2024-07-25 19:48

LONDON, July 25 (Reuters) - Investors are ditching some of this year's favourite trades as a retreat in the glitzy megacaps risks snowballing into a multi-pronged selloff that has hit everything from cryptocurrency to gold, and made calling the market's next move ever more complex. Shares on Wall Street ended lower on Thursday, adding to losses after the S&P 500 (.SPX) , opens new tab and Nasdaq (.IXIC) , opens new tab on Wednesday suffered their worst day since late 2022. The 2024 "everything rally" - stocks, and especially tech, up; gold and crypto - up; dollar - up; emerging markets, up - may be on hold. A diverse set of factors has lit the fuse of market anxiety over how stretched valuations in Big Tech might be, against a backdrop of rising U.S.-China trade tensions and tepid earnings. Quarterly results from Tesla (TSLA.O) , opens new tab and Alphabet (GOOGL.O) , opens new tab, the first of Wall Street's most valuable companies to report, have unnerved investors ahead of a deluge of results next week. Microsoft (MSFT.O) , opens new tab reports on Tuesday, followed by Meta Platforms (META.O) , opens new tab on Wednesday, and then Amazon (AMZN.O) , opens new tab and Apple (AAPL.O) , opens new tab on Thursday. Those four companies have a combined stock market value of over $9 trillion and account for a fifth of the entire S&P 500. “Investor positioning was pretty pro-risk and people had become quite positively inclined towards markets and valuations had become quite stretched,” said Toby Gibb, head of investment solutions at fund manager Artemis in London.“It's difficult to call whether the market is going to continue correcting." The S&P 500 ended 0.5% lower on Thursday after spending much of the session in positive territory. Volatility has picked up, with the VIX index (.VIX) , opens new tab rising on Wednesday by the most in a day for two years. The S&P 500 is trading at almost 22 times expected earnings, an over-two year high, according to LSEG data. The benchmark's recent dip has left it up 14% in 2024. "On the upside, (markets) are valuation insensitive and this is the same on the downside. The volatility compression you have on the way up goes in the opposite direction on the way down," Mario Baronci, portfolio manager at Fidelity International, said. Wall Street's AI boom has created a two-tier stock market, with megacap stocks driving most of the S&P 500's ascent to record highs, as the rest mostly bumble along. Keith Lerner, co-chief investment officer at Truist Advisory Services, maintains a favourable long-term view on tech stocks but believes they may be vulnerable to more volatility going forward. “Tech is correcting following the strongest two-month relative outperformance since 2022,” he wrote in a Thursday report. “Our base case is that the longer-term bull market remains intact, but it’s often two steps forward, one step back.” Meanwhile, China's economy is slowing faster than economists and Beijing authorities anticipated, sucking commodities into the down-draught. Europe's home-grown luxury megacaps (.STXLUXP) , opens new tab, another favoured trade, have shed a quarter of a trillion dollars in value since their peak in March. WHITE HOUSE ROLLERCOASTER Adding to the mix is a rollercoaster race for the White House, where Democrat President Joe Biden rescinded his candidacy for Vice President Kamala Harris shortly after an assassination attempt on Donald Trump. The Republican candidate's anti-China rhetoric and potentially inflationary policies have hit chipmakers around the world and hurt U.S. 30-year government bonds. But some big investors are certain this is a bull market dip that became undeservedly shrouded in geopolitical risk language. "I think these narratives are being used to create some excuse for what was probably just some sort of summer profit taking,” said Richard Clode, tech portfolio manager at Janus Henderson Investors. As stocks and other 2024 star assets like gold , up 14% this year, have been pounded this week, small cap shares (.RUT) , opens new tab and classic havens such as the Swiss franc and the Japanese yen , have surged. That is more than just a flight from risk. These currencies have been used for years to fund holdings with juicier returns. As the Federal Reserve prepares to cut interest rates and doubt creeps in about the robustness of the equity market rally, those so-called carry trades are unravelling. This heaps further pressure on the dollar, although shorter-dated Treasuries have gained this week, pulling yields down to almost six-month lows. "A lot of investors had been selling the yen to buy tech, and with the recent strength in the yen and the unwind of those carry trades, that's created some forced selling in the large-cap tech space as well," said Jeff Schulze, Head of economic and market strategy ClearBridge Investments. BITCOIN SYNDROME With summer trading usually thin and a typical volatility spike in the early autumn, this is a time investors take profits, Clode said, adding that this could present a buying opportunity. Many investors, long-primed to see pull-backs as bull-market blips and often more focused on asset prices over valuations, could agree. "I call this the 'bitcoin syndrome'. When it goes down people don't mind. People think sooner or later it will go up and that a correction is a good time to re-enter the market," Fidelity's Baronci said. Bitcoin itself, however, has dropped 5% in as many days to around $64,000. Trade Nation senior market strategist David Morrison warned against complacency. "Further gains are predicated on solid second quarter results, together with positive guidance for the current quarter. If that isn’t forthcoming, then expect more profit-taking to emerge," he said. "Investors have a muscle-memory for this type of thing." ($1 = 0.9220 euros) Sign up here. https://www.reuters.com/markets/global-markets-selloff-pix-2024-07-25/

