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(C) Reuters. FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Samuel Indyk and Rae Wee

LONDON (Reuters) – The dollar headed on Friday for its longest weekly winning streak in nine years, bolstered by a resilient run of U.S. economic data that has put the end of the Federal Reserve’s aggressive rate-increase cycle into question.

China’s onshore yuan meanwhile ended its domestic session at the weakest since 2007, as it battles capital outflow pressures and a widening yield gap with major economies.

The U.S. dollar index, which measures the greenback against major peers, was last 0.05% lower at 105 but remained not far from the previous session’s six-month high of 105.15.

The index was on track to extend its gains into an eighth straight week, and is up 0.7% thus far.

The euro, the largest component in the dollar index, was staring at eight straight weeks of losses, with the single currency last gaining 0.08% to stand at $1.0704, having fallen to a three-month low of $1.0686 on Thursday.

“The relative divergence of the U.S. and European economy is a key topic again and the weaker dollar story has just faded away,” said Dane Cekov, senior macro and FX strategist at Nordea Markets.

Data out this week showed the U.S. services sector unexpectedly gained steam in August and that jobless claims last week hit their lowest level since February, while in the euro zone, industrial production in Germany, Europe’s largest economy, fell by slightly more than expected in July.

“The U.S. economic data is still robust and in Europe it’s flattening out. The dollar usually does well when the U.S. economy outperforms peers and at the moment the U.S. is the bright spot,” said Nordea’s Cekov.

Sterling edged away from Thursday’s three-month low and last bought $1.2480, though was still set to clock a weekly loss of more than 0.8%.

IN THE DOLDRUMS

The onshore yuan opened at 7.3400 per dollar on Friday and touched its weakest level since December 2007 at 7.3510, while its offshore counterpart sank to a 10-month low of 7.3621 per dollar.

China’s currency has depreciated steadily since February as the faltering post-pandemic economic recovery and widening yield gap with other economies, particularly the United States, affected capital flows and trade.

The onshore yuan has fallen roughly 6% against the dollar so far this year and has become one of the worst-performing Asian currencies alongside its offshore counterpart.

“The travails of a stumbling (yuan) … reveals the complexity and profusion of China’s underlying economic stress points amid confidence deficit,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.

The yuan’s rapid decline has prompted authorities to step in to slow the pace of its depreciation.

Also on trader radars was a struggling yen, which steadied at 147.39 per dollar but remained on the weaker side of the key 145 level that prompted intervention by Japanese authorities last year.

Japanese Finance Minister Shunichi Suzuki said on Friday rapid currency moves were undesirable and that authorities wouldn’t rule out any options against excessive swings, in a fresh warning to investors trying to sell the yen.

The Bank of Japan is the only major central bank yet to raise interest rates in the current global tightening cycle, although analysts expect a move could come this year.

“It’s understandable why the Bank of Japan is moving in tiny steps after 30 years of very low rates,” Nordea’s Cekov said.

“If you rock the boat you may get undesired consequences and the yen is collateral damage from that perception.”

The Australian dollar was last 0.28% higher at $0.6395, but eyed a weekly loss of over 0.8%.

The New Zealand dollar similarly was on track to lose roughly 0.5% for the week and last bought $0.5910.

(C) Reuters.

Investing.com – European stock markets edged higher Friday, as investors digested better than expected French industrial production data at the end of a difficult week.

At 03:40 ET (07:40 GMT), the DAX index in Germany traded 0.1% higher, the FTSE 100 in the U.K. rose 0.1% and the CAC 40 in France climbed 0.1%.

Yet, these major cash indices are all on course to register losses this week, while the pan-European benchmark STOXX 600 index has fallen for seven straight days, its worst string of losses since February 2018.

French industrial production rebounded in July

Data released earlier Friday showed that French industrial output rebounded more than expected in July, climbing 0.8% on a monthly basis instead of the 0.1% expected after slumping 0.9% the prior month.

The equivalent data in Spain fell 1.8% in July, but this was still better than the 2.0% fall expected and the prior month’s 3.2% drop.

While these figures have generated some optimism, industrial production in Germany, the region’s dominant economy, fell by more than expected in July

Gross domestic product in the eurozone grew just 0.1% in the second quarter compared to the previous three months, and Citigroup (NYSE:C) has downgraded its 2023 economic growth forecast for the euro area to 0.4%, and said it expected the region’s economy to shrink “gently” over the next three quarters.

Additionally, German consumer prices rose 0.3% on the month in August, an annual rise of 6.1%, data showed earlier Friday.

This represented a minor slowing from the 6.2% annual increase the previous month, which could pressure ECB policymakers to hike interest rates once more next week given inflation in the eurozone’s largest economy remains more than three times higher than the central bank’s medium-term 2% target.

The European Central Bank has raised rates at each of its past nine meetings and policymakers are now debating whether to raise the deposit rate again, to 4%, or pause.

Japanese 2Q growth revised lower

It’s not only Europe that is struggling economically.

A string of weak economic readings this week have increased concerns about the strength of the recovery of the Chinese economy from its COVID hit, while Friday’s revised data showed Japan’s economy grew less than initially estimated in the second quarter.

Japan’s economy grew an annualised 4.8% in April-June, down from a preliminary estimate of 6.0% growth and below market forecasts for a revised 5.5% expansion.

Apple woes weigh on tech sector

The tech sector is likely to remain in the spotlight Friday as a consequence of Apple’s difficulties in China.

Apple (NASDAQ:AAPL) has seen about $200 billion wiped from its market capitalisation in two days on reports of China curbing iPhone use by state employees.

This comes ahead of an event next week where the world’s most valuable company is expected to unveil its iPhone 15 line-up.

Elsewhere, Casino (EPA:CASP) stock fell 1.6% after Euronext said the debt-ridden supermarket retailer will be excluded from a key French equity index of major companies.

Crude weakens but still on course for positive week

Oil prices retreated Friday, falling further from the 10-month peaks seen earlier in the week on concerns about the health of the crucial Chinese economy and weighed by a strong dollar.

Yet, despite these losses, both benchmarks are still on course for gains of around 1% this week on the back of the news that top producers Saudi Arabia and Russia have extended their voluntary supply cuts to the end of the year.

Additionally, data released late Thursday showed that U.S. inventories shrank a hefty 6.3 million barrels in the week to September 1, falling for the fourth consecutive week.

By 03:40 ET, the U.S. crude futures traded 0.4% lower at $86.56 a barrel, while the Brent contract dropped 0.2% to $89.78.

Additionally, gold futures rose 0.3% to $1.948.75/oz, while EUR/USD traded 0.1% higher at 1.0713.

(C) Reuters

Investing.com — Apple (NASDAQ:AAPL) shares hug the flatline in premarket trading on Friday following a two-day skid sparked by reports that China is telling government officials not to use the California company’s iPhone device for work. Elsewhere, two more Federal Reserve policymakers hint that the central bank may skip hiking interest rates at its September gathering, while U.S. Treasury Secretary Janet Yellen suggests that China’s post-COVID economic woes may not have a “significant impact” on the United States.

1. Nasdaq futures inch down after Apple-driven decline

U.S. stock futures pointed lower on Friday, as investors gauged a sharp drop in Apple’s stock this week and weighed the possibility of more Federal Reserve rate hikes this year.

At 05:53 ET (09:53 GMT), the Dow futures contract lost 61 points or 0.2%, S&P 500 futures fell by 10 points or 0.2%, and Nasdaq 100 Futures shed 45 points or 0.3%.

The main indices on Wall Street were mixed at the close of trading on Thursday, with the 30-stock Dow Jones Industrial Average edging up 0.2% and the benchmark S&P 500 dipping by 0.3%.

Attention widely centered around a Wall Street Journal report that central government officials in China had been ordered not to use Apple’s iPhone and other foreign-branded mobile devices for work, which traders took as a potential sign that Beijing may be willing to sideline American tech companies in favor of their Chinese counterparts. A separate report from the Financial Times said that state employees across China have also been told to cease using iPhones.

Shares in Apple, which relies on China for almost a fifth of its total revenue and is set to unveil the latest model of its mega-popular iPhone next week, slumped to a second consecutive day of losses, dragging the tech-heavy Nasdaq Composite down by 0.9%.

2. Apple stabilizes premarket after two-day tumble

Apple shares held near the flatline in premarket U.S. trading on Friday following a slide of about 6% over the past two sessions that has now wiped close to $200 billion in value off of the stock’s market capitalization.

The losses had a wide-spread impact in Asia, particularly on Apple’s regional suppliers. South Korea’s SK Hynix (KS:000660), which supplies Apple with memory chips, fell by 4.1%, while phone display-provider Samsung Electronics (KS:005930) shed 0.1%.

Taiwan’s TSMC (TW:2330) dipped by 0.7%, while display manufacturer Japan Display (TYO:6740) decreased by 2.5%. In China, Luxshare Precision Industry (SZ:002475), a source of connector cables for a slew of Apple devices, dropped 3.2%.

Hong Kong-listed supplier AAC Technologies (HK:2018), a builder of Apple’s AirPods headphones, was down nearly 6% this week, although the stock did not trade on Friday due to a broader trade suspension in Hong Kong.

3. Fed officials back rate pause

Senior officials on the Federal Reserve’s policy-setting committee on Thursday seemingly threw their support behind keeping interest rates steady at the central bank’s upcoming meeting later this month.

Speaking at a Bloomberg event, John Williams, New York Fed President and voting member of the Federal Open Market Committee, suggested that rates are currently “in a good place.” Williams added, however, that it is an “open question as we go forward” whether the Fed would need to continue tightening policy to help slow the economy to a point that cools inflation down to its 2% target.

Elsewhere, Dallas Fed President Lorie Logan — widely considered to be one of the more hawkish FOMC voters — said that it would be “appropriate” to keep the benchmark federal funds rate at a 22-year high of 5.25% to 5.50% this month.

Fed Governor Christopher Waller also backed a rate pause earlier this week, telling CNBC that recent U.S. economic data did not indicate that policymakers needed to take “imminent” action.

The comments were some of the last investors will hear from Fed officials before a customary black-out period ahead of their two-day gathering scheduled for Sept. 19-20.

4. Crude reverses losses

Oil prices gained on Friday, paring back earlier losses despite lingering concerns over the health of the crucial Chinese economy and a stronger dollar.

Both benchmarks are on course for weekly gains of around 2%, a rally that has been broadly driven by news that top producers Saudi Arabia and Russia have extended their voluntary supply cuts to the end of the year.

Additionally, data released late Thursday showed that U.S. inventories shrank a hefty 6.3 million barrels in the week to September 1, falling for the fourth consecutive week.

By 05:54 ET, the U.S. crude futures traded 0.2% higher at $87.08 a barrel, while the Brent contract added 0.4% to $90.25 per barrel.

5. Yellen addresses China slowdown

U.S. Treasury Secretary Janet Yellen predicted that China’s sputtering post-pandemic recovery will likely not take a major toll on the American economy, but could hit east Asian countries hard.

In a speech at the G20 summit of world leaders in India, Yellen said she does not see China’s downturn having a “very significant direct impact” on the U.S., although she noted that Washington is monitoring the situation closely.

Yellen added that Beijing does have “policy space” to help reignite growth in the world’s second largest economy, which has been slammed by contracting exports, a weakening manufacturing industry and a property sector liquidity crisis.

China has yet to roll out large-scale stimulus measures despite increasing calls to do so. Officials have instead opted to introduce measures to prop up specific industries or support the local currency, which finished its domestic session on Friday at its weakest level since the global financial crisis.

(C) Reuters

By Davit Kirakosyan

Here is your Pro Recap of the biggest analyst cuts you may have missed since yesterday: downgrades at Polestar Automotive, Essex Property Trust, ABM Industries, and Clarivate.

InvestingPro subscribers got this news first. Never miss another market-moving headline.

Polestar Automotive slashed at Barclays

Polestar Automotive (NASDAQ:PSNY) shares dropped more than 8% yesterday after Barclays downgraded the company to Underweight from Equal Weight and cut its price target to $3.00 from $5.00 on demand and capital concerns.

“The largest incremental development since our launch of coverage has been a deterioration of EV demand,” mentioned Barclays. The firm acknowledges Polestar’s reliance on contract manufacturing as a strategic move to sidestep direct price competition by eliminating overhead cost worries, however, the uncertain demand landscape raises concerns about the company’s eventual production levels.

Essex Property Trust cut at Citi

Citi downgraded Essex Property Trust (NYSE:ESS) to Neutral from Buy and cut its price target to $260.00 from $280.00, as reported in real-time on InvestingPro.

Despite ESS’s positive outlook on rent growth and limited new supply in its markets, the bank expects a cautious growth forecast for 2024 in the upcoming Q3 earnings.

Like peers, the company’s rent growth looked slightly weaker to us than expected. Thus, we downgrade to Neutral on balanced risk/reward profile at ESS’ current premium valuation.

More analyst cuts

ABM Industries (NYSE:ABM) received two downgrades following the company’s reported Q3 miss, which resulted in a stock price drop of more than 13% yesterday.

William Blair downgraded the company to Market Perform Outperform.

Meanwhile, Deutsche Bank downgraded to Hold from Buy and cut its price target to $43.00 from $65.00.

The bank cited disappointing results and guidance, which include a continued downturn due to a weak commercial real estate market in fiscal 2024, ongoing delays in Technical Solutions projects, and the possibility of losing significant business in the manufacturing & distribution sector from a large customer.

Clarivate (NYSE:CLVT) shares fell more than 3% pre-market today after Barclays downgraded the company to Underweight from Equal Weight and cut its price target to $7.00 from $8.00.

We move to Underweight on a litany of shortcomings in the company’s three divisions and a lack of urgency to conduct a strategic review.

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