News updates from July 3: Fed minutes show slowing inflation; US stocks close at record highs for second straight day

A US federal court has postponed the implementation of a rule crafted by the Federal Trade Commission that bans virtually all non-compete agreements in the country, in a narrow ruling that only applies to plaintiffs in the case, including the US Chamber of Commerce.

A Texas district court judge on Wednesday blocked the rule and postponed its “effective date” of September 4, on the basis that the antitrust regulator “lacks substantive rulemaking authority with respect to unfair methods of competition”.

The move only applies to the US Chamber of Commerce; Business Roundtable, a large American business group; a tax services company; as well as a Texas-based chamber of commerce and trade association. The rule is set to go into effect for all other parties as scheduled.

An FTC spokesperson said: “The FTC stands by our clear authority, supported by statute and precedent, to issue this rule. We will keep fighting to free hardworking Americans from unlawful noncompetes, which reduce innovation, inhibit economic growth, trap workers, and undermine Americans’ economic liberty.”

A conservative-backed lawsuit challenging three New York City employee pension funds over their decision to sell billions of dollars in fossil fuel investments has been thrown out by a state court judge.

The ruling, which was made public on Wednesday, held that the city employees who sued, and the advocacy group that backed them, could not challenge the divestment decision because they had not suffered any direct harm.

The case, filed in 2022, is part of a flurry of litigation about socially conscious investing.

While liberal lawyers have sought to force pension funds to take action to stop climate change, the New York case was one of the first to try to stop or reverse such actions. It has been closely watched, in part because it was brought by a legal team headed by Eugene Scalia, a leading conservative attorney and son of late US Supreme Court justice Antonin Scalia.

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US stocks finished at record highs for the second day in a row in a shortened trading session ahead of the July 4 public holiday.

The S&P 500 closed 0.5 per cent higher on Wednesday, with the utilities and materials sectors finishing as the benchmark index’s top performers. The Nasdaq Composite gained 0.9 per cent.

Treasuries rallied as economic data from earlier in the morning pointed to a cooling US labour market, raising hopes for interest rate cuts this year. Minutes from the Federal Reserve’s most recent policy-setting meeting were set to be released later this afternoon and may provide further insight in the central bank’s thinking.

The releases come ahead of the important non-farm payrolls report on Friday.

The yield on the 10-year bond slipped 0.09 percentage points to 4.35 per cent. The two-year note’s yield fell 0.06 percentage points to 4.69 per cent.

Joe Biden was set to sit down with Kamala Harris and a group of influential Democratic governors on Wednesday, as speculation swirled over whether the president would ditch his re-election bid in favour of his vice-president.

The White House and the Biden campaign have for days insisted the president will stay in the race after a disastrous debate performance last week.

But mounting pressure from lawmakers, party operatives and donors urging him to quit the race, and a series of damaging polls, have cast fresh doubt on his campaign.

A New York Times report on Wednesday quoted an anonymous key ally saying that Biden was aware that his re-election bid was now in peril, with much riding on forthcoming public appearances.

A White House spokesperson called the New York Times report “absolutely false”.

European stocks rallied on Wednesday and the euro strengthened against the dollar as a flurry of weak US economic data boosted the chances of Federal Reserve interest rate cuts later this year.

The region-wide Stoxx Europe 600 rose 0.8 per cent, boosted by real estate groups, industrials and basic materials. Germany’s Dax gained 1.2 per cent and London’s FTSE 100 rose 0.6 per cent. France’s Cac 40 rose 1.2 per cent, with 39 of its 40 constituent stocks ending the day in positive territory.

Germany’s 10-year Bund, the Eurozone’s benchmark, fell 0.04 percentage points to 2.56 per cent. The euro rose 0.5 per cent against the dollar to $1.0801.

Activity in the US services sector slowed to a four-year low, as business activity and new orders weakened as demand softens.   

The Institute for Supply Management said its index tracking the services sector fell to 48.8 last month from 53.8 in May. That was the lowest level since May 2020 and missed economists’ forecasts of 52.5. A reading below 50 indicates a contraction of activity.

“Survey respondents report that in general, business is flat or lower, and although inflation is easing, some commodities have significantly higher costs,” said ISM chair Anthony Nieves. 

Business activity contracted for the first time since May 2020, while an index measuring new orders contracted for the first time since December 2022.

US stocks made small gains on Wednesday after Federal Reserve chair Jay Powell hailed “really good progress” in the fight against inflation.

Wall Street’s benchmark S&P 500 added 0.1 per cent shortly after the opening bell in New York, while the tech-dominated Nasdaq Composite rose 0.2 per cent. Both indices are trading at record highs. 

