Global Market Updates 09 July 2022

*Namaste*

*US Markets in Detail...*

*Have A Beautiful Rainy Weekend!!!*

*SGX: 16,207 (-21) (-0.13%)*

*Provisional Cash Rs. In Crs. (8th July)*

FIIs: -109 (6,320 – 6,429)

DIIs: +34 (5,321 – 5,287)

*Today’s major corporate earnings: DMART*

Sensex: 54,482: +303: +0.56%

Nifty: 16,221: +88: +0.54%

BankNifty: 35,124: +204: +0.58%

NiftyIT: 28,250: +54: +0.19%

MIDCAP: 22,656: +44: +0.20%

Dow: 31,338 (-46) (-0.15%)

S&P: 3,899 (-3) (-0.08%)

Nas: 11,635: +14: +0.12%

Brazil: 100,289 (-441) (-0.44%)

Ftse: 7,196: +7: +0.10%

Dax: 13,015: +172: +1.34%

Cac: 6,033: +26: +0.44%

MOEX: 2,223 (-4) (-0.19%)

WTI Oil: $104.79: 2: +2.01%

Brnt: $107.15: +2.5: +2.39%

Gold: $1,742: +3: +0.15%

Silver: $19.24: +0.25%

Copper: $352 (-5) (-1.40%)

Copper (LME): $7,823: +302: +4.02%

Alluminum (LME): $2,443: +33: +1.37%

Zinc (LM): $3,110: +112: +3.74%

Tin (LME): $25,984: +1,272: +5.15%

Eur-$: 1.0185: +0.25%

GBP-$: 1.2032: +0.07%

Jpy-$: 136.10: +0.07%

Re: 79.2538: +0.10%

USD = RUB: 63.7829 (-0.39%)

US10yr: 3.08%

GIND10YR: 7.415: +0.83%

$ Index: 106.8950 (-0.22%)

US Vix: 24.64 (-5.52%)

India Vix: 18.39 (-4.22%)

BalticDry: 2,073: +30: +1.47%

*ADR/GDR*

Cogni (-0.83%)

Infy (-0.52%)

Wit (-3.66%)

IciciBk: +1.05%

HdfcBk: +0.49%

DrRdy: +0.80%

TataMo: +0.72%

TatSt (-3.04%)

Axis: +0.59%

SBI: +0.16%

RIGD: +0.33%

INDA (-0.25%) (IShares MSCI INDIA ETF)

INDY (-0.19%) (IShares MSCI INDIA 50 ETF)

EPI (-0.20%) (Wisdom Tree India Earning)

PIN (-0.34%) (Invesco India Etf)

*Nasdaq books longest win streak since November as U.S. stocks end mixed after stronger-than-expected jobs report, spurring bets of a more hawkish Federal Reserve. A strong jobs report alleviated recession fears but cleared the path for the Federal Reserve to keep raising interest rates to fight inflation.*

The S&P 500 closed flat on Friday after struggling for direction throughout the session. Treasuries slumped, with the two- and 10-year yield curve remaining inverted for the fourth straight day. The Bloomberg Commodity Index suffered its longest streak of weekly losses since March 2020.

U.S. stocks closed mixed Friday, with the technology-heavy Nasdaq Composite ending higher as the Dow Jones Industrial Average and S&P 500 index slipped, after a stronger-than-expected June jobs report. All three major benchmarks booked weekly gains, with the Nasdaq leading the way up. It was its fifth straight day of gains that marks its longest winning streak since November.

Wall Street ended little changed on Friday after a volatile session in which investors tried to comprehend how a robust jobs report would influence the U.S. Federal Reserve and its plans to aggressively hike interest rates.

Despite the bumpy nature of the day though, the Nasdaq posted its fifth straight gain - its longest winning streak since the beginning of November - and all three benchmarks finished solidly up for the week shortened by the Independence Day holiday.

*Today’s market was highly volatile with very low volumes. Dow opened lower by 67 points, then turned slightly positive. Again turned negative by 125 points. Then turned positive with 115 points. Again turned negative by 108 points. Then turned positive with 87 points…and finally closed lower.*

*For the week, the Nasdaq gained 4.5%, while the S&P and Dow advanced 1.9% and 0.8%, respectively.*

We’re still in the midst of positive momentum from earlier in the week, so when the selloff failed, the next tactic was to move higher. Nothing else really changed.

The Nasdaq Composite rose on Friday for a fifth straight day, its longest winning streak since November. The S&P 500 snapped four consecutive days of gains, a stretch that marked its best winning run since late March.

After a brutal first half of the year, U.S. stock markets started July on a solid footing as investors took relief from easing commodity prices and the Fed hinting at a more tempered program of rate hikes amid concerns of a recession.

Still, the S&P 500 is down around 18% this year, as investors await the bulk of companies’ second-quarter earnings reports in the coming weeks.

"We think the market has right-sized itself, somewhat, and will continue to adjust around the edges as we see macro data and as we work our way through earnings season," said Mike Loukas, chief executive of TrueMark Investments. "Now it's a matter of people trying to figure out where the entry point is, and where the bottom is or if we are close to it."

*Treasury yields jumped sharply after the jobs data was released, which may have limited gains for stocks. The 2-year Treasury yield held above the 10-year Treasury yield, an inversion that is seen by many as a recession indicator.*

Investors remain nervy though, sifting through each new piece of data and commentary from Fed governors to see how this might influence the U.S. central bank's plans to dramatically shift rates higher.

This resulted in see-saw trading on Friday, with all three main benchmarks experiencing periods in positive and negative territory.

The market suspects when you start to see truly strong signs of the Fed relaxing its path of rate increases and leading indicators picking up, we'll probably get a pretty good upward movement in the market, and no one wants to miss that.

*With the earnings season around the corner, investors will focus on company forecasts as well as key inflation data expected next week to gauge the health of the economy.*

*Atlanta Fed President Raphael Bostic, until recently among the central bank's most dovish policymakers, said on Friday he "fully" supports another 75-basis-point rate rise later this month.*

*Speaking later on Friday, New York Federal Reserve President John Williams did not specify if he favors a half point or three-quarter point increase at the Fed's upcoming July meeting, but acknowledged rising interest rates were affecting the economy.*

*The second-quarter earnings season begins in earnest next week, with reports due out from most major banks. The June consumer price index report, scheduled for Wednesday, will also be a key focus for investors.*

*It seems it’s going to be tough. This could be the first quarter where you see the brunt” of commodity-price and shipping-cost pressures on companies’ profit margins. Earnings estimates are “too high,” which may lead to a further decline in the stock market. We could potentially get one more leg down.*

*Volume on U.S. exchanges was 9.60 billion shares, compared with the 13.03 billion average for the full session over the last 20 trading days.*

What drove markets?

U.S. stocks ended a choppy trading session mostly lower after Friday’s jobs report showed more robust growth in the American labor market last month than had been expected.

*The jobs report reaffirmed the strength of the economy, fueling the Fed to stay aggressive to combat inflation. The moderation in the number of jobs, however, was seen as a positive sign as the central bank seeks to engineer a soft landing. A handful of Fed officials, including two of its most hawkish policy makers, said this week that they supported raising interest rates by 75 basis points for a a second month in a row. Recent data also signaled to investors that worries about a recession were overblown, a claim echoed by Fed officials this week.*

“The economy is slowing but the Fed wants it to slow. So I think all the recession talk is a little bit premature right now,” Priya Misra, global head of rates strategy at TD Securities, said on Bloomberg TV. “Inflation is still a problem and the Fed has changed their reaction function, I would argue. They are emphasizing – overemphasizing – headline inflation over the labor market right now.”

“The labor market is a lagging indicator for where the economy is,. the risk of a mild recession is still pretty high here.”

Stock market action was choppy as investors weighed the latest jobs data against fears the Federal Reserve will continue with large interest-rates hikes to cool the economy as it seeks to tame high inflation.

*The U.S. created 372,000 new jobs in June, substantially higher than the 250,000 expected by economists polled by The Wall Street Journal.*

*Job gains in June slowed modestly month-over-month but were much better than expected. It’s worth emphasizing that employment is generally a lagging economic indicator so this morning’s report does not eliminate the risk of a recession starting soon. However, with labor demand still near record highs, this does suggest that the next economic downturn could be a relatively mild one for workers.*

*Friday’s job’s report also showed average hourly earnings rose 0.3% in June, slowing from a 0.4% rise the prior month. On a year-over-year basis, the rise in pay slowed to 5.1% in June, from 5.3% in May. Wage growth continues to cool modestly.*

Overall, the job market looks stronger than expected. To be sure, the April and May results were revised lower by a total of 74,000. “On net, those revisions make the headline beat for June less notable, but the overall takeaway remains that the labor market remains reasonably strong despite.

*The solid report means the Federal Reserve’s interest rate hikes may not slow down as soon as markets had hoped. The Fed has made clear that its main priority is to lower inflation, and price increases may stick around for longer if the labor market is healthy.*

The bond market is, therefore, reflecting slightly increased Fed hawkishness, or willingness to aggressively lift rates.

The 2-year Treasury yield, which attempts to forecast the level of the fed funds rate a couple of years from the present, climbed from around 3.0% just before the jobs report to 3.12%. The 10-year yield rose from just under 3% before the report to 3.1%.

Importantly, the 10-year yield did not gained much, and it’s lower than the 2-year yield. That “inverted yield curve” means that markets see the Fed’s plan to rapidly hike rates as potentially damaging to inflation and economic growth for the longer term.

That view hasn’t yet ended the recent stock market rally. The S&P 500 has risen 7% from its June intraday low, as markets have been hoping that the Fed is getting closer to the end of its aggressive rate hiking path.

*At its July meeting, the Fed is expected to lift the benchmark lending rate by either half or three-quarters of a percentage point. That aggressiveness could stick around for a bit longer than previously expected—and Friday’s jobs number solidifies the expectation of a three-quarter point hike.*

Fed policy expectations could become more hawkish on July 13, when the consumer price index is released. Economists expect a second consecutive inflation reading of above 8%.

That all may feel scary for the moment, but the stock market stabilized this week in part because financial markets have reflected much of the hawkishness already.

A lot of the risk has [already] been run out of the market.

While it’s entirely plausible that stock and bond prices could keep falling from here, the declines could easily get smaller. The stock market’s Friday morning drop wasn’t as ugly as other ones this year, when the indexes fell more than 2% on hawkish Fed bets. And rates are up, but they aren’t surging to their recent highs.

“The bigger sell-offs in [bond] yields are probably behind us, said a strategist. Investors hope the same is true going forward for stocks.

*Here’s what else Wall Street is saying about US payrolls:*

# “Good news is bad news for the market today...you couldn’t ask for anything better from this jobs report in terms of broad gains, low unemployment, the number was above expectations,” said Michael Arone of State Street Global Advisors. “Wages were growing but at a slower rate. …That was a good thing, and yet the markets kind of shrugged their shoulders here because at the end, the conclusion is the Fed is going to go by 75 basis points.”

# Phillip Toews, the CEO at Toews Corporation, said that the market appears to be “drifting higher” from oversold conditions but that the aggressive Fed will keep a larger rally from happening in the short term. “Unfortunately, the Fed really implicitly has an objective now of keeping financial assets down, and we’re just going to have a very hard time getting used to that,” Toews said. “That’s one of the biggest things they can do right now to move the dial on inflation. ...There will be a day when I am very positive about the stock market, but that day is not today.”

# “We’re dealing with a central bank that actually wants concrete evidence of seeing price increases slow, and we didn’t get that today.” - Giorgio Caputo, senior fund manager at JO Hambro Capital Management.

# “Right now, the labor market is not the problem child, it is being the well-behaved kid, so the Fed thinks they can kind of ignore the labor market right now and focus all on inflation.” - Victoria Greene, chief investment officer and founding partner at G Squared Private Wealth.

# “Today’s job number should soothe fears of an imminent recession, but it does nothing to relieve fears of considerable further Fed tightening.” - Seema Shah, chief global strategist at Principal Global Investors.

# “There is a feeling of Wile E. Coyote running over the cliff, the economy is slowing, Fed hikes will almost certainly lead to a hard landing, but with employment remaining this strong, and next week’s CPI likely to stay high, the risk that the Fed will hike higher and further than they should increases.” - Steve Chiavarone, senior portfolio manager at Federated Hermes

*Here are some stocks on the move Friday:*

• *Twitter Inc. shares fell 5.1%* following a Washington Post report that led investors to suspect that Elon Musk might be trying to back out of his deal to take the company private.

• *PayPal Holdings shares fell more than 2%* after a broker downgrade.

• *Enphase Energy Inc. was the best performer* on the S&P 500, with shares climbing around 4.7%.

• *Tesla Inc. rose 2.5%*, despite shipping a record 78,906 vehicles in China last month.

• *GameStop fell 4.9%* after layoffs and a CFO change.

• *Upstart Holdings sank 19.7%* after the artificial-intelligence lending company cut its second-quarter revenue guidance.

• *Spirit Airlines stock gained 4.2%* after the company said in a statement late Thursday that it delayed for the third time a shareholder vote on a merger with Frontier Group Holdings (ULCC) so the discount carrier can continue discussions with both Frontier and JetBlue Airways (JBLU). Frontier rose 3.8% Friday, while JetBlue slipped 2.3%.

• *Costco Wholesale finished 1.3% higher* after the company released its June sales data, which continued to rise thanks to elevated gas prices.

• *Health care stocks were among the outperformers*. Centene Corp. and McKesson rose more than 3%, while vaccine makers Moderna and Regeneron each added more than 2%.

In European equities, the STOXX Europe 600 Index closed 0.5% higher Friday to book a weekly gain of 2.45%. London’s FTSE 100 Index ended 0.1% higher Friday, advancing 0.4% for the week.

Sterling hovered over $1.20 mark on Friday, having initially climbed on Thursday after U.K. Prime Minister Boris Johnson announced that he would step down as more than 50 MPs resigned from his government.

In Asia, Japan’s Nikkei 225 Index pared its advance following news of the assassination of former Prime Minister Shinzo Abe, closing 0.1% higher Friday. That brought its weekly gain to 2.2%. China’s Shanghai Composite ended 0.2% lower for a weekly decline of 0.9%, despite reports Beijing is considering further fiscal stimulus. The Hang Seng Index in Hong Kong closed 0.4% higher, trimming its weekly loss to 0.6%.

*Currencies*

# The Bloomberg Dollar Spot Index was little changed

# The euro rose 0.2% to $1.0181

# The British pound was little changed at $1.2032

# The Japanese yen was little changed at 136.08 per dollar

*Bonds*

# The yield on 10-year Treasuries advanced nine basis points to 3.08%

# Germany’s 10-year yield advanced three basis points to 1.34%

# Britain’s 10-year yield advanced 11 basis points to 2.23%

*Commodities*

# West Texas Intermediate crude rose 1.9% to $104.68 a barrel

# Gold futures were little changed.

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