North American Morning Briefing: Stock Futures Point to Indexes Rebounding

MARKET WRAPS

Watch For:

Oracle Corp. 1Q earnings.

Opening Call:

Stock futures rose Monday, pointing to major indexes recovering some ground following the S&P 500's worst weekly performance since February.

Stocks are rebounding on investors' optimism that the Federal Reserve and the government will continue offering stimulus measures. That is because U.S. lawmakers are trying to push ahead this month with a proposed $3.5 trillion legislation for additional spending on healthcare, education and climate. But money managers say they are also waiting to assess if fresh data Tuesday shows that inflation remains elevated, and how that may impact the Fed's easy-money policies.

"I do believe that the bulls have a little more ammunition than the bears: fiscal support still remains on tap, activity indicators are strong," said Gregory Perdon, chief investment officer of Arbuthnot Latham. "Risk is still on."

The current level of yields is signaling that bond investors see higher inflation levels as transitory, according to Georgina Taylor, a multiasset fund manager at Invesco. "There's not enough inflationary pressure to really feel a reassessment of nominal growth over the long term," she said.

In Asia, Hong Kong's Hang Seng Index dropped by the close of trading, with technology stocks among notable decliners in the city.

Concerns about tensions between the U.S. and China had dented investor sentiment, said Dickie Wong, executive director of research at Kingston Securities Ltd. in Hong Kong. Over the weekend, The Wall Street Journal reported that the Biden administration is targeting Beijing's widespread use of industrial subsidies in an effort that could lead to new sanctions on Chinese imports and further strain U.S.-China relations.

Forex:

The dollar rose to a two-week high against a basket of currencies as investors look ahead to the U.S. Federal Reserve's Sept. 22 meeting amid prospects that asset-purchase tapering will begin this year.

UniCredit said the dollar has been helped higher after Philadelphia Fed President Patrick Harker said he favored tapering sooner rather than later.

This week will see a raft of key U.S. data, including CPI inflation, retail sales and industrial production.

Strong data may help the dollar but weaker-than-expected figures should have a bigger impact if they "raise uncertainty about the timing of the Fed's tapering process," UniCredit said.

Bitcoin traded below $45,000, slipping 0.6% from its 5 p.m. ET level on Friday. Last week, it rose above $52,500.

Bonds:

The yield on the benchmark 10-year U.S. Treasury note edged up to 1.344% from 1.340% on Friday.

Morgan Stanley expects the spread between U.S. and German government bond yields to widen, as the policy divergence between the Fed and the European Central Bank increases, said strategists Alina Zaytseva and Lorenzo Testa.

They expect the Fed's September 22 meeting to be one of the catalysts for the move, with 2024 dots revealed for the first time. The 10-year U.S. Treasury-German Bund yield spread is 166 basis points, according to Tradeweb.

At last week's meeting, the ECB said it would shift to a "moderately lower" purchase pace under the Pandemic Emergency Purchase Programme in the coming quarter. ECB purchases will still be higher than at the beginning of the year, however, while the Fed is expected to start tapering asset purchases later this year.

Citigroup expects eurozone government bond yield spreads stable near-term, while vulnerability might emerge for the long-term, strategist Jamie Searle said.

The fact that the ECB's pandemic emergency asset purchases will be lowered only moderately versus the peak in the remainder of the year will provide comfort to intra-eurozone spreads, and so will hopes that the constraints of the regular Asset Purchase Programme might be adjusted, he said.

On the longer-term, "however, there is still likely to be a cliff in asset purchases next spring and the ECB appears to be slowly shifting tactics from capping EMU spreads to instead anchoring core rates, precisely because such an approach is less reliant on asset purchases," Searle said.

Commodities:

Oil rose, with prices extending their gains over the past week. While prices have lacked strong direction over the past week, data showing strong U.S. gasoline demand over the Labor Day weekend gave prices a boost on Friday.