2024-07-25 19:45

July 25 (Reuters) - A man was arrested on Thursday on suspicion of starting a wildfire that forced thousands to flee their homes in a fast-moving blaze that is the largest in California so far this year. Butte County District Attorney Mike Ramsey said in a statement that the man, Ronnie Dean Stout II, was jailed without bond on a Butte County judge's warrant after he was identified as the person seen pushing a flaming car into a gully on Wednesday afternoon. The vehicle spread flames that caused what is being called the Park Fire, which exploded overnight from about 1,400 acres (567 hectares) on Wednesday near Chico, California, to about 125,000 acres on Thursday afternoon in northern California about 80 miles (130 km) north of the state capital Sacramento. The 42-year-old suspect was detained by arson investigators with the state California Department of Forestry and Fire Protection, or Cal Fire, along with police. His arraignment is set for Monday, according to Ramsey, who did not specify what type of arson charge the man might face. A spokesperson for the Butte County District Attorney's Office did not immediately respond to a Reuters request for more details. The Park Fire was only 3 percent contained on Thursday afternoon and the largest in the state so far this year, Cal Fire said. No injuries were reported. More than 4,000 people were evacuated in Butte County and the city of Chico, said Megan McMann, a spokesperson for the Butte County Sheriff's Office. The largest fire now burning in the United States, Oregon's Durkee Fire, has burned at least 268,000 acres, threatened multiple small towns, scorched ranch land and killed cattle by the hundreds, local media reported. High winds, with gusts of 60 miles mph (97 kph) along with lightning strikes on Wednesday and overnight could fan the flames, said Marc Chenard, a forecaster with the National Weather Service in College Park, Maryland. The fire, about 100 miles northwest of Boise, Idaho, was 20% percent contained on Thursday afternoon. More wind was forecast and lightning possible. "There is zero percent chance of rain in the forecast for the region," Chenard said. Smoke from fires in western Canada and the Pacific Northwest is blamed for hazy skies and unhealthy air from the Rocky Mountains to Chicago, weather reports said. Denver had the worst air quality in the U.S. and ranked the 22nd worst in the world, according to IQAir, a group that tracks air pollution across the globe. The air could be clearing later on Thursday as a high pressure ridge rolls in bringing clearer skies, according to weather reports. Scientists and environmental advocates have long called for global leaders to phase out and end the reliance on fossil fuels to prevent catastrophic effects of climate change, including worsening wildfires. Sign up here. https://www.reuters.com/world/us/pacific-northwest-wildfires-force-evacuations-smoke-chokes-swaths-us-2024-07-25/