The benchmark 10-year Treasury yield declined 0.03 percentage points to 4.4 per cent, as the price of the debt rose. The interest rate policy-sensitive two-year yield was steady at 4.73 per cent.

A measure of the dollar’s strength against a basket of six other major currencies fell 0.3 per cent. 

The US trade deficit rose in May to its highest level since October 2022, as exports struggle due to a strong dollar and diminished global demand.

The balance of goods and services deficit increased to $75.1bn, up from a revised $74.5bn the previous month and $66.1bn year on year.

The figures come amid a race for the White House in which both candidates have pledged to raise tariffs. President Joe Biden has imposed levies on Chinese technologies such as solar panels and semiconductors, while Donald Trump has suggested a blanket 60 per cent charge on Chinese imports and 10 per cent on all other imports. The deficit with China increased by $1.9bn.

Business leaders and donors who belong to Leadership Now, a non-profit dedicated to renewing US democracy, have urged Joe Biden to pass this year’s presidential nomination to “the next generation of highly capable Democrats” to avoid the threat of a second Donald Trump term in office.

Eighty per cent of Leadership Now members now want a new Democratic nominee, the group’s chief executive Daniella Ballou-Aares told the Financial Times. “I know many are considering not writing additional cheques.”

Leadership Now, which issued a statement on Wednesday calling for Biden to “pass the torch” to colleagues, is working with others to try to send a co-ordinated message. “We are engaging with a large number of business and civic leaders who are deeply concerned about the risks to democracy and believe that Biden has a historic opportunity to do the right thing for America by stepping aside for a new nominee,” Ballou-Aares said.

“The suggestion that this a very narrow decision to be made by the president and his family is very damaging for democracy.”

Marko Kolanovic will leave his role as JPMorgan’s chief global markets strategist, ending a 19-year stint that culminated in a series of mistimed calls on the US stock market.

Kolanovic, also the bank’s co-head of global research, was among the few bearish strategists left on Wall Street, having recently forecast that the S&P 500 would tumble by almost 25 per cent from current levels by year-end.

Once dubbed “the man who moves markets” by CNBC and “Gandalf” by Bloomberg, Kolanovic’s star has fallen in recent years on a series of contrarian and ultimately mistimed calls on the direction of the S&P 500.

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The US labour market continues to show some signs of cooling, according to the latest data on US jobless claims and private sector employment, as traders prepare for Friday’s crucial non-farm payrolls report.

Private sector employers added 150,00 jobs in June, ADP reported on Wednesday, slipping from an upwardly revised 157,000 positions in May. Economists polled by LSEG expected 160,000 roles to have been added last month.

“Job growth has been solid, but not broad-based,” ADP chief economist Nela Richardson said. “Had it not been for a rebound in hiring in leisure and hospitality, June would have been a downbeat month.”

Separately, new applications for unemployment aid totalled 238,000 in the week ended June 29, the labour department said, from 234,000 in the previous seven-day period. Economists had expected 235,000 jobless claims.

At least five people were killed and 34 injured in a Russian missile and drone attack on the Ukrainian city of Dnipro on Wednesday, according to state and local authorities.

Dnipro mayor Borys Filatov and regional head Serhiy Lysak reported that several residential and commercial buildings, including schools and kindergartens, were badly damaged in the attack. 

A video shared by President Volodymyr Zelenskyy showed one missile striking the city and exploding into a ball of flames.

“Only two things can stop this Russian terror,” Zelenskyy said. “Modern air defence systems and the long-range capabilities of our weapons.”

The Ukrainian president has repeatedly pleaded with western partners to fast-track deliveries of any available air defence systems and munitions to help protect Ukraine’s cities and critical infrastructure after Russia stepped up its aerial campaign in March. 

A case against the former leader of Northern Ireland’s Democratic Unionist party over 18 historic sex offences charges will go forward to crown court, with an arraignment hearing set for September 10, a court has heard.

Sir Jeffrey Donaldson, who resigned as leader of the pro-UK party after his arrest in March, was asked in Newry magistrates court on Wednesday if he wanted to enter a plea, Donaldson said: “Not at this stage.” He has previously said he will strenuously contest the charges.

His wife, Lady Eleanor Donaldson, answered “no” to the same question. She faces five charges of aiding and abetting.

The hearing came on the eve of the UK general election in which the DUP faces several tough battles.

Fed minutes: Minutes from the policy-setting Federal Open Market Committee’s June meeting will be pored over by Fed watchers looking to gauge whether the central bank plans to begin cutting interest rates this year. 

US private payrolls: ADP will release its US employment report for June, which will give insight into the labour market ahead of the official government figures on Friday. Private employers are expected to have added 160,000 jobs in June, compared with an increase of 152,000 jobs in May. 

