North American Morning Briefing: UPDATED: Stocks to Drop as Recession Fears Grip Markets


Watch For:

Personal Income & Outlays for May; Weekly Jobless Claims; Chicago Business Barometer – ISM Chicago Business Survey – Chicago PMI for June; Canada GDP for June

Opening Call:

Stock futures dropped more than 1% on Thursday as the familiar fears of more interest rate increases and the risk of recession continued to weigh on investors.

Worries over the Federal Reserve’s pathway to rein in multi-decade high inflation with aggressive interest rate hikes–and the risk of recession that brings–have dominated the market narrative in 2022.

“If everything remains unchanged today we’re currently set to end [the first of the year] with the S&P 500 off to its worst first half since 1970 in total return terms,” said Henry Allen, an analyst at Deutsche Bank.

“A large reason for that has been investors’ fears that ongoing rate hikes to deal with inflation will end up leading to a recession,” Allen said.

Overseas, the pan-European Stoxx 600 tumbled 1.7% and Tokyo’s Nikkei 225 shed 1.5%.

“We are at the month and quarter-end. We are likely to see some chunky rebalancing flows from institutional investors across multiple asset classes,” said Jeffrey Halley, an analyst at broker OANDA. “That may distort price movements and throw up a few false positives in markets today.”

A catalyst in the day ahead could be the personal consumption expenditures price index. The data will be closely watched, considering PCE is the Fed’s preferred inflation indicator.

Economic Insight:

Global consumer confidence in June reached levels only seen in economic recessions, according to JPMorgan’s aggregate global indicator, which excludes China.

The magnitude of the current shock to consumer confidence is about 85% of the drop seen during the initial Covid-19 outbreak and about three-quarters of the shock during the 2008 global financial crisis, JPM said. The slide from last year’s peak has been broad-based, although it has been larger in developed markets than in emerging markets, the data show.

The fall in confidence is largely due to concerns over inflation, though consumers are also likely responding to the sharp slide in equity markets and broader concerns about the outlook for the economy, JPM said.

Data from regional manufacturing surveys in the U.S. show that supply-chain shortages have improved in the last few months, said Capital Economics.

Less bottlenecks will likely contribute to ease core goods inflation over the second half of the year, with core producer price inflation set to fall to 5% over the coming months from 8.3% in May.

“The fact that supply chain pressures are already easing is an encouraging sign the Fed’s inflation problem may soon look less daunting.”


The dollar edged down in Europe but the USD Index remained above 105.00 following the buck’s solid gains on Wednesday.

Recession fears appear to have strengthened, said CMC Markets, after the final reading of U.S. GDP was revised lower while the GDP deflator climbed further, pointing to a sharp slowdown in economic growth.

Read: Sweden Becomes the Latest to Hike Interest Rates, with 50-Basis-Point Policy Move


Oil prices edged higher in Europe ahead of an OPEC+ meeting at which member states will discuss production levels

Despite growing concerns about market tightness, the cartel’s members and allied oil-producing nations are expected to stick to a plan outlined at a previous meeting to raise oil supply by just under 650,000 barrels a day in August.

Regardless of what production levels the group agrees to, the oil market is concerned that the group is falling behind its quotas due to a lack of spare capacity.

“The headache for the oil market is the inability of OPEC+ to deliver the promised volumes,” said DNB Markets.


Gold futures were flat in early trading despite other recession hedges falling having acted as headwinds for the precious metal this year.

“Gold is still underperforming, catching a down draft from the deflated commodity super cycle thanks to front-loaded Fed hikes,” said SPI Asset Management.

Base metal prices were lower in London, with a lack of Asian buying outweighing the positive sentiment from China’s decent PMI data.

“Whilst we had a very decent China PMI print showing a V-shaped recovery from April lows, metals in general barely reacted to this,” said Marex’s Asian team. “Asia has not been a buyer of metals in general,” keeping prices lower.




Aerojet Rocketdyne CEO Poised to Win Proxy Fight Against Executive Chairman

The chief executive of defense supplier Aerojet Rocketdyne Holdings Inc. is poised to prevail in an unusual proxy fight against its executive chairman, people familiar with the matter said.

Shareholders appear set to elect the eight-person board slate put forth by CEO Eileen Drake based on the votes that have come in ahead of the shareholder meeting Thursday, the people said. The company’s executive chairman, Warren Lichtenstein, had proposed his own slate after the two became embroiled in a bitter internal battle.


Spirit Air Board Pushes Shareholders Meeting on Frontier Bid for Second Time

Spirit Airlines Inc. is postponing a vote on a merger with Frontier Group Holdings Inc. that had been scheduled for Thursday to continue discussions with Frontier and JetBlue Airways Corp., a rival suitor.

Spirit said Wednesday evening it plans to hold the vote July 8.


Cyberattack Prevents Macmillan From Shipping Its Books to Retailers

Macmillan, one of the largest book publishers in the U.S., said it has been hit by a cyberattack, and book retailers nationwide said they were unable to place new orders from the publisher.

Macmillan “recently experienced a security incident, which involves the encryption of certain files on our network,” the publisher said Wednesday. “As a precautionary measure, we immediately took systems offline to prevent further impact to our network.”


Niantic Lays Off 8% of Its Workforce and Stops Some Projects

Niantic Inc. has laid off about 8% of its workforce and stopped production on several projects, the company said Wednesday, as the creator of the popular game “Pokémon Go” struggles to produce another breakout hit.

Closely held Niantic said it would devote attention to games such as “NBA All-World,” a newly announced title featuring augmented reality, or AR, technology that it’s making in partnership with the National Basketball Association. It will also work on its app-development platform called Lightship and “Pokémon Go,” the groundbreaking AR game for smartphones that exploded in popularity after launching in 2016.


Justice Department Sues to Block Merger of National-Security Contractors

WASHINGTON-The Justice Department filed an antitrust lawsuit challenging Booz Allen Hamilton Holding Corp.’s proposed acquisition of rival EverWatch, alleging a merger would drive up prices for the U.S. government and create a monopoly supplier for a critical national-security service.

In its suit, filed Wednesday in Maryland federal court, the Justice Department said the tie-up would hurt the National Security Agency, which is scheduled to award a multiyear contract that Booz Allen and EverWatch were the only firms competing to win. Booz Allen moved to buy EverWatch in March, just months before the NSA was scheduled to start the selection process, according to the Justice Department.


Xerox CEO John Visentin Dies

Giovanni “John” Visentin, the chief executive of Xerox Holdings Corp., died after running the printer-and-copier company for roughly four years.

Mr. Visentin, 59 years old, died on Tuesday “due to complications from an ongoing illness,” the company said on Wednesday. Steve Bandrowczak, Xerox’s chief operations officer and president, will serve as interim CEO.


U.S. Blacklists Five Chinese Firms for Allegedly Helping Russia’s Military

The U.S. Commerce Department added five Chinese companies to an export blacklist for allegedly helping Russia’s military despite U.S. and allied efforts to cut off Russia’s access to technology following its invasion of Ukraine.

Commerce officials said the companies had supplied items to Russian entities of concern before Russia’s Feb. 24 invasion and “continue to contract to supply” sanctioned Russian entities. They didn’t provide details on the technology involved.


Nexstar Nears Deal to Acquire Majority Control of CW Network

Nexstar Media Group Inc., the nation’s biggest owner of local television stations, is close to a deal to acquire majority control of the CW Network from co-owners Warner Bros. Discovery Inc. and Paramount Global, according to people familiar with the matter.

Under the terms being discussed, Nexstar would acquire 75% of the CW, a broadcast network aimed primarily at teens and young adults, with Paramount and Warner Bros. Discovery each retaining 12.5% stakes, the people said.


U.S. Agrees to Pay $3.2 Billion for More Pfizer Covid Vaccines

The Biden administration has agreed to pay $3.2 billion for 105 million doses of Pfizer Inc.’s Covid-19 vaccine.

The deal would provide supplies for the federal government’s planned fall booster campaign, which administration officials are devising to blunt a potential wave in cases, possibly driven by variants of the Omicron strain now spreading across the U.S.


China’s Economy Returns to Growth Mode as Covid Lockdowns Lift

SINGAPORE-Economic activity in China expanded in June after three straight months of contraction, according to official surveys of businesses and factories that point to a modest recovery after Covid-19 restrictions were eased in the world’s second-largest economy.

Economists are downbeat about the prospects for a major revival, however, given the darkening global backdrop and the risk of further Covid outbreaks.


Riksbank Lifts Key Rate and Signals Slower Pace of Asset Purchases

(MORE TO FOLLOW) Dow Jones Newswires

June 30, 2022 05:30 ET (09:30 GMT)

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