ANZ said.

"This saw swaps traders price in 75bp of cuts for the remainder of the year."

Angel One said gold was likely to trade higher on the back of intensified geo-political tensions, and projected support for gold at $2,595-$2,644 and resistance at $2,735-$2,788.

The intensifying conflict between Iran-backed Hezbollah in Lebanon and Israel is supporting the haven metal amid increasing fears of a wider conflict, it said.

Base Metals

Base metals continued to trade higher driven by China's latest stimulus measures, but gains were limited by skepticism on whether the move will be enough to revive the country's economy.

Prices have also been supported by weakness in the dollar after the Fed rate cut.

"A stronger USD has been a headwind for the sector this year; however, it is now on the verge of giving up all the gains this year," ANZ Research said.

"This should support further gains in investor appetite."

Industrial Metals

China's stimulus package won't materially alter its commodity demand outlook, Capital Economics said.

The measures are a step in the right direction, but won't drive a turnaround in economic activity which is needed to lift commodity demand, and an additional fiscal stimulus directed towards infrastructure spending could have a bigger impact on commodity demand.

Even if policymakers manage to boost economic growth and commodity demand, any uptick is likely to be temporary given the country's aging population and slowing urbanization and these structural economic problems will remain a headwind for commodity demand ahead particularly for industrial metals, it added.

TODAY'S TOP HEADLINES

Mark Zuckerberg's AI Vision Makes Metaverse a Slightly Easier Sell

Mark Zuckerberg's metaverse show has become an AI show. The makeover is apt.

The chief executive of Meta Platforms kicked off the company's annual developers conference on Wednesday, showing off its latest headsets that now employ a mix of virtual reality and augmented reality technology. That has been the historic aim of the event, at least since the company once known as Facebook spent $2 billion to acquire VR headset maker Oculus in 2014. But the VR business mostly has been a dud. Meta's Reality Labs division that includes VR generated just over $2 billion in revenue for the 12 months ended in June-about what the company's core advertising operation generates every five days.

Commerzbank Confirms Independent Strategy, Raises Returns Targets

Commerzbank plans to improve its profitability and boost shareholder returns in the coming years, the German lender said as it confirmed its independent strategy while it grapples with a possible takeover attempt by Italy's UniCredit.

The board of the Frankfurt-based group, which is the country's leading bank for small and medium-sized companies, on Thursday unanimously confirmed the strategy to 2027 it outlined in November and said that its implementation is progressing rapidly and on schedule.

Fed's Rate Cut Is Jolting Small Businesses to Spend Again

A tire seller will open more stores. A maker of gun safes plans to boost advertising. A candle maker is looking at taking out a $20,000 loan to expand for the holidays.

Some small-business owners have begun to recalibrate their spending and investment plans in response to the Federal Reserve's decision to cut interest rates by half a percentage point.

When Will Money-Market Funds Lose Their Allure?

Americans' dash for cash isn't over yet.

Investors have poured $126 billion into money-market funds since the Federal Reserve's jumbo-size interest-rate cut. That sent assets in such funds to a record $6.76 trillion as of Tuesday, based on Crane Data going back to 1998.

China Pledges More Support for Economy

China's top leaders surprised markets by pledging even more support for the economy, sparking hopes that policymakers are readying the sort of fiscal stimulus analysts say is key to the country's recovery.

The Politburo, China's highest decision-making body, on Thursday said it would extend additional fiscal and monetary measures to boost the economy, according to state media Xinhua. That comes days after the central bank unveiled a raft of aggressive easing measures, underscoring a rising sense of urgency among policymakers to revive the world's second-largest economy.

China Market Support May Fizzle Out If Key Issues Remain Unsolved

China's over $100 billion push to bolster its stock markets has stirred optimism, but begs the question of whether investors and businesses will take the bait amid lingering doubts about the economy's underlying weakness.

In an unprecedented move, the People's Bank of China vowed to invest 800 billion yuan of liquidity, equivalent to $113.77 billion, into Chinese stock markets through new swap and loan facilities, a move cautiously welcomed by analysts.

Swiss Central Bank Delivers Third Straight Rate Cut

Switzerland's central bank on Thursday cut its key interest rate for the third straight meeting as it pivots away from worries about high inflation toward concerns about the impact of a strong currency on exporters.

The Swiss National Bank lowered its key rate to 1%from 1.25%, having cut borrowing costs by the same amount in June. Three months earlier, it became the first central bank from a rich, developed economy to ease policy since the start of the global inflation surge in 2021.

China-Linked Hackers Breach U.S. Internet Providers in New 'Salt Typhoon' Cyberattack

Hackers linked to the Chinese government have broken into a handful of U.S. internet-service providers in recent months in pursuit of sensitive information, according to people familiar with the matter.

The hacking campaign, called Salt Typhoon by investigators, hasn't previously been publicly disclosed and is the latest in a series of incursions that U.S. investigators have linked to China in recent years. The intrusion is a sign of the stealthy success Beijing's massive digital army of cyberspies has had breaking into valuable computer networks in the U.S. and around the globe.

U.S. and Allies Call for Three-Week Pause to Head Off Israel-Hezbollah Ground War

WASHINGTON-The Biden administration is urgently pressing for Israel and Hezbollah to pause their escalating aerial attacks into and from Lebanon for 21 days, hoping to head off a full-scale ground war that appears increasingly likely, according to U.S. officials.

Despite a growing buildup along Israel's northern border, U.S. officials think Prime Minister Benjamin Netanyahu's government doesn't want a wider war and is looking for a diplomatic resolution and that Hezbollah wants breathing room after Israel decimated its leadership and degraded its weapons arsenal in recent weeks.

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September 26, 2024 06:26 ET (10:26 GMT)

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