Nikkei soars 2.50% on mixed Wall Street

Japan’s 225 index surged 2.4% to a 5-month high on its return on Thursday as US investors ushered in the realization that the Fed has a lot more hiking to do to bring inflation down to target.

Key factors for today

• Nikkei jumps on markets’ reassessment about the Fed’s hiking aggressiveness
• US stocks end mixed after investors lock in profits, negative PPI
• Nasdaq down as several tech stocks take a hit, triggering a domino effect
• OPEC and IEA not as pessimistic as markets had thought based on latest outlook
• EU markets close flat

Asian stocks market at 5-month high

The benchmark Japanese index jumped to a 5-month high of 28390 on Thursday late US hours, propped up by muted price action in key US indices as market participants locked in earlier gains after realizing the Fed won’t stop hiking until inflation is under control. The rise was partially buoyed by energy stocks, gaining traction on the rising outlook for oil demand in 2023.

Nasdaq hit poor stock performance

Despite closing down 0.6% yesterday, the Nasdaq technically moved into a bull market after regaining 20% of its value off the most recent low. The US posted its first negative monthly PPI since the middle of 2020 and annual dropped, but the core fell more than anticipated. The Dow performed better following the data as it posted a 0.08% uptick on Thursday, but the S&P lost its initial gains and ended closing 0.07% lower. Although data supported the peak inflation theme, 3-month bond yields moved 0.013 higher.

S&P was somewhat flat, supported by gains in Devon Energy and Marathon, with the DJIA ending higher after Walt Disney posted upbeat subscriber numbers for Q2. Nasdaq, on the other hand, lost its grip after DocuSign, Atlassian, Zoom, Splunk, and Workday all ended in loss.

Oil market developments

OPEC sees the oil market turning into surplus this quarter, and cut its forecast for demand for this year. The demand forecast for next year was maintained, though. Crude prices drifted higher but closed 0.42% lower Thursday despite Shell being forced to shut down three oil platforms in the Gulf of Mexico due to leakage. Meanwhile, suppliers are trying to force Freeport to resume its force majeure declaration.

Europe flat on geopolitics

In Europe, the market was flat after the IEA report said that western sanctions had a "limited impact" on Russian oil output. Russia has resumed shipping through the Druzhba pipeline. With the European forward energy prices hitting a new all-time high as high temperatures in the continent push demand for energy, German Chancellor Olaf Scholz now supports a new gas pipeline in Europe to connect supply from non-Russian sources.

Aegon and ALK-Abello were top performers in the Stoxx 600, but Netcompany shredded their gains up.
Where’s the money?

Glencore among others has stopped supplying Huludao Ruisheng metal trader in China after reportedly half a billion dollars in copper went missing. With the housing crisis in China, there has been renewed interest in commodity financing, but the latest scandal could be another blow to the world’s second-largest economy’s financial woes.


Movers and shakers

• Enovix +30.8% on top and bottom earnings beat and contract announced from US Army
• Dillard’s +17.8% on sales beat, noted strength in men’s apparel
• Sonos -25% on missed topline and lower guidance. Results impacted by supply constraints and currency
• Six Flags -18.2% on big earnings miss, with attendance down. Customers spending less
• New York Times +10.6% after activist investor Value Act disclosed stake.

Today’s calendar

• UK GDP might confirm a technical recession
• EU’s industrial production expected to improve
• Michigan inflation expectations and consumer sentiment to lead Friday’s close
• The oil rig count could move the WTI a bit