2024-07-25 19:14

Canadian dollar touches its weakest since Nov. 10 Price of U.S. oil rises 1% 2-year yield hits 14-month low before rebounding TORONTO, July 25 (Reuters) - The Canadian dollar weakened to an eight-month low against its U.S. counterpart on Thursday as investors grew confident the Bank of Canada would continue to ease policy following its latest interest rate cut the day before. The loonie was trading 0.1% lower at 1.3815 per U.S. dollar, or 72.39 U.S. cents, after touching its weakest intraday level since Nov. 10 at 1.3848. "The market thinks that the Bank of Canada delivered a dovish cut," said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. "The market feels more confident after the meeting that there will be another cut in September." The Bank of Canada is shifting its focus to boosting the economy rather than suppressing inflation, which raises prospects of further interest rate cuts in the coming months, analysts say. Investors see a roughly 60% chance the BoC will cut rates again at its next policy decision in September after the central bank on Wednesday lowered its policy rate by 25 basis points for a second time in two months to 4.50%. Unwinding of short yen positions have also weighed on the loonie in recent days, Chandler said, adding that a popular trade for hedge funds has been to short the yen and go long on higher yielding currencies such as the loonie, as well as the Australian and New Zealand dollars . The price of oil , one of Canada's major exports, rose after stronger-than-expected U.S. economic data stoked expectations for higher crude demand. U.S. crude oil futures were up 1% at $78.35 a barrel Canadian government bond yields were mixed across a flatter curve. The 2-year was up 1.8 basis points at 3.650%, after earlier touching its lowest level since May last year at 3.559%. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-hits-8-month-low-dovish-bank-canada-2024-07-25/

2024-07-25 19:12

Macklem says helping growth weighed into rate cut decision Excess supply in the economy needs to be absorbed, he says Bank cut rates for a second time by 25 bps to 4.5% OTTAWA, July 25 (Reuters) - The Bank of Canada is shifting its focus to boosting the economy rather than suppressing inflation, which raises prospects of further interest rate cuts in the coming months, analysts say. The Canadian central bank lowered its benchmark rate for a second straight month on Wednesday, cutting by 25 basis points to 4.50%. It said downside risks to inflation are taking on increased weight in its deliberations. Investors see a roughly 60% chance the BoC will ease again at its next policy meeting in September. Investors are pricing in 44 basis points of easing in total by the end of the year, which implies a policy rate 6 basis points below previous expectations . A faster pace of rate cuts would provide relief for heavily indebted Canadian households. It could also increase pressure on the Canadian dollar , which weakened on Thursday to a three-month low of 1.3848 per U.S. dollar, or 72.21 U.S. cents. "There is a pivot that has taken place with the BoC shifting its focus away from the inflation fight, which has been won, to economic support, which is much more necessary," said Philip Petursson, chief investment strategist at IG Wealth Management. Canada's GDP has grown in recent quarters at less than the 2.25% pace the BoC estimates as its potential, with first-quarter growth at 1.7%. The slower GDP growth raises excess supply in the economy, cooling inflation, which was 2.7% in June. But too much slack in the economy could slow inflation more than the bank would like. "We are determined to get inflation back to 2%, but we also don't want to weaken the economy too much and have inflation go below our 2% target," Governor Tiff Macklem told reporters after the rate-cut decision. While high interest rates have not tipped Canada into recession, economists have said the growth has been largely driven by a big increase in the population. Macklem said on Wednesday the bank was not only looking at overall economic growth, but also at GDP per capita, which has fallen for four straight quarters. The rising population has contributed to a jump in the unemployment rate to a 29-month high of 6.4% last month, which has also been a concern for the bank. And a wave of mortgages is set to renew at higher borrowing costs over the coming year, which could further restrain economic activity. "The BoC was about as dovish as possible," Jason Daw and Simon Deeley, strategists at RBC Dominion Securities Inc, said in a note. "With only one inflation report before the next meeting, the bar to them not cutting is very high," the strategists said. Sign up here. https://www.reuters.com/business/finance/bank-canada-pivots-boosting-economic-growth-raising-rate-cut-bets-2024-07-25/