Constellation Brands: The beer and tequila group is expected to report another quarter of solid revenue and net income growth, thanks in large part to the continued success of its Modelo beer label. Investors will be keen to get a reading on consumer sentiment as well as what the company might do to improve its wine and spirits divisions, where revenues have shrunk.

Other economic data: The pace of expansion in the vast US services sector is expected to have cooled in June, according to economists’ predictions for the Institute for Supply Management’s non-manufacturing purchasing managers’ index. Elsewhere, factory orders data is forecast to have shown that manufacturing activity grew in May.

Wall Street: The US stock market will close early, at 1pm ET, ahead of Thursday’s public holiday.

Oil prices have risen to trade around a two-month high, as refineries gear up for the summer driving season and traders fret over renewed tensions in the Middle East. 

International benchmark Brent crude edged up to as high as $86.83 on Wednesday, having gained nearly $10 a barrel since the beginning of June. The US equivalent, West Texas Intermediate, advanced above $83. 

Ahead of the latest data on crude stocks from the US Energy Information Administration, analysts at Energy Aspects said they expected refineries to draw more than 2mn barrels a day from inventories in the third quarter. That would more than reverse the build-up of stocks in the first half of the year. 

Big share price moves in Europe today include German defence company Rheinmetall, Swedish private equity firm EQT and Dublin-based housebuilder Cairn Homes:

• Rheinmetall: Shares in the German defence company advanced 4.3 per cent after a German newspaper reported Italy had placed a €20bn order for tanks.
  

  

• EQT: Shares in the Swedish private equity firm dipped 2.2 per cent after it reached a deal to buy video game services provider Keywords Studios for £2.1bn. 

• Cairn Homes: Shares in the London-listed housebuilder surged 5.3 per cent after the Dublin-based company announced a €45bn share buyback programme.

European equities rose in early trade on Wednesday after tech stocks powered US indices to fresh closing highs in the previous session.

The region-wide Stoxx Europe 600 gained 0.6 per cent, boosted by banks and consumer non-cyclicals. Germany’s Dax rose 0.6 per cent, France’s Cac 40 rose 0.9 per cent and London’s FTSE 100 added 0.5 per cent. 

Contracts tracking Wall Street’s blue-chip S&P 500 and the tech-dominated Nasdaq 100 were steady ahead of the New York open. On Tuesday the S&P 500 rallied 1 per cent and closed above 5,500 for the first time thanks to large gains for large tech stocks.

Mike Zigmont, at Harvest Volatility Management, said: “This is the longest and strongest and smoothest rally in a handful of market-leading stocks that I can remember.”

Turkey’s inflation rate has cooled for the first time in eight months, bolstering policymakers’ hopes that a cost of living crisis is easing a year after Ankara launched a sweeping economic turnaround plan.

Consumer prices rose 71.6 per cent in June from the same month in the previous year, marking a slowdown from a nearly two-year high of 75.5 per cent in May. The drop was sharper than the fall to 72.5 per cent forecast by economists in a FactSet poll.

The decline signals how Turkey’s pivot away from unconventional policies are starting to bear fruit. The central bank has gradually hoisted its main interest rate to 50 per cent from 8.5 per cent last June, as it attempts to stomp out runaway price growth.

Vodafone UK and Virgin Media O2 have agreed a new long-term network sharing deal, which could ease one of the UK competition regulator’s concerns about the proposed domestic merger between Vodafone and CK Hutchison’s Three UK.

The Competition and Markets Authority in March said it was concerned that the merged business “may have the ability and incentive to disrupt the effective functioning” of two network sharing arrangements when outlining its plan to refer the proposed tie-up to a full-blown investigation.

BT’s consumer division EE and Three UK have a separate network sharing agreement.

The new deal extends the current agreement between Vodafone UK and Virgin Media O2 for more than a decade.

Keywords Studios, the video game services provider that has worked on blockbuster titles including Fortnite and League of Legends, has reached a takeover deal with private equity firm EQT that values the business at £2.1bn, having rebuffed four earlier bids from the group. 

The acquisition price of £24.50 per share represents a 66.7 per cent premium to Keywords’ closing price at the start of the offer period on May 17, but is lower than Swedish firm EQT’s earlier £25.50 per share bid. Dublin-based Keywords reported in June that some of its projects were delayed or cancelled.

Keywords reported record revenues of €780mn in 2023, up 13 per cent year on year, while its pre-tax profit plunged 49 per cent to €35mn.

GSK has reached a licensing agreement with mRNA vaccine developer CureVac worth up to €1.4bn to develop its vaccines for flu, Covid-19 and avian flu.