Meanwhile, 49% of U.S. Gulf of Mexico production remains closed after Hurricane Ida, DNB Markets' Helge Andre Martinsen said. Still, Iran's signaling that it is ready to return to nuclear talks could put pressure on prices in the coming weeks. The market is awaiting OPEC's monthly market report, due later Monday.

Gold prices were listless as a stronger dollar dents the safe-haven's appeal. The U.S. dollar index rose 0.2% to 92.80, diminishing appetite for dollar-denominated gold among holders of other currencies.

With gold's price performance lackluster and the Fed expected to soon begin tapering its stimulus measures, speculative investors have been cutting back heavily on their gold exposure, TD Securities said.

Investors "are anticipating higher real rates and less capital to flow into the yellow metal, as the Fed prepares to start tapering its aggressive asset purchasing program," the bank said in a note. "Robust equity market performance also likely persuaded funds to ease up on their gold exposure," TD said.

TODAY'S TOP HEADLINES

TransUnion Nears $3.1 Billion Deal for Neustar

TransUnion is nearing a deal to buy information-services company Neustar Inc. for $3.1 billion, according to people familiar with the matter, a move that could help the consumer-credit reporting giant diversify beyond its core business and put data to new uses.

The purchase of closely held Neustar could be finalized by Monday, the people said, assuming the talks don't fall apart at the last minute.

Read More ->

ViacomCBS to Restructure Paramount Pictures

ViacomCBS Inc. is revamping the operations of its Paramount Pictures movie and television production unit as part of a broader shake-up of the management there that will give television veteran David Nevins a larger role, people familiar with the matter said.

Under the new structure, the movie and television arms will be run as separate entities, the people said. Nickelodeon chief Brian Robbins will oversee films while Mr. Nevins, a longtime ViacomCBS television executive, will add oversight of the Paramount television unit.

Read More ->

Kansas City Southern Says Canadian Pacific Bid Superior to Canadian National Deal

Kansas City Southern said a recent takeover offer from Canadian Pacific Railway Ltd. is superior to one it already accepted from Canadian National Railway Co. in the latest twist in a hotly contested battle for the railroad.

As set out in the terms of its existing agreement with Kansas City Southern, Canadian National now has five business days to improve its offer to avoid termination of the deal. It could also choose to walk away-and receive a $700 million breakup fee and reimbursement for a similar fee it previously covered.

Read More ->

China Seeks to Consolidate Crowded Electric-Vehicle Industry

China wants its electric-vehicle industry that supports hundreds of car makers to consolidate and strengthen its business, the country's top auto industry regulator said Monday.

"The number of new-energy vehicles companies is too big, and the industry is full of small players and fragmented," Xiao Yaqing, minister for industry and information technology, said at a news conference on Monday.

Read More ->

Soho China Shares Drop 36% After BlackStone Scraps Offer for Company

Shares of Soho China Ltd. dropped 36% on Monday after Blackstone Group scrapped its 23.66 billion Hong Kong dollar (US$3.04 billion) offer to buy the commercial real estate operator.

The deal fell through as none of the preconditions set for the offer were met, Soho China said Friday. In the offer made in June, the preconditions included clearance and review by China's State Administration for Market Regulation.

Read More ->

Chip Shortage Drives Tech Companies and Car Makers Closer

Cooperation between semiconductor companies and the automotive industry is moving into the fast lane, driven by a chip shortage and a recognition that cars are becoming ever-more digital.

More than a year into the crisis, executives from car and chip makers are establishing closer ties to address the shortage and working together to introduce new products. The shift was on display as executives from such chip companies as Intel Corp., Qualcomm Inc. and Nvidia Corp. flocked to Munich last week for an annual auto show, lured by the promise of selling chips for new car displays, driver-assistance features and other vehicle applications.

Read More ->

Hertz Searches for a New CEO After Bankruptcy

Hertz Global Holdings Inc. is in talks to name a new chief executive officer, as the car-rental company resets after emerging from bankruptcy under new ownership, people familiar with the matter said.

