GLOBAL CAPITAL MARKETS OVERVIEW:

European shares ended mostly higher on Thursday, with the benchmark Stoxx 600 up 0.1%, as gains in travel and leisure stocks offset losses at oil and gas companies. The Bank of England raised its key interest rate by 50 basis points to 1.75%, the most since 1995, and warned of recession risks amid runaway inflation. On the corporate front, British retailer Next raised its full-year sales and profit forecasts, signaling an increase in demand for new clothes in warmer weather. Crédit Agricole joined BNP Paribas and Societe Generale in reporting a higher-than-expected quarterly profit. Domestically, the DAX rose 0.6%, with German online retailer Zalando forecasting a return to profit growth in the second half of the year, sending shares of Zalando up more than 11%. Also, Lufthansa rose more than 6% after reporting a lower-than-expected quarterly loss and forecasting further growth. The FTSE MIB index recovered earlier gains but closed up 0.3% on Thursday at 22,650, providing support to an eight-week high, with medical and industrial stocks providing support as investors focused on a possible new plan by the Italian government. Diasolin and Pressman rose more than 4 percent, leading to gains in Milan. Also, shares of Banca Mediolanum continued to rise after the insurer posted record operating profit margins in the first half of the year. On the other hand, Tenaris shares fell 4% as recession fears offset a 167% surge in the industry's core profit. Meanwhile, parliament will approve a package worth 14.3 billion euros to help businesses and households with soaring energy costs and consumer prices. The CAC 40 index rose 41 points, or 0.6%, to 6,511, its highest in eight weeks, after rising 1% a day earlier on upbeat corporate earnings. Credit Agricole rose nearly 5%, joining BNP Paribas and Societe Generale in reporting higher-than-expected quarterly profits. In addition, Air France-KLM shares rose more than 3%, and Lufthansa expressed optimism for further growth. Meanwhile, satellite operator SES confirmed its financial targets for 2022 but fell 9% as the Financial Times reported it was discussing a possible merger with Intelsat. Meanwhile, the Bank of England raised interest rates by 50 basis points, the most significant increase since 1995, signaling a prolonged recession. London stocks increased on Thursday to close at 7,448 as investors digested the Bank of England's latest currency decision while welcoming upbeat corporate results. The Bank of England raised its key interest rate by 50 basis points to 1.75% at its August 2022 meeting, the sixth consecutive hike, pushing borrowing costs to their highest level since 2009. Even though this was a significant rate hike since 1995 to curb inflation, markets took a more hawkish stance, with one policymaker backing a 25 basis point hike instead of 50. Money markets are now pricing in a 25 basis point upward revision in September, with the central bank seeing inflation peaking at 11.1% in October. On the corporate side, miner Glencore said profits doubled to a record in the year's first half. Meanwhile, retailer Next raised its full-year sales, and profit forecasts as demand for new clothes in warm weather led to better-than-expected second-quarter results. On Thursday, the ruble-based MOEX-Russia index erased earlier gains to close at 2,117 after falling for four straight sessions under pressure from the utilities and energy sectors. Rossetti and Inter RAO lost more than 4 percent, leading the grid operators in Moscow. Elsewhere, Gazprom shares fell more than 1% after it said Canadian, EU, and U.K. sanctions prevented Siemens turbines from returning to the Nord Stream I pipeline, citing the measures for cutting capacity to Germany. Also, metallurgists fell sharply after the Ministry of Industry and Trade said it expected steel demand to decrease. On the other hand, tech stocks outperformed the broader market after Kommersant reported that the government provided Yandex, VK, and Ozon with 130 billion rubles in loans to help them meet their Eurobond obligations. The three major U.S. stock indexes were flat on Thursday, as investors held no new positions ahead of Friday's federal jobs report. This week, several Fed policymakers dismissed recent speculation that the central bank will take a less aggressive stance on interest rates by reassuring markets that the central bank will remain fully committed to containing inflation even in the face of recession risks. Investors are awaiting the monthly U.S. jobs report to gauge the economy's health while looking for clues on Fed tightening. On the corporate front, Alibaba's U.S.-listed shares jumped more than 3 percent after the Chinese e-commerce giant surprised investors with earnings. The S&P/TSX Composite hovered around the 19,540 level on Thursday, with sharp losses in the energy sector offsetting a good showing in the mining sector, while investors remained cautious ahead of tomorrow's U.S. and domestic jobs report. Canadian energy heavyweights tracked a drop in crude oil prices, posting sharp losses, with Cenovus energy down 3.2%. Still, Canadian Naturals outperformed its industry and traded on a flat line after doubling its quarterly profit. Gold miners, on the other hand, tracked gains in gold prices and were among the leaders in Toronto, with shares of Barrick Gold Corporation and Agnico Eagle Mines up 3%. On the data front, Canada posted its largest trade surplus in 14 years. Hong Kong stocks rose for a second straight session on Thursday, with the benchmark Hang Seng closing near 20,175, boosted by gains in healthcare and technology shares. Sentiment continued to be supported by Wednesday's report, which said China's services sector activity rose at the fastest pace in 15 months in July as easing of Covid-19 control measures boosted consumer confidence, while Hong Kong's private sector maintained its fourth straight month of gains expansion trend. Wharf Real Estate Investment Company and Sunny Optical Technology Group were among the index's biggest gainers, rising more than 6%. China Shanghai Composite rose 0.8 percent to close at 3,189, while the Shenzhen sector added 0.69 percent to 12,065, snapping two days of losses as concerns over heightened tensions between the U.S. and China over the Taiwan issue Started to ease, and almost all sectors rose. Chinese mainland stocks followed Wall Street's strong rebound as strong U.S. corporate earnings and upbeat economic data boosted risk appetite. Heavyweights led the rally, with substantial gains from BYD Corporation (1.5%), Tianqi Lithium (3.3%), Kweichow Moutai (1.7%), Nora Technology (1.1%), and Greatoo Intelligent (9.9%). Meanwhile, the Contemporary Ampere index fell 0.62% despite a Reuters report that the world's largest battery maker will move forward with plans to deliver low-cost lithium-ion batteries to Ford vehicles and North American battery production in 2026. Japan Nikkei 225 rose 0.69 percent to close at 27,932 on Thursday, rising for a second straight session, boosted by a weaker yen and optimism about domestic corporate earnings. Japanese stocks followed Wall Street's strong rebound as a strong earnings report and a better-than-expected U.S. services sector purchasing managers' index for July eased fears of a potential recession. Heavyweights led gains, led by SoftBank Group (2.6%), Tokyo Electron (3.1%), and Nintendo (0.4%). Japanese shippers also rose on solid quarterly results, including Kawasaki Kishimori (5.5%), Nippon Yusen (1.7%), and Mitsui OSK (1.1%). Elsewhere, Subaru rose 8.5% and was Nikkei's top performer after a positive earnings report and an upbeat forecast for U.S. futures sales. Meanwhile, Z Holdings fell 11% on lower-than-expected earnings, while Toyota fell 3% after a 42% drop in operating profit for the year. Australia S&P/ASX 200 edged down 0.01% to close at 6975 on Thursday, reversing early gains as losses in the resources sector offset gains in technology and banking stocks. Australian shares lagged their Asia-Pacific peers on weaker commodity prices amid renewed concerns that rising interest rates would hamper global growth and dent overall demand. Mining and energy stocks fell, led by BHP Billiton (-1.1%), Rio Tinto (-1.6%), Fortescue Metals (-2%), Woodside energy (-3.1%) and Santos Ltd (-1.1%). Meanwhile, domestic tech stocks followed their U.S. counterparts higher, with Block Inc (8.9%), NEXTDC Ltd (1.1%), and Seek Ltd (3.8%) gaining. New Zealand NZX 50 rose 30.44 points, or 0.26%, to close at 11,735.47, its highest close in three months and its sixth session of gains, boosted by Wednesday's Wall Street rally, easing recession fears, and easing recession fears. Bao's earnings forecast is vital. At the same time, a growing number of Fed officials have joined the ranks, citing the need for more tightening measures to curb soaring inflation. Domestically, New Zealand's Ministry of Health said there were clear signs that the country's latest Covid-19 outbreak had peaked, new cases continued to decline, and the number of people infected with the virus in hospitals fell at the end July. New Zealand King Salmon Investments (11.6%), Today Me Ltd (6.7%), and Third Age Health Services led gains. In contrast, Plexure Group Limited (10%), Bremworth Limited (5.4%), TruScreen Group (3.9%), and Paysoup Limited (3.5%) saw notable declines.

