Tumbling US dollar is a boon to risk assets globally

More encouraging news on inflation boosted US equities for a fourth consecutive session Thursday, with the S&P 500 Index and Nasdaq Composite posting fresh 15-month highs, as investors grow increasingly confident the Federal Reserve might soon close the book on its historically steep rate-hiking cycle of the past 16 months.  Technology shares were among the strongest performers yesterday together with communication services, regional banks and oilfield services shares.  Meantime, the US dollar sank to its weakest point against the euro since February 2022 on expectations US interest rates may have peaked.  In Europe, equity markets extended their gains yesterday, with the Euro Stoxx 50 Index up another 0.7%, to end towards the highs for the year. 

Summary for 14.07.2023 

• Most Asian equities rose further on Friday, capping off a positive week on signs of cooling US inflation, with the focus now turning to upcoming data offering more cues on the Chinese economy.  Meanwhile, in Singapore, the economy grew 0.7% year-over-year in the second quarter, avoiding a technical recession.  The S&P/ASX 200, Nikkei 225, Kospi, Hang Seng and Shanghai Composite indices advanced, while the Topix and Shenzhen Component indices declined. 
• European and US equity markets look to a set to steady open as investors continue to assess when the Fed might reach its interest-rate peak.  Attention will also be focused on the start of the US quarter earnings season, as major banks JPMorgan Chase, Citigroup, and Wells Fargo are expected to report results Friday. 
• Oil prices rose this morning, hovering near 10-week highs on the prospect of tighter supplies, amid disruptions in Libya and Nigeria, while data showing a drop in US inflation also supported sentiment.  Several Libyan oil fields, including the country’s second-largest, Sharara, were shut down on Thursday, amid protests by local tribes over the kidnapping of a former minister.  Separately, Shell suspended crude loading at Nigeria’s Forcados terminal due to a suspected pipeline leak. 

• Producer prices for final demand in the US edged up 0.1% month-over-month in June, following an upwardly revised 0.4% fall in May, and below forecasts of a 0.2% rise.  Year-on-year, producer prices were also up 0.1%, the smallest increase since the fall in 2020. 
• Fed member Christopher Waller expects the central bank will need to raise rates at least twice this year, though some inflation data could obviate the need for a second hike.  Meanwhile, James Bullard resigned as head of the Fed’s St. Louis branch to become the inaugural dean of a university business school.  
• Microsoft and Activision are considering giving up some control of their cloud-gaming business in the UK to appease regulators so they can complete their $69 billion merger by the July 18 deadline.  That could involve selling off the cloud-based market rights for games in the UK to a telecommunications, gaming or internet-based computing company.  Meantime, the FTC urged an appeals court to delay the takeover while its challenge to the deal is pending. 
• Delta Air Lines fell about 0.3% in Thursday’s session despite an initial surge after the airline operator reported its highest-ever quarterly earnings and revenue and raised its 2023 earnings forecast.  Delta posted adjusted earnings per share of $2.68 cents, more than the $2.40 expected by analysts.  It gained adjusted revenue of $14.61 billion, greater than the $14.49 billion consensus estimate. 
• PepsiCo shares rose about 2.6% after the company early Thursday reported quarterly earnings and revenue that topped expectations.  The drinks maker also raised its full-year outlook. 

• Alphabet shares rallied by 4.7% yesterday after the parent company of Google launched its large-language model, Bard AI, in Brazil and the European Union. 
• Amazon shares rose 2.8% on Thursday after the company said its Prime Day was the “single largest sales day in company history,” with online sales surging to $12.7 billion. 
• Carvana shares fell 3.1% after JPMorgan downgraded the share to “underweight” from “neutral” because the equity had “disconnected materially from fundamentals.”  Carvana has soared about 700% this year.