CEO Paul Stone has had the top job at Hertz since May 2020, taking the position days before the company filed for bankruptcy protection. Hertz exited chapter 11 earlier this year and is now controlled by an investor group led by Certares Management LLC and Knighthead Capital Management LLC.

Read More ->

Apple Judge's Warning Suggests App Store Fight Is Far From Over

Apple Inc. scored a partial victory Friday in a landmark antitrust case, but its fight with opponents of the App Store is far from over.

While U.S. District Judge Yvonne Gonzalez Rogers left in place many of Apple's restrictions for third-party software, she raised the specter of the tech company nearing a point where it could be deemed a monopoly in the mobile videogame market.

Read More ->

U.S. Stock Market Faces Risk of Bumpy Autumn, Wall Street Analysts Warn

After a record-breaking bull run for the U.S. stock market this year, many Wall Street analysts are starting to warn that investors could be in for a bumpy ride in the coming weeks and months.

Analysts at firms including Morgan Stanley, Citigroup Inc., Deutsche Bank AG and Bank of America Corp. published notes this month cautioning about current risks in the U.S. equity market. With the S&P 500 already hitting 54 records this year through Thursday-the most during that period since 1995-several analysts said that they believe there is a growing possibility of a pullback or, at the least, flatter returns.

Read More ->

House Democrats Consider 26.5% Corporate Tax Rate

WASHINGTON-House Democrats expect to propose raising the corporate tax rate to 26.5% from 21% and imposing a 3- percentage-point surtax on individual income above $5 million, according to two House Democratic aides familiar with the plans.

The tax increases would be part of the House Ways and Means Committee's plans to pay for the party's priorities in a fast-moving budget bill. Those items include an expanded child tax credit, a national paid-leave program and renewable- energy tax breaks.

Read More ->

Economy Week Ahead: Inflation, Retail Sales and Industrial Output

Measures of U.S. inflation and consumer spending are in focus this week.

Read More ->

Meme Stocks AMC and GameStop Push Small-Cap Benchmark Higher

Meme stocks are distorting the way some investors see parts of the market.

The Russell 2000 value index, designed to follow shares of small companies that are viewed as bargains relative to the rest of the market, is up 21% this year. Meanwhile, the Russell 2000 growth index, populated with companies whose earnings are expected to flourish faster than the rest of the market, has increased only 5%.

Read More ->

Short-Lasting Inflation Depends on Long-Lasting Goods

For decades, Americans have enjoyed falling prices for cars, electronics and furniture.

Until the Covid-19 pandemic, that is. For the past year, prices for durable goods have been rising-and not just by a little. Whether those prices come back down is a key part of the puzzle facing the Federal Reserve as it plots how to handle an unexpectedly strong burst of inflation.

Read More ->

Riskier Chinese Property Bonds Suffer as Evergrande Struggles

Bonds from lower-rated Chinese property developers have fallen steeply in price after warnings of a potential default at industry giant China Evergrande Group sent investors scrambling to protect themselves against trouble elsewhere in their portfolios.

Various dollar bonds due in 2023 and 2024 from Fantasia Holdings Group Co. and Guangzhou R&F Properties Co. have fallen to less than 60 cents on the dollar, pushing yields on most of these debts above 40%.

Read More ->

Libor Transition Stokes Sales of Risky Corporate Debt

Wall Street's shift away from Libor is fueling sales in the red-hot market for bundles of risky corporate loans.

Managers of collateralized loan obligations-securities made up of bundled loans with junk credit ratings-are rushing to close deals ahead of the year-end move away from the London interbank offered rate. The interest-rate benchmark underpins trillions of dollars of financial contracts but was scheduled for phaseout after a manipulation scandal.