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

-US: Imports to the U.S. fell 0.3%, or $1 billion, to $340.4 billion in June 2022. Merchandise imports fell $1.4 billion to $282.5 billion, as lower purchases of automobiles, parts, and vehicles, with engines (down $2.7 billion) offset by computers (up $1.4 billion) and industrial supplies and materials (up 6 billion) imports. Meanwhile, imports of services increased by $0.4 billion to $57.9 billion in June, particularly transportation (up $1 billion) and tourism (up $100,000).

- US: In June 2022, U.S. exports rose 1.7% or $4.3 billion from the previous month to $260.8 billion, the highest level since the series began in 1950. Merchandise exports increased by $3.5 billion, driven by non-monetary gold ($1.8 billion) and industrial supplies and materials ($4.7 billion) such as natural gas ($1.6 billion). Meanwhile, food, feed, and beverages sales increased by $0.9 billion, while commercial aircraft sales decreased by $800 million. Services exports increased by $700 million to $77.8 billion, particularly tourism ($300 million) and transportation ($300 million).

- US: The U.S. trade deficit narrowed by $5.3 billion to a six-month low of $79.6 billion in June 2022, compared with market forecasts of $80.1 billion. Total exports rose 1.7% to an all-time high of $260.8 billion, driven by non-monetary gold sales; natural gas; food, feed, and beverages; and travel and transportation services. Meanwhile, imports fell 0.3% to $340.4 billion, mainly dragged down by passenger cars. Goods deficits widened in China ($36.9 billion) and Mexico ($11 billion) but narrowed in the European Union ($18 billion), Canada ($7.9 billion), and Russia ($600 million).

- CA: The total value of building permits in Canada fell 1.5 percent to C$11.9 billion in June 2022, after falling 1.6 percent in the previous month, in line with market expectations. Permits in the non-residential sector fell 10.4% to $3.7 billion, reaching the second-highest monthly value a month ago, as declines in the institutional (-32.2%) and commercial (-2.7%) sectors outpaced the industrial sector (+ 0.6%). Meanwhile, the residential sector rose 3.1% to $8.2 billion, with a 6.5% increase in multifamily units, offsetting a 0.6% decline in single-family units.