The British pharmaceutical company has an existing collaboration with the German vaccine maker but it will pay €400mn to CureVac to take full control of developing vaccines under the agreement. There could also be an additional €1.05bn in milestone payments linked to sales and development of the jabs, as well as royalties.

Nasdaq-listed CureVac will retain the rights to develop its other vaccine candidates, including a cancer vaccine in early development.

India’s benchmark index hit a record high on Wednesday morning, buoyed by a jump in the share price of the country’s largest private bank.

The Nifty 50 added 0.7 per cent in early trading, driven higher by a 3.2 per cent rise in HDFC Bank, the index’s largest constituent.

US index-maker MSCI is expected to increase its weighting for HDFC in the MSCI Emerging Markets index, which investors anticipate will lead to a higher share price.

Elsewhere in Asia, China’s offshore currency fell to Rmb7.31 per dollar after the country’s central bank continued weakening the renminbi-dollar daily fixing rate.

Hong Kong stocks led gains in the region as Chinese tech and property companies listed in the city rallied.

Eurozone services activity: The final reading for the bloc’s services purchasing managers’ index will be released by S&P Global. Analysts polled by Reuters predict a June reading of 52.6, in line with the flash estimate, and compared with 53.2 in the previous month. A reading above 50 indicates businesses reporting an expansion in activity. S&P will also publish PMI services data for the UK, which analysts predict will come in at 51.2. 

Russian central bank: The bank’s Financial Congress event will include its governor Elvira Nabiullina as a speaker.

Poland: Interest rate decision. Analysts predict the rate will be held at 5.75 per cent. 

Hong Kong shares of China Tourism Group Duty Free surged 15 per cent on Wednesday, buoyed by the recent announcement of a higher duty free limit for mainland tourists visiting Hong Kong.

On Monday the duty-free allowance for mainland Chinese shopping in Hong Kong and Macau rose from Rmb5,000 to Rmb12,000 ($1,650) after China’s Ministry of Commerce announced the policy on Friday.

Despite the jump in CTG’s share price, its Hong Kong shares are down more than 28 per cent for 2024.

Mainland shares of CTG rose 10 per cent. Although the Hong Kong shares of CTG outperformed their mainland counterpart, they remain significantly cheaper, with a discount of 25 per cent.

China’s services sector grew less than expected last month, according to a private business survey published on Wednesday.

The Caixin services purchasing managers’ index stood at 51.2 in June, down from 54.0 in May.

A Bloomberg poll of five economists estimated a reading of 53.4. A figure above 50 indicates expansion from the previous month.

The Caixin services PMI has indicated expansion in every month since the country ended its zero Covid policy in January 2023.

China’s benchmark CSI 300 index dipped 0.4 per cent, the only major Asian index to register a loss in early trading.

Asian currencies slid against the US dollar in early trading on Wednesday, while equities in the region were mixed.

The Indonesian rupiah led losses as it weakened 0.4 per cent. The Korean won lost 0.2 per cent and the Thai baht dropped 0.1 per cent. Japan’s yen shed 0.1 per cent to ¥161.60.

In China the central bank set the daily midpoint of the country’s currency at Rmb7.13 per dollar, its weakest level since November. The renminbi is allowed to trade within 2 per cent of the daily fixing rate.

Mainland China’s CSI 300 index was the only major index to decline following a weaker than forecast Caixin services purchasing managers’ index.

Events: This year’s summit of the Shanghai Cooperation Organisation begins in the Kazakhstan capital of Astana. An expo on the green economy begins in Jakarta.

Economic data: China’s Caixin services purchasing managers’ index for June is due to be announced. Australia releases data on retail sales and building approvals for May.

Japanese banknotes: Japan begins circulating its first new banknotes in 20 years. The notes feature three-dimensional designs meant to prevent counterfeiting.

Corporate updates: Hyundai Motor Group and LG Energy Solution inaugurate their first electric vehicle battery plant in Indonesia. Japanese convenience store operator Lawson holds an extraordinary meeting to resolve share consolidation after KDDI’s takeover bid.

US stocks closed at record highs on Tuesday, with gains for big tech groups propelling major indices past fresh milestones.

The S&P 500 ended the session up 0.6 per cent, closing above 5,500 points for the first time. The Nasdaq Composite rose 0.8 per cent, the first time it finished higher than 18,000 points.

Heavyweight tech companies contributed to those gains, with Apple and Amazon adding 1.6 per cent and 1.4 per cent respectively, while Tesla advanced more than 10 per cent after posting a quarterly sales rebound.

US equity and bond markets will be shut on Thursday for the July 4 holiday.

China’s coast guard has confiscated a Taiwanese fishing vessel near the Taipei-controlled island of Kinmen, according to the Taiwan government, in a sