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Bruised stocks find support as growth fears dent commodities

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© Reuters. FILE PHOTO: Men wearing protective masks amid the coronavirus disease (COVID-19) outbreak, use mobile phones in front of an electronic board displaying Japan’s Nikkei index outside a brokerage in Tokyo, Japan June 16, 2022. REUTERS/Kim Kyung-Hoon

By Tom Westbrook and Sam Byford

SINGAPORE/TOKYO (Reuters) – Global stocks and bonds headed for their first weekly gain in a month on Friday, with growth concerns tempered by hopes that sliding commodity prices can help brake runaway inflation.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.4% on Friday, helped by short sellers bailing out of Alibaba (NYSE:BABA) – which rose nearly 7% – amid hints that China’s technology crackdown is abating.

Japan’s Nikkei rose 1.2% for a 2% weekly gain, while S&P 500 futures extended overnight gains by 0.76%. EuroSTOXX 50 futures rose 1% and FTSE futures rose 0.6%.

The week has been marked by steep declines for commodities on worries that the world economy is looking shaky and that interest rate hikes will hurt growth – which in turn is also prompting traders to pare back some bets on the size of rate hikes.

Copper, a bellwether for economic output with its wide range of industrial and construction uses, is heading for its steepest weekly drop since March 2020. It fell in Shanghai on Friday and is down about 8% on the week.

Oil is also headed for a weekly loss. Brent crude futures are down 2.5% on the week to $110.35 a barrel, while benchmark grain prices sank with Chicago wheat off more than 8% for the week. [O/R][GRA/]

The falls have made for some relief in equities since energy and food have been the drivers of inflation. After heavy recent losses, MSCI’s World equities index is up 2.3% this week, setting it up for the first weekly gain since May.

“While market worries about an abrupt slowdown are the culprit behind recent moves lower in raw materials prices, lower commodity prices do feel like they could be just what the doctor ordered for the global economy,” said NatWest markets strategist Brian Daingerfield.

“So much of our hard landing fears relate to concerns that link back to commodity prices.”

Soft data through this week has been to blame.

Gauges of factory activity in Japan, Britain, the euro zone and United States all softened in June, with U.S. producers reporting the first outright drop in new orders in two years in the face of slumping confidence.

Bonds rallied hard on hopes the bets on aggressive rate hikes would have to be curtailed, with German two-year yields down 26 basis points on Thursday in their biggest drop since 2008. [GVD/EUR]

The benchmark 10-year Treasury yield fell 7 bps on Thursday and was steady at 3.0908%. [US/]

The U.S. dollar has slipped from recent highs, but not too far as investors remain cautious. It was last fairly steady at $1.05395 per euro and bought 134.73 yen. [FRX/]

The battered yen has steadied this week and drew a little support on Friday from Japanese inflation topping the Bank of Japan’s 2% target for a second straight month, putting more pressure on its ultra-easy policy stance.

European Central Bank and Federal Reserve speakers will be watched closely later in the day, as will British retail sales data and German business confidence. Beyond that, the main worry is what it all means for company performance.

“Second quarter earnings reports will send shockwaves to the market as the earnings outlook hasn’t deteriorated materially so far, and that will further build concerns of a recession,” said Charu Chanana, market strategist at brokerage Saxo in Singapore.

Stock Markets

Easing chip shortages to help Volkswagen in H2 – CEO

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© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo

BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.

“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.

This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.

“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.

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Reliance Chairman Mukesh Ambani steps down as director of telecom arm

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© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas

BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.

Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.

India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.

Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.

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UBS Downgrades Ebay, Farfetch to Neutral on Guidance Risks

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© Reuters. UBS Downgrades Ebay (EBAY), Farfetch (FTCH) to Neutral on Guidance Risks

By Senad Karaahmetovic

UBS analyst Kunal Madhukar downgraded shares of Farfetch (NYSE:FTCH) and eBay (NASDAQ:EBAY) to Neutral from Buy.

EBAY shares are cut alongside the price target (to $48.00 from $60.00 per share) despite low expectations. Still, the analyst expects 2022 GMV to fall by 17%, which is worse than the guidance of 16%-14% and the Street’s consensus of 15%.

“We think the buy side may already be lower than the Street. YTD, the stock has been one of the better performers within the eCommerce space, benefiting from both a ~2% dividend yield and aggressive share repurchases. However, when the market rebounds, we think EBAY shares could lag smaller cap peers (which are likely to grow much faster in a recovery) until investors have better visibility into organic growth at eBay. Consequently, we think the shares likely will remain range-bound until visibility improves,” Madhukar told clients in a note.

The price target on Farfetch shares goes to $10.00 from the prior $13.00 as Madhukar sees too optimistic assumptions for growth from the side of the company’s management.

“In addition to slower growth, we think upside is limited by lack of visibility into key drivers of value, including FPS volumes and economics, as well as on China. Granted, the YNAP deal could be a positive catalyst (link), but if the disclosure is limited (like with the recent deal with Neiman Marcus Group or NMG), it may be challenging for investors to understand if it creates shareholder value or not. Last, FTCH remains a profitless-tech company in an environment where investors are acutely focused on profits, and thus, there is limited valuation support,” the analyst added.

Similar to eBay, Madhukar sees shares remaining “range-bound until we have better visibility into growth and/or the path to profitability.”

Shares of eBay and Farfetch are down 2.4% and 2.2%, respectively, in pre-market Tuesday.

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