Read More ->

Democrats Grapple With Limits of Antipoverty and Climate Bill

WASHINGTON-Democrats are grappling with the fiscal and political limits of their pursuit of a broad antipoverty and climate bill, with some senior lawmakers preparing to slim down or eliminate elements of the proposal as moderates push to shrink the $3.5 trillion package.

Senators return to Washington Monday after a weekslong break, in a rush to craft the legislation at the center of President Biden's agenda, an effort that Republicans oppose. To pass the bill with just Democratic votes, lawmakers will need to navigate a host of intraparty disagreements over the legislation-which aims to expand access to child care, education and healthcare while also raising taxes on high-income households and companies.

Read More ->

Biden's Covid-19 Vaccine Mandate Further Stresses Supply of Rapid Tests

America's Covid-testing infrastructure, from drugstores to diagnostics manufacturers, is bracing for a surge in demand following the Biden administration's order that most large U.S. companies mandate their workers get vaccinated or be screened weekly for the virus.

Makers of over-the-counter Covid-19 tests are continuing to boost production, while laboratories and companies are ramping up operations that some had scaled back after the virus largely retreated earlier this year.

Read More ->

Iran Pledges to Cooperate With U.N. Atomic Agency, Easing Nuclear Talks Threat

Iran reached an agreement Sunday with the United Nations atomic agency that will grant international inspectors access to some of the country's nuclear-related sites, a step likely to avert a crisis in the negotiations on restoring the 2015 nuclear deal.

The agreement comes after International Atomic Energy Agency Director-General Rafael Grossi made a last-minute trip to Tehran this weekend in a bid to persuade Iran to step up its cooperation with the agency ahead of a meeting of the IAEA's top member states starting Monday.

Read More ->

House Democrats Consider 26.5% Corporate Tax Rate

WASHINGTON-House Democrats expect to propose raising the corporate tax rate to 26.5% from 21% and imposing a 3- percentage-point surtax on individual income above $5 million, according to two House Democratic aides familiar with the plans.

The tax increases would be part of the House Ways and Means Committee's plans to pay for the party's priorities in a fast-moving budget bill. Those items include an expanded child tax credit, a national paid-leave program and renewable- energy tax breaks.

Read More ->

California Recall Puts Governor's Pandemic Leadership to the Test

California Gov. Gavin Newsom on Tuesday will be the first governor in a recall election to face voters divided over Covid-19 restrictions and collectively angry about a pandemic that continues to upend lives nationwide.

State leaders around the U.S. have exercised broad authority to try to safeguard the health and well-being of both their residents and economies over the past 18 months, including decisions that have drawn fire from all sides.

Read More ->

After Hurricane Ida, Louisiana Bayou Community Contemplates Moving or Rebuilding

POINTE-AUX-CHÊNES, La.-The closer you get to the marina, the stronger the smell. "Sewer mixed with swamp," said Christine Verdin, who grew up in the community and serves on the council of the Pointe-au-Chien tribe. "I wish we could bottle this up as perfume and send it to people who haven't been around and say, 'You didn't come to see what it looked like, but now you can smell it.'"

Two weeks after Ida ripped through this unincorporated bayou community of 3,700, 80% of homes are uninhabitable, said Chuckie Verdin, tribal council leader in Pointe-aux-Chênes, where around a third of residents are members of the tribe that includes primarily people of Chitimacha descent. Nobody has power or running water.

Read More ->

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

None scheduled

Economic Indicators:

None scheduled

Stocks to Watch:

Kansas City Southern Says Canadian Pacific Bid Superior to Canadian National Deal: Kansas City Southern said a recent takeover offer from Canadian Pacific Railway is superior to one it already accepted from Canadian National Railway in the latest twist in a hotly contested battle for the railroad.

As set out in the terms of its existing agreement with Kansas City Southern, Canadian National now has five business days to improve its offer to avoid termination of the deal. It could also choose to walk away -- and receive a $700 million breakup fee and reimbursement for a similar fee it previously covered.

Canadian Pacific, which had given Kansas City Southern until Sunday to make a determination, said in a statement Sunday that it stands ready to complete a deal. Canadian National said in a statement that it is evaluating all of its options.

Should Canadian Pacific ultimately prevail, it would reunite two companies that first agreed to a $25 billion tie-up in March, before Canadian National swooped in with a roughly $30 billion topping bid.

In a deal with Canadian Pacific, Kansas City Southern shareholders would receive 2.884 Canadian Pacific shares and $90 in cash for each of their shares, now valued at about $288 a share, or $26 billion.

Under the current deal with Canadian National, Kansas City Southern shareholders would receive 1.129 Canadian National shares and $200 in cash, valued at worth about $334 a share.

Expected Major Events for Monday

06:00/GER: Aug WPI

08:00/ITA: 2Q Labour Cost Index

18:00/US: Aug Monthly Treasury Statement of Receipts & Outlays of the U.S. Govt

23:01/UK: 4Q Manpower UK Employment Outlook Survey

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Monday

Adamis Pharmaceuticals Corp (ADMP) is expected to report $-0.04 for 2Q.

Aimia (AIM.T) is expected to report for 2Q.

Champions Oncology Inc (CSBR) is expected to report $0.03 for 1Q.

Coda Octopus Group Inc (CODA) is expected to report for 3Q.

EVI Industries Inc (EVI) is expected to report for 4Q.

Evolution Petroleum (EPM) is expected to report $0.09 for 4Q.

FedEx Corp (FDX) is expected to report.

Frequency Electronics (FEIM) is expected to report for 1Q.

KalVista Pharmaceuticals Inc (KALV) is expected to report $-0.92 for 1Q.

Matrix Service (MTRX) is expected to report $-0.03 for 4Q.

MaxCyte Inc (MXCT.LN) is expected to report for Interim.

NAPCO Security Technologies Inc (NSSC) is expected to report $0.25 for 4Q.

Ocean Power Technologies Inc (OPTT) is expected to report for 1Q.

Optical Cable (OCC) is expected to report for 3Q.

Oracle Corp (ORCL) is expected to report $0.72 for 1Q.

Perpetua Resources Corp (PPTA.T) is expected to report for 3Q.

Pioneer Bancorp Inc (PBFS) is expected to report for 4Q.

RF Industries (RFIL) is expected to report $0.12 for 3Q.

SeaChange International Inc (SEAC) is expected to report $-0.07 for 2Q.

Starcore International Mines Ltd (SAM.T) is expected to report for 1Q.

Virco Manufacturing Corp (VIRC) is expected to report for 2Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

American Tower REIT Cut to Perform From Outperform by Oppenheimer

Apellis Pharmaceuticals Cut to Neutral From Outperform by Wedbush

BridgeBio Pharma Raised to Buy From Neutral by B of A Securities

Cigna Cut to Underperform From Buy by B of A Securities

CNO Financial Raised to Overweight From Neutral by Piper Sandler

Colfax Cut to Neutral From Buy by Goldman Sachs

Crown Castle Cut to Perform From Outperform by Oppenheimer

Editas Medicine Raised to Outperform From Perform by Oppenheimer

Equinix Cut to Perform From Outperform by Oppenheimer

Host Hotels & Resorts Raised to Buy From Hold by Argus Research

Humanigen Cut to Hold From Buy by Jefferies

Inovio Pharma Cut to Underperform From Neutral by B of A Securities

Kymera Therapeutics Raised to Buy From Neutral by B of A Securities

Orchid Island Capital Raised to Hold From Sell by JonesTrading

Rexnord Raised to Buy From Neutral by Goldman Sachs

Sumo Logic Cut to Neutral From Buy by BTIG

Sumo Logic Cut to Neutral From Overweight by Piper Sandler

This article is a text version of a Wall Street Journal newsletter published earlier today.


  (END) Dow Jones Newswires
  09-13-21 0608ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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