- CA: In June 2022, Canadian imports rose 1.7% to a record high of C$64.9 billion, the fifth consecutive month of growth. Purchases increased in 5 of 11 product categories, mainly energy products (+22.3%) and refined petroleum products (+32.5%, a record high of C$1.9 billion). In addition, imports of aircraft and other transport equipment and components increased significantly (39.7%). However, exports of cars and parts fell sharply (-6.8%), namely passenger cars and light trucks (-11.2%), partly offset by lower imports from South Korea and Germany. Meanwhile, global auto production continues to suffer from supply chain issues.

- CA: Canada's trade surplus widened to C$5.0 billion in June 2022 from a downwardly revised C$4.8 billion last month, well above market expectations of C$4.8 billion. It was the largest monthly trade surplus since August 2008, with exports rising 2.0% from the previous month to a record $69.9 billion, driven by higher sales of energy, metals, and non-metallic minerals. Meanwhile, imports rose 1.7% to C$64.9 billion, primarily refined petroleum products and aircraft.

- CA: In June 2022, Canadian exports rose 2% monthly to a record $69.9 billion. It was the sixth straight month of growth in Canadian exports and the first time since 2011. Overall, 8 of the 11 product segments posted gains in June, led by energy products (up 3.2% to $21.0 billion), which accounted for 30% of total exports, and crude oil and bitumen, which hit an all-time high. Leading the gains (+3.7%). Non-energy exports also rose (+1.4%). Other significant positive contributions came from metallic and non-metallic mineral products (up 6.5%) and consumer goods (up 6.3%), mainly due to solid growth in exports of pharmaceutical products (up 34.0%). However, these gains were partially offset by a decline (-6.6%) in exports of forest products and construction and packaging materials. This decline was mainly due to a decline in the value of timber exports (-11.1%), mainly due to lower prices.

- IT: The S&P Global Italy Construction PMI fell to 46.2 in July 2022 from 50.4 the previous month, marking the first contraction in construction since January 2021. The inflow of new jobs fell for a second straight month as heightened economic uncertainty, questions surrounding Italy's super bonus tax plan, and venue closures weighed on client demand. The most significant drop in construction was civil engineering, with residential construction activity contracting for the first time since May 2020. Builders lowered input buying levels for the first time in 18 months and halted job creation for the first time in 17 months as new business fell. On the price front, higher prices for energy, materials, fuel, and transport contributed to input cost inflation, although this was the lowest in 17 months. Economic uncertainty and political instability weighed business confidence in the sector to its lowest level since April 2020.

- FR: The S&P Global French Construction PMI rose to 48.6 in July 2022 from 46.4 the previous month. The latest data showed a sequential decline in activity as the growth outlook deteriorated and extremely high-interest rates dented demand for construction work. Subsequently, the French construction company cut jobs for the first time since February. Finally, builders' expectations for activity in the coming year fell to a 15-month low.

- GE: The S&P Global German Construction PMI fell to 43.7 in July 2022 from 45.9 in June, the most significant contraction since February 2021, as soaring material prices and sky-high interest rates dented demand for construction work. Activity in all major industries, the commercial sector, residential construction, and civil engineering, fell, and new order inflows remained sharply. Finally, builders' expectations for activity in the coming year fell to one of the lowest levels in more than 20 years.

- EU: The S&P Global Eurozone Construction Purchasing Managers' Index came in at 45.7 in July, down from 47.0 in June, indicating that overall construction activity across the eurozone fell for the third straight month. Furthermore, the contraction rate is the highest since February 2021. Key figures suggest that the decline in the headline index was primarily driven by a rapid decline in commercial construction activity; residential and civil engineering activity declined slightly but still significantly. Residential construction in the eurozone fell for the third straight month in July. The rate of contraction was little changed from June and fell sharply overall. Commercial construction project starts fell for the fourth straight month in July. The decline was rapid, the fastest since February 2021. Civil engineering activity across the euro area fell less sharply, although the pace of decline in July was still rapid.

- AU: In June 2022, Australia's exports of goods and services rose by 5.1% month-on-month to a record A$61.53 billion as commodity prices surged. Non-rural goods sales rose 1.6 percent to $45.67 billion, driven by demand for metal ores and minerals (5.5 percent), metals (excluding non-monetary gold), and machinery (3 percent). In addition, shipments of rural goods increased, driven by meat and meat products (12.0%), cereals and cereal products (21.1%), other rural products (7.0%), and wool and sheepskins (10.6%), 11.8% to A$6.3 billion. Meanwhile, sales in the services sector rose 3.3 percent to $5.92 billion, driven by growth in tourism (6.7 percent) and services (0.9 percent). In addition, sales of non-monetary gold surged 63.8% to A$3.63 billion. Meanwhile, net exports of merchandise sales rose 5.6 percent to $19 million.

- AU: Australia's imports of goods and services rose 0.7% month-on-month to a record A$43.86 billion in June 2022, as the economy fully emerged from the Covid-19 pandemic and domestic demand was strong. Arrivals of intermediate and other commodity goods rose 2.4 percent to $16.8 billion, led by gains in fuels and lubricants (2.5 percent) and other parts of capital goods (5.1 percent). In addition, services imports rose by 5.1% to A$8.03 billion, mainly driven by other services (0.7%). In contrast, consumer goods purchases fell 3.9% to A$10.56 billion, mainly related to non-industrial transport equipment (-11.5%) and textiles, apparel, and footwear (-2%); while capital goods fell 2.1% to A$7.74 billion, due to civil aircraft and classified items (-45.2%) and machinery and industrial equipment (-2.8%).

