Morning Markets

September E-Mini S&P 500 futures (ESU23) this morning are up +0.31%, and Sep Nasdaq 100 E-Mini futures (NQU23) are up +0.22%.

Stock index futures this morning are moderately higher.  Stocks found support today after China cut the reserve requirement rate for banks by -25 bp to 10.50%.  Stocks also have carryover support from gains in European stocks after the ECB raised interest rates by 25 bp today but signaled that it is on hold for now. 

However, stock index futures fell back from their best levels after stronger-than-expected U.S. economic news today bolstered the case for the Fed to keep interest rates higher for longer. 

U.S. weekly initial unemployment claims rose +3,000 to 220,000, showing a stronger labor market than expectations of 225,000.

The U.S. Aug final-demand PPI accelerated to +1.6% y/y from +0.8% y/y in July, the highest in 4 months and slightly stronger than expectations of +1.3% y/y.  However, Aug PPI ex-food and energy eased to +2.2% y/y from +2.4% y/y in July, right on expectations and the smallest increase in 2-1/2 years.

U.S. Aug retail sales rose +0.6% m/m, stronger than expectations of +0.1% m/m.  Aug retail sales ex-autos rose +0.6% m/m, stronger than expectations of +0.4% m/m.

The markets are discounting the odds at 2% for a +25 bp rate hike at the September 20 FOMC meeting and 42% for that +25 bp rate hike at the November 1 FOMC meeting. 

Global bond yields are mixed.  The 10-year T-note yield is down -1.0 bp at 4.239%.  The 10-year German bund yield is down -6.7 bp at 2.584%.  The 10-year UK gilt yield fell to a 1-1/2 month low of 4.277% and is down -6.4 bp at 4.283%.  

Overseas stock markets are higher.  The Euro Stoxx 50 is up +0.37%.  China’s Shanghai Composite Index closed +0.11%.  Japan’s Nikkei Stock Index closed +1.41%.

The Euro Stoxx 50 today is moderately higher.  Strength in mining stocks is leading the overall market higher after iron ore prices jumped to a 5-month high and copper prices climbed to a 1-week high.  Gains are limited by weakness in European automakers, which fell after China criticized the European Union’s investigation into Chinese subsidies for electric vehicles.  China’s state-sponsored Global Times newspaper said in a commentary today that Europe’s economy may suffer if protectionist measures are used to suppress China’s EV industry and suggested retaliatory steps might be taken.

European stocks extended their gains after government bond yields fell when the ECB raised its main refinancing rate by 25 bp to 4.50% but signaled its intent to pause its rate hike cycle.

The ECB raised its main refinancing rate by 25 bp to 4.50% from 4.25% but said the new level of constriction would make a "substantial contribution" to bringing inflation under control.  The ECB also signaled its intent to stay on hold for now, saying, "Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to target. 

The ECB cut its Eurozone 2023 GDP forecast to +0.7% from a prior forecast of +0.9% and raised its 2023 inflation forecast to +5.6% from a prior forecast of +5.4%.

China’s Shanghai Composite Index closed slightly higher.  Strength in steelmakers and mining stocks led the overall market higher after iron ore prices rose to a 5-month high.  However, weakness in property stocks limited gains in the overall market after Moody’s Investors Service revised the outlook for China’s property sector to negative from stable, saying weaker economic growth prospects and continued homebuyers’ concerns over project delivery will dampen property sales.  Also, Chinese electric vehicle makers moved lower for a second day sold off after the European Union said it was launching an investigation into Chinese subsidies for electric vehicles. 

After the close of trading in China today, the People’s Bank of China (PBOC) cut the reserve requirement ratio by -25 bp to 10.50% from 10.75% for most banks. The reduction in the ratio frees up cash for banks, allowing them to extend more loans to businesses and consumers.

Japan’s Nikkei Stock Index closed moderately higher.  Japanese stocks moved higher today, led by strength in technology stocks after Thursday’s U.S. CPI report for August came in close to expectations and bolstered the outlook for the Fed to pause its interest rate hikes. Japanese life insurance companies rallied today after Daiwa Securities upgraded the sector to positive from neutral. Also, Japanese energy producers rose after crude oil prices climbed to a nearly 10-month high.  On the negative side was today’s economic news that showed July core machine orders fell more than expected.

Japan Jul industrial production was revised upward by +0.2 to -1.8% m/m from the initially reported -2.0% m/m.

Japan Jul core machine orders fell -1.1% m/m and -13.0% y/y, weaker than expectations of -0.8% m/m and -10.3% y/y, with the -13.0% decline the biggest year-on-year decline in almost three years.

Pre-Market U.S. Stock Movers

Cruise line operators are moving higher in pre-market trading after Redburn Atlantic upgraded Carnival and Norwegian Cruise Line Holdings Ltd to buy from neutral.  As a result, Norwegian Cruise Line Holdings Ltd (NCLH) is up more than +2%, and Carnival (CCL) and Royal Caribbean Cruises Ltd (RCL) are up more than +1%. 

MetLife (MET) rose more than -1% in pre-market trading after Jeffries upgraded the stock to buy from hold with a price target of $72.

Etsy (ETSY) climbed more than +3% in pre-market trading after Wolfe Research upgraded the stock to outperform from peer perform with a price target of $100. 

Yum China Holdings (YUMC) jumped more than +4% in pre-market trading after it said it sees high-single to double-digit sales growth in the next three years and sets a target for new-store openings at 1,400 to 1,600 this year, up from a previous outlook of 1,100 to 1,300

Visa (V) slid more than -1% in pre-market trading after taking steps to allow the biggest U.S banks to eventually sell their shares in the company and amend a share structure that was implemented before Visa’s 2008 initial public offering.

HP Inc (HPQ) fell more than -1% in pre-market trading after Warren Buffet’s Berkshire Hathaway disclosed that it sold $158.5 million worth of its HP stake. 

Semtech (SMTC) tumbled more than -5% in pre-market trading after forecasting Q3 net sales of $190 million-$210 million, well below the consensus of $247.6 million. 

Vital Energy (VTLE) dropped more than -6% in pre-market trading after announcing that it signed three agreements for Permian Basin assets with a total transaction consideration of about $1.7 billion.

RTX Corp (RTX) slid more than -1% in pre-market trading after Bank of America downgraded the stock to underperform from neutral.

Earnings Reports (9/14/2023)

Adobe Inc (ADBE), Copart Inc (CPRT), eGain Corp (EGAN), Ispire Technology Inc (ISPR), Lennar Corp (LEN), Mitek Systems Inc (MITK), Urban One Inc (UONEK), Veradigm Inc (MDRX).

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