Marketmind: Markets find feet after Apple topples

[September 08, 2023]  A look at the day ahead in U.S. and global markets from Mike Dolan

Some soothing words from Federal Reserve officials calmed a jumpy first week of September for world markets, aggravated by geopolitical tech wars that saw Apple caught in the crosshairs.

The world's most valuable company, whose stock is up more than 36% so this year, has recoiled more than 6% since Wednesday on reports China had ordered central government employees to stop using iPhones at work.

Although the extent of the ban is still unclear, it wiped some $190 billion from Apple's market capitalization and dragged down major Wall St stock indices again on Thursday.

Coming just as China's main rival telecom firm Huawei launched two new smartphones, and as most G20 leaders gathered in India for another fractious global summit, the Apple sideswipe also unnerved shares in major suppliers across Asia.

The stock appeared to stabilize in out-of-hours trade on Friday and Morgan Stanley analysts claimed China's iPhone bans would at most hit Apple revenues by about 4%.

But there was also a slightly calmer market tone more generally to end the downbeat week.

Even though the latest update on U.S. employment continued to show a super-tight labor market, noises from top Fed policymakers suggested the central bank's tightening campaign may indeed be over after all.

"We've got policy in a good place," said New York Fed President John Williams, adding it was still an "open question" whether monetary policy is restrictive enough to bring the economy back into balance.

The typically more dovish Chicago Fed boss Austan Goolsbee went one further. "We are very rapidly approaching the time when our argument is not going to be about how high should the rates go; it's going to be an argument about how long do we need to keep the rates at this position."

Dallas Fed chief Lorie Logan showed up for the hawks. "There is work left to do," she said.

People walk near an Apple logo outside its store in Shanghai, China September 8, 2023. REUTERS/Aly Song

The upshot was the rates market calmed a bit - with the odds on another Fed hike in the cycle falling back below 50% despite the red hot jobless claims readout.

That helped Treasury yields fall back too, aided by the stock market wobble and an oil price coming off the boil.

After six straight daily gains to its highest in six months, the dollar index took a breather too.

But the greenback continued to climb against China's onshore yuan, which hit another near 16-year low on Friday after this week's dour Chinese trade data, the ongoing property bust, a worrying sounding from its service sector and more credit easing in mortgages and loans.

China's August inflation report is due out on Saturday amid hopes it may pull out of a brief flirtation with headline price deflation.

Friday trading was disrupted by alarming weather again in Hong Kong, however. The stock exchange there halted trading in both securities and derivatives markets due to a black rainstorm warning.

Events to watch for on Friday:

* Federal Reserve issues quarterly financial accounts of the United States, U.S. July wholesale sales/inventories; Canada Aug employment report

* Federal Reserve Vice Chair for Supervision Michael Barr and San Francisco Fed President Mary Daly speak

* Leaders gather for weekend G20 Summit in New Delhi

* U.S. corporate earnings: Kroger

(By Mike Dolan, editing by Andrew Cawthorne; [e-mail]. Twitter: @reutersMikeD)

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