LOOKING AHEAD:   

Today, investors will receive:

-USD: Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate, and Consumer Credit m/m.

EUR: German Industrial Production m/m, French Industrial Production m/m, French Prelim Private Payrolls q/q, French Trade Balance and Italian Industrial Production m/m.

GBP: Halifax HPI m/m and MPC Member Pill Speaks.

JPY: Average Cash Earnings y/y, Household Spending y/y, and Leading Indicators.

AUD: AIG Services Index and RBA Monetary Policy Statement.

CHF: Foreign Currency Reserves.

CAD: Employment Change, Unemployment Rate, and Ivey PMI.

KEY EQUITY & BOND MARKET DRIVERS:

- US: The 10-year U.S. Treasury yield fell back to 2.7 percent, near its lowest level since April, as investors continued to assess recession risks in the world's largest economy. Hawkish rhetoric from Fed policymakers shifted investors' attention to further monetary policy tightening. The central bank has assured markets that it remains fully committed to containing inflation, which is at its highest in 40 years, making hopes of a soft landing even more remote. The Federal Reserve has gone to great lengths to reduce inflation to its 2% target, pushing the gap between 2-year and 10-year Treasury yields to nearly 40 basis points. The closely watched part of the U.S. yield curve has not been this high since 2000, and many see it as a warning of economic contraction.

- UK: Britain's 10-year gilt fell below 1.9%, near a 2-1/2-month low of 1.7% hit this week, after the Bank of England revised its growth forecast to suggest a recession will start in the fourth quarter and run into 2023. As widely expected, the central bank raised bank rates by 50 basis points, marking the most significant rise in borrowing costs since 1995, to curb inflation, which is now at a 40-year high. The Bank of England also said that inflation is expected to peak at 11.1% in October. Investors also continued to focus on the financial commitments of Britain's two prime ministerial candidates. Meanwhile, the final Purchasing Managers' Index (PMI) showed that the UK economy slowed more than initially expected at the start of the third quarter but remained at a robust pace of growth. Nevertheless, three Fed officials said further rate hikes were needed to combat high inflation.

- UK: The Bank of England raised its primary interest rate by 50 basis points to 1.75% at its August 2022 meeting, the sixth hike in a row, and pushed borrowing costs to the highest level since 2009, in line with market forecasts. This is the most significant rate hike since 1995. The bank said that wholesale gas prices have nearly doubled since May, affecting retail energy prices, exacerbating the decline in real UK household incomes, and further fueling UK CPI inflation in the near term. As a result, CPI inflation is expected to rise to 11.1% in October and remain very high for most of 2023 before falling to its 2% target over the next two years, according to new forecasts from the Bank of England. In terms of growth, the UK is expected to enter a recession in the fourth quarter, lasting five quarters.

- US: Stock futures contracts linked to the three major indexes rose 0.5% on Thursday, putting Wall Street on track for further gains as quarterly results from U.S. companies and upbeat economic data ease fears of a looming recession. This week, several Fed policymakers dismissed recent speculation that the central bank will take a less aggressive stance on interest rates by reassuring markets that the central bank will remain fully committed to containing inflation even in the face of recession risks. However, investors are awaiting Friday's monthly U.S. jobs report, which could shed more light on the Fed's tightening path. On the corporate front, Alibaba's U.S.-listed shares rose nearly 10% in premarket trading after the Chinese e-commerce giant surprised investors with earnings.

- UK: Share futures contracts linked to the FTSE 100 were almost flat on Thursday as investors reassessed the prospect of tightening monetary policy ahead of the Bank of England's next monetary policy decision. The Bank of England is expected to raise interest rates by 50 basis points, the most significant increase since 1995. On the corporate front, British retailer Next raised its full-year sales and profit forecasts, signaling an increase in demand for new clothes in warmer weather.

STOCK MARKET SECTORS:

- High: Utilities, Industrials, Materials, Consumer Discretionary, Information Technology, Communication Services.

- Low: Energy, Health Care, Consumer Staples, Real Estate.

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

-GBP: Sterling weakened against the dollar, bottoming out at around $1.21 following the widely expected Bank of England decision to raise interest rates to 1.75%, pushing borrowing costs to their highest level since 2009. Despite the steep hikes since 1995 to curb inflation, the market remains more hawkish, with one policymaker favoring a small 25 basis point hike instead of 50. Money markets are now pricing in a 25 basis point upward revision in September,

CHART OF THE DAY:

London stocks increased on Thursday to close at 7,448 as investors digested the Bank of England's latest currency decision while welcoming upbeat corporate results. The Bank of England raised its key interest rate by 50 basis points to 1.75% at its August 2022 meeting, the sixth consecutive hike, pushing borrowing costs to their highest level since 2009. However, even though this was a significant rate hike since 1995 to curb inflation, markets took a more hawkish stance, with one policymaker backing a 25 basis point hike instead of 50. As a result, money markets are now pricing in a 25 basis point upward revision in September, with the central bank seeing inflation peaking at 11.1% in October. On the corporate side, miner Glencore said profits doubled to a record in the year's first half. Meanwhile, retailer Next raised its full-year sales, and profit forecasts as demand for new clothes in warm weather led to better-than-expected second-quarter results.

- FTSE 100 - D1, Resistance around ~ 7668, Support (target zone) around ~ 6732

 

Aggressive rate hikes from England and Brazil's central banks, Dropping oil prices

GLOBAL CAPITAL MARKETS OVERVIEW:

European shares ended mostly higher on Thursday, with the benchmark Stoxx 600 up 0.1%, as gains in travel and leisure stocks offset losses at oil and gas companies. The Bank of England raised its key interest rate by 50 basis points to 1.75%, the most since 1995, and warned of recession risks amid runaway inflation. On the corporate front, British retailer Next raised its full-year sales and profit forecasts, signaling an increase in demand for new clothes in warmer weather. Crédit Agricole joined BNP Paribas and Societe Generale in reporting a higher-than-expected quarterly profit. Domestically, the DAX rose 0.6%, with German online retailer Zalando forecasting a return to profit growth in the second half of the year, sending shares of Zalando up more than 11%. Also, Lufthansa rose more than 6% after reporting a lower-than-expected quarterly loss and forecasting further growth. The FTSE MIB index recovered earlier gains but closed up 0.3% on Thursday at 22,650, providing support to an eight-week high, with medical and industrial stocks providing support as investors focused on a possible new plan by the Italian government. Diasolin and Pressman rose more than 4 percent, leading to gains in Milan. Also, shares of Banca Mediolanum continued to rise after the insurer posted record operating profit margins in the first half of the year. On the other hand, Tenaris shares fell 4% as recession fears offset a 167% surge in the industry's core profit. Meanwhile, parliament will approve a package worth 14.3 billion euros to help businesses and households with soaring energy costs and consumer prices. The CAC 40 index rose 41 points, or 0.6%, to 6,511, its highest in eight weeks, after rising 1% a day earlier on upbeat corporate earnings. Credit Agricole rose nearly 5%, joining BNP Paribas and Societe Generale in reporting higher-than-expected quarterly profits. In addition, Air France-KLM shares rose more than 3%, and Lufthansa expressed optimism for further growth. Meanwhile, satellite operator SES confirmed its financial targets for 2022 but fell 9% as the Financial Times reported it was discussing a possible merger with Intelsat. Meanwhile, the Bank of England raised interest rates by 50 basis points, the most significant increase since 1995, signaling a prolonged recession. London stocks increased on Thursday to close at 7,448 as investors digested the Bank of England's latest currency decision while welcoming upbeat corporate results. The Bank of England raised its key interest rate by 50 basis points to 1.75% at its August 2022 meeting, the sixth consecutive hike, pushing borrowing costs to their highest level since 2009. Even though this was a significant rate hike since 1995 to curb inflation, markets took a more hawkish stance, with one policymaker backing a 25 basis point hike instead of 50. Money markets are now pricing in a 25 basis point upward revision in September, with the central bank seeing inflation peaking at 11.1% in October. On the corporate side, miner Glencore said profits doubled to a record in the year's first half. Meanwhile, retailer Next raised its full-year sales, and profit forecasts as demand for new clothes in warm weather led to better-than-expected second-quarter results. On Thursday, the ruble-based MOEX-Russia index erased earlier gains to close at 2,117 after falling for four straight sessions under pressure from the utilities and energy sectors. Rossetti and Inter RAO lost more than 4 percent, leading the grid operators in Moscow. Elsewhere, Gazprom shares fell more than 1% after it said Canadian, EU, and U.K. sanctions prevented Siemens turbines from returning to the Nord Stream I pipeline, citing the measures for cutting capacity to Germany. Also, metallurgists fell sharply after the Ministry of Industry and Trade said it expected steel demand to decrease. On the other hand, tech stocks outperformed the broader market after Kommersant reported that the government provided Yandex, VK, and Ozon with 130 billion rubles in loans to help them meet their Eurobond obligations. The three major U.S. stock indexes were flat on Thursday, as investors held no new positions ahead of Friday's federal jobs report. This week, several Fed policymakers dismissed recent speculation that the central bank will take a less aggressive stance on interest rates by reassuring markets that the central bank will remain fully committed to containing inflation even in the face of recession risks. Investors are awaiting the monthly U.S. jobs report to gauge the economy's health while looking for clues on Fed tightening. On the corporate front, Alibaba's U.S.-listed shares jumped more than 3 percent after the Chinese e-commerce giant surprised investors with earnings. The S&P/TSX Composite hovered around the 19,540 level on Thursday, with sharp losses in the energy sector offsetting a good showing in the mining sector, while investors remained cautious ahead of tomorrow's U.S. and domestic jobs report. Canadian energy heavyweights tracked a drop in crude oil prices, posting sharp losses, with Cenovus energy down 3.2%. Still, Canadian Naturals outperformed its industry and traded on a flat line after doubling its quarterly profit. Gold miners, on the other hand, tracked gains in gold prices and were among the leaders in Toronto, with shares of Barrick Gold Corporation and Agnico Eagle Mines up 3%. On the data front, Canada posted its largest trade surplus in 14 years. Hong Kong stocks rose for a second straight session on Thursday, with the benchmark Hang Seng closing near 20,175, boosted by gains in healthcare and technology shares. Sentiment continued to be supported by Wednesday's report, which said China's services sector activity rose at the fastest pace in 15 months in July as easing of Covid-19 control measures boosted consumer confidence, while Hong Kong's private sector maintained its fourth straight month of gains expansion trend. Wharf Real Estate Investment Company and Sunny Optical Technology Group were among the index's biggest gainers, rising more than 6%. China Shanghai Composite rose 0.8 percent to close at 3,189, while the Shenzhen sector added 0.69 percent to 12,065, snapping two days of losses as concerns over heightened tensions between the U.S. and China over the Taiwan issue Started to ease, and almost all sectors rose. Chinese mainland stocks followed Wall Street's strong rebound as strong U.S. corporate earnings and upbeat economic data boosted risk appetite. Heavyweights led the rally, with substantial gains from BYD Corporation (1.5%), Tianqi Lithium (3.3%), Kweichow Moutai (1.7%), Nora Technology (1.1%), and Greatoo Intelligent (9.9%). Meanwhile, the Contemporary Ampere index fell 0.62% despite a Reuters report that the world's largest battery maker will move forward with plans to deliver low-cost lithium-ion batteries to Ford vehicles and North American battery production in 2026. Japan Nikkei 225 rose 0.69 percent to close at 27,932 on Thursday, rising for a second straight session, boosted by a weaker yen and optimism about domestic corporate earnings. Japanese stocks followed Wall Street's strong rebound as a strong earnings report and a better-than-expected U.S. services sector purchasing managers' index for July eased fears of a potential recession. Heavyweights led gains, led by SoftBank Group (2.6%), Tokyo Electron (3.1%), and Nintendo (0.4%). Japanese shippers also rose on solid quarterly results, including Kawasaki Kishimori (5.5%), Nippon Yusen (1.7%), and Mitsui OSK (1.1%). Elsewhere, Subaru rose 8.5% and was Nikkei's top performer after a positive earnings report and an upbeat forecast for U.S. futures sales. Meanwhile, Z Holdings fell 11% on lower-than-expected earnings, while Toyota fell 3% after a 42% drop in operating profit for the year. Australia S&P/ASX 200 edged down 0.01% to close at 6975 on Thursday, reversing early gains as losses in the resources sector offset gains in technology and banking stocks. Australian shares lagged their Asia-Pacific peers on weaker commodity prices amid renewed concerns that rising interest rates would hamper global growth and dent overall demand. Mining and energy stocks fell, led by BHP Billiton (-1.1%), Rio Tinto (-1.6%), Fortescue Metals (-2%), Woodside energy (-3.1%) and Santos Ltd (-1.1%). Meanwhile, domestic tech stocks followed their U.S. counterparts higher, with Block Inc (8.9%), NEXTDC Ltd (1.1%), and Seek Ltd (3.8%) gaining. New Zealand NZX 50 rose 30.44 points, or 0.26%, to close at 11,735.47, its highest close in three months and its sixth session of gains, boosted by Wednesday's Wall Street rally, easing recession fears, and easing recession fears. Bao's earnings forecast is vital. At the same time, a growing number of Fed officials have joined the ranks, citing the need for more tightening measures to curb soaring inflation. Domestically, New Zealand's Ministry of Health said there were clear signs that the country's latest Covid-19 outbreak had peaked, new cases continued to decline, and the number of people infected with the virus in hospitals fell at the end July. New Zealand King Salmon Investments (11.6%), Today Me Ltd (6.7%), and Third Age Health Services led gains. In contrast, Plexure Group Limited (10%), Bremworth Limited (5.4%), TruScreen Group (3.9%), and Paysoup Limited (3.5%) saw notable declines.