2024-07-25 17:06

July 25 (Reuters) - Warner Bros Discovery (WBD.O) , opens new tab will sue the National Basketball Association in New York after the league rejected its matching bid for TV broadcasting rights, a source familiar with the matter said on Thursday. The NBA on Wednesday rejected an offer from Warner's TNT sports division — ending four decades of partnership — and announced new agreements with Walt Disney's (DIS.N) , opens new tab ESPN, Comcast-owned (CMCSA.O) , opens new tab NBCUniversal and Amazon.com (AMZN.O) , opens new tab in an 11-year deal worth $77 billion. Warner Bros Discovery and the NBA did not immediately respond to Reuters requests for comment. Shares fell more than 5% and the company that was formed in 2022 when WarnerMedia and Discovery merged was set to lose over $1 billion in market value, if losses hold. After the loss of NBA rights, Macquarie Equity Research downgraded the stock to "neutral". "NBA rights were important in our view to the future success of the Max streaming service," its analysts said, adding the loss may hasten the downturn in linear networks too. Some analysts said suing the NBA could hurt the company's competitiveness in the long run. "When other leagues have rights come up, they will keep in mind how tumultuous the NBA and WBD relationship became when they accept WBD's bids," said Ross Benes, television and streaming analyst at eMarketer. "WBD is desperate so they will pursue all possibilities to retain the NBA. A lawsuit would make the end of the partnership shift from awkward to hostile." Rosenblatt analyst Barton Crockett said losing the NBA could pressure Warner to be more open about breaking up their assets. The current composition as a consolidated public company is not working in Warner's favor, BofA Global Research analysts had said in July, while suggesting a strategic review, including sale, to unlock more shareholder value. CNBC first reported that Warner has sued the NBA. Sign up here. https://www.reuters.com/legal/warner-bros-discovery-sues-nba-over-matching-rights-cnbc-reports-2024-07-25/

2024-07-25 16:41

July 25 (Reuters) - AbbVie (ABBV.N) , opens new tab increased its profit forecast for 2024 on Thursday after reporting strong sales of immunology drugs and quarterly results that exceeded Wall Street expectations, sending its shares to a record high. The company boosted both ends of its profit forecast range by 10 cents - two cents more than the second-quarter beat - and now expects to earn between $10.71 and $10.91 per share. The Chicago-based drugmaker's shares rose as much as 5.6% to hit an all-time high of $186.11 before giving back some gains. They were up about 4% at $183.25 by midday. Sales of AbbVie's flagship arthritis drug Humira, once the world's top-selling medicine, have been declining with the introduction to the U.S. market of multiple biosimilar versions of the therapy. There are now 10 of the close copies available in the U.S. Humira's global sales fell nearly 30% to $2.81 billion in the second quarter, but still topped analysts' estimate of $2.76 billion, according to LSEG data. The loss of exclusivity has forced AbbVie to reduce the drug's net price to maintain market share with industry middlemen known as pharmacy benefit managers that determine much patient access to prescription drugs. Humira has so far held on to more than 80% of patients this year. "It will certainly be lower next year," AbbVie Chief Commercial Officer Jeffrey Stewart said on a call to discuss the company's results. AbbVie in February said it expects a 36% decline in U.S. Humira sales this year. The drugmaker and investors have focused on newer immunology drugs Skyrizi and Rinvoq to offset the Humira sales erosion. Skyrizi, which treats psoriasis and related arthritis, Crohn's disease and ulcerative colitis, recorded global sales of $2.73 billion, beating expectations of $2.59 billion. Rinvoq, approved for similar conditions as well as rheumatoid arthritis, recorded sales of $1.43 billion, topping Wall Street estimates of $1.36 billion. The company said it now expects Skyrizi sales of $11 billion this year, and for Rinvoq to generate $5.7 billion, $300 million and $100 million more, respectively than its prior forecasts. Skyrizi's total prescription share in the U.S. biologic market for psoriasis patients has reached around 38%, the company said. The strong results show "the command AbbVie has over its commercial business and their impressive ability to guide through" the loss of exclusivity for Humira, BMO Capital Markets analyst Evan Seigerman said in a note. AbbVie is also facing pressure on its big-selling cancer drug Imbruvica, which was selected as one of the 10 medicines subject to the first-ever price negotiations by U.S. Medicare insurance plans. Imbruvica sales fell 8% to $833 million in the second quarter, but still beat estimates of $789 million. AbbVie Chief Scientific Officer Roopal Thakkar said the company was discontinuing development of an experimental Alzheimer's drug as a standalone antibody after finding it was unlikely to be "sufficiently differentiated" from approved therapies. Overall sales for the quarter were $14.46 billion, beating estimates of $14.03 billion. On an adjusted basis, AbbVie earned $2.65 per share, beating estimates by 8 cents. Sign up here. https://www.reuters.com/business/healthcare-pharmaceuticals/abbvie-lifts-annual-profit-forecast-strong-immunology-drug-sales-2024-07-25/