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

-US: Imports to the U.S. fell 0.3%, or $1 billion, to $340.4 billion in June 2022. Merchandise imports fell $1.4 billion to $282.5 billion, as lower purchases of automobiles, parts, and vehicles, with engines (down $2.7 billion) offset by computers (up $1.4 billion) and industrial supplies and materials (up 6 billion) imports. Meanwhile, imports of services increased by $0.4 billion to $57.9 billion in June, particularly transportation (up $1 billion) and tourism (up $100,000).

- US: In June 2022, U.S. exports rose 1.7% or $4.3 billion from the previous month to $260.8 billion, the highest level since the series began in 1950. Merchandise exports increased by $3.5 billion, driven by non-monetary gold ($1.8 billion) and industrial supplies and materials ($4.7 billion) such as natural gas ($1.6 billion). Meanwhile, food, feed, and beverages sales increased by $0.9 billion, while commercial aircraft sales decreased by $800 million. Services exports increased by $700 million to $77.8 billion, particularly tourism ($300 million) and transportation ($300 million).

- US: The U.S. trade deficit narrowed by $5.3 billion to a six-month low of $79.6 billion in June 2022, compared with market forecasts of $80.1 billion. Total exports rose 1.7% to an all-time high of $260.8 billion, driven by non-monetary gold sales; natural gas; food, feed, and beverages; and travel and transportation services. Meanwhile, imports fell 0.3% to $340.4 billion, mainly dragged down by passenger cars. Goods deficits widened in China ($36.9 billion) and Mexico ($11 billion) but narrowed in the European Union ($18 billion), Canada ($7.9 billion), and Russia ($600 million).

- CA: The total value of building permits in Canada fell 1.5 percent to C$11.9 billion in June 2022, after falling 1.6 percent in the previous month, in line with market expectations. Permits in the non-residential sector fell 10.4% to $3.7 billion, reaching the second-highest monthly value a month ago, as declines in the institutional (-32.2%) and commercial (-2.7%) sectors outpaced the industrial sector (+ 0.6%). Meanwhile, the residential sector rose 3.1% to $8.2 billion, with a 6.5% increase in multifamily units, offsetting a 0.6% decline in single-family units.

- CA: In June 2022, Canadian imports rose 1.7% to a record high of C$64.9 billion, the fifth consecutive month of growth. Purchases increased in 5 of 11 product categories, mainly energy products (+22.3%) and refined petroleum products (+32.5%, a record high of C$1.9 billion). In addition, imports of aircraft and other transport equipment and components increased significantly (39.7%). However, exports of cars and parts fell sharply (-6.8%), namely passenger cars and light trucks (-11.2%), partly offset by lower imports from South Korea and Germany. Meanwhile, global auto production continues to suffer from supply chain issues.

- CA: Canada's trade surplus widened to C$5.0 billion in June 2022 from a downwardly revised C$4.8 billion last month, well above market expectations of C$4.8 billion. It was the largest monthly trade surplus since August 2008, with exports rising 2.0% from the previous month to a record $69.9 billion, driven by higher sales of energy, metals, and non-metallic minerals. Meanwhile, imports rose 1.7% to C$64.9 billion, primarily refined petroleum products and aircraft.

- CA: In June 2022, Canadian exports rose 2% monthly to a record $69.9 billion. It was the sixth straight month of growth in Canadian exports and the first time since 2011. Overall, 8 of the 11 product segments posted gains in June, led by energy products (up 3.2% to $21.0 billion), which accounted for 30% of total exports, and crude oil and bitumen, which hit an all-time high. Leading the gains (+3.7%). Non-energy exports also rose (+1.4%). Other significant positive contributions came from metallic and non-metallic mineral products (up 6.5%) and consumer goods (up 6.3%), mainly due to solid growth in exports of pharmaceutical products (up 34.0%). However, these gains were partially offset by a decline (-6.6%) in exports of forest products and construction and packaging materials. This decline was mainly due to a decline in the value of timber exports (-11.1%), mainly due to lower prices.

- IT: The S&P Global Italy Construction PMI fell to 46.2 in July 2022 from 50.4 the previous month, marking the first contraction in construction since January 2021. The inflow of new jobs fell for a second straight month as heightened economic uncertainty, questions surrounding Italy's super bonus tax plan, and venue closures weighed on client demand. The most significant drop in construction was civil engineering, with residential construction activity contracting for the first time since May 2020. Builders lowered input buying levels for the first time in 18 months and halted job creation for the first time in 17 months as new business fell. On the price front, higher prices for energy, materials, fuel, and transport contributed to input cost inflation, although this was the lowest in 17 months. Economic uncertainty and political instability weighed business confidence in the sector to its lowest level since April 2020.

- FR: The S&P Global French Construction PMI rose to 48.6 in July 2022 from 46.4 the previous month. The latest data showed a sequential decline in activity as the growth outlook deteriorated and extremely high-interest rates dented demand for construction work. Subsequently, the French construction company cut jobs for the first time since February. Finally, builders' expectations for activity in the coming year fell to a 15-month low.

- GE: The S&P Global German Construction PMI fell to 43.7 in July 2022 from 45.9 in June, the most significant contraction since February 2021, as soaring material prices and sky-high interest rates dented demand for construction work. Activity in all major industries, the commercial sector, residential construction, and civil engineering, fell, and new order inflows remained sharply. Finally, builders' expectations for activity in the coming year fell to one of the lowest levels in more than 20 years.

- EU: The S&P Global Eurozone Construction Purchasing Managers' Index came in at 45.7 in July, down from 47.0 in June, indicating that overall construction activity across the eurozone fell for the third straight month. Furthermore, the contraction rate is the highest since February 2021. Key figures suggest that the decline in the headline index was primarily driven by a rapid decline in commercial construction activity; residential and civil engineering activity declined slightly but still significantly. Residential construction in the eurozone fell for the third straight month in July. The rate of contraction was little changed from June and fell sharply overall. Commercial construction project starts fell for the fourth straight month in July. The decline was rapid, the fastest since February 2021. Civil engineering activity across the euro area fell less sharply, although the pace of decline in July was still rapid.

- AU: In June 2022, Australia's exports of goods and services rose by 5.1% month-on-month to a record A$61.53 billion as commodity prices surged. Non-rural goods sales rose 1.6 percent to $45.67 billion, driven by demand for metal ores and minerals (5.5 percent), metals (excluding non-monetary gold), and machinery (3 percent). In addition, shipments of rural goods increased, driven by meat and meat products (12.0%), cereals and cereal products (21.1%), other rural products (7.0%), and wool and sheepskins (10.6%), 11.8% to A$6.3 billion. Meanwhile, sales in the services sector rose 3.3 percent to $5.92 billion, driven by growth in tourism (6.7 percent) and services (0.9 percent). In addition, sales of non-monetary gold surged 63.8% to A$3.63 billion. Meanwhile, net exports of merchandise sales rose 5.6 percent to $19 million.

- AU: Australia's imports of goods and services rose 0.7% month-on-month to a record A$43.86 billion in June 2022, as the economy fully emerged from the Covid-19 pandemic and domestic demand was strong. Arrivals of intermediate and other commodity goods rose 2.4 percent to $16.8 billion, led by gains in fuels and lubricants (2.5 percent) and other parts of capital goods (5.1 percent). In addition, services imports rose by 5.1% to A$8.03 billion, mainly driven by other services (0.7%). In contrast, consumer goods purchases fell 3.9% to A$10.56 billion, mainly related to non-industrial transport equipment (-11.5%) and textiles, apparel, and footwear (-2%); while capital goods fell 2.1% to A$7.74 billion, due to civil aircraft and classified items (-45.2%) and machinery and industrial equipment (-2.8%).

LOOKING AHEAD:   

Today, investors will receive:

-USD: Average Hourly Earnings m/m, Non-Farm Employment Change, Unemployment Rate, and Consumer Credit m/m.

EUR: German Industrial Production m/m, French Industrial Production m/m, French Prelim Private Payrolls q/q, French Trade Balance and Italian Industrial Production m/m.

GBP: Halifax HPI m/m and MPC Member Pill Speaks.

JPY: Average Cash Earnings y/y, Household Spending y/y, and Leading Indicators.

AUD: AIG Services Index and RBA Monetary Policy Statement.

CHF: Foreign Currency Reserves.

CAD: Employment Change, Unemployment Rate, and Ivey PMI.

KEY EQUITY & BOND MARKET DRIVERS:

- US: The 10-year U.S. Treasury yield fell back to 2.7 percent, near its lowest level since April, as investors continued to assess recession risks in the world's largest economy. Hawkish rhetoric from Fed policymakers shifted investors' attention to further monetary policy tightening. The central bank has assured markets that it remains fully committed to containing inflation, which is at its highest in 40 years, making hopes of a soft landing even more remote. The Federal Reserve has gone to great lengths to reduce inflation to its 2% target, pushing the gap between 2-year and 10-year Treasury yields to nearly 40 basis points. The closely watched part of the U.S. yield curve has not been this high since 2000, and many see it as a warning of economic contraction.

- UK: Britain's 10-year gilt fell below 1.9%, near a 2-1/2-month low of 1.7% hit this week, after the Bank of England revised its growth forecast to suggest a recession will start in the fourth quarter and run into 2023. As widely expected, the central bank raised bank rates by 50 basis points, marking the most significant rise in borrowing costs since 1995, to curb inflation, which is now at a 40-year high. The Bank of England also said that inflation is expected to peak at 11.1% in October. Investors also continued to focus on the financial commitments of Britain's two prime ministerial candidates. Meanwhile, the final Purchasing Managers' Index (PMI) showed that the UK economy slowed more than initially expected at the start of the third quarter but remained at a robust pace of growth. Nevertheless, three Fed officials said further rate hikes were needed to combat high inflation.

- UK: The Bank of England raised its primary interest rate by 50 basis points to 1.75% at its August 2022 meeting, the sixth hike in a row, and pushed borrowing costs to the highest level since 2009, in line with market forecasts. This is the most significant rate hike since 1995. The bank said that wholesale gas prices have nearly doubled since May, affecting retail energy prices, exacerbating the decline in real UK household incomes, and further fueling UK CPI inflation in the near term. As a result, CPI inflation is expected to rise to 11.1% in October and remain very high for most of 2023 before falling to its 2% target over the next two years, according to new forecasts from the Bank of England. In terms of growth, the UK is expected to enter a recession in the fourth quarter, lasting five quarters.

- US: Stock futures contracts linked to the three major indexes rose 0.5% on Thursday, putting Wall Street on track for further gains as quarterly results from U.S. companies and upbeat economic data ease fears of a looming recession. This week, several Fed policymakers dismissed recent speculation that the central bank will take a less aggressive stance on interest rates by reassuring markets that the central bank will remain fully committed to containing inflation even in the face of recession risks. However, investors are awaiting Friday's monthly U.S. jobs report, which could shed more light on the Fed's tightening path. On the corporate front, Alibaba's U.S.-listed shares rose nearly 10% in premarket trading after the Chinese e-commerce giant surprised investors with earnings.

- UK: Share futures contracts linked to the FTSE 100 were almost flat on Thursday as investors reassessed the prospect of tightening monetary policy ahead of the Bank of England's next monetary policy decision. The Bank of England is expected to raise interest rates by 50 basis points, the most significant increase since 1995. On the corporate front, British retailer Next raised its full-year sales and profit forecasts, signaling an increase in demand for new clothes in warmer weather.

STOCK MARKET SECTORS:

- High: Utilities, Industrials, Materials, Consumer Discretionary, Information Technology, Communication Services.

- Low: Energy, Health Care, Consumer Staples, Real Estate.

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

-GBP: Sterling weakened against the dollar, bottoming out at around $1.21 following the widely expected Bank of England decision to raise interest rates to 1.75%, pushing borrowing costs to their highest level since 2009. Despite the steep hikes since 1995 to curb inflation, the market remains more hawkish, with one policymaker favoring a small 25 basis point hike instead of 50. Money markets are now pricing in a 25 basis point upward revision in September,

CHART OF THE DAY:

London stocks increased on Thursday to close at 7,448 as investors digested the Bank of England's latest currency decision while welcoming upbeat corporate results. The Bank of England raised its key interest rate by 50 basis points to 1.75% at its August 2022 meeting, the sixth consecutive hike, pushing borrowing costs to their highest level since 2009. However, even though this was a significant rate hike since 1995 to curb inflation, markets took a more hawkish stance, with one policymaker backing a 25 basis point hike instead of 50. As a result, money markets are now pricing in a 25 basis point upward revision in September, with the central bank seeing inflation peaking at 11.1% in October. On the corporate side, miner Glencore said profits doubled to a record in the year's first half. Meanwhile, retailer Next raised its full-year sales, and profit forecasts as demand for new clothes in warm weather led to better-than-expected second-quarter results.

- FTSE 100 - D1, Resistance around ~ 7668, Support (target zone) around ~ 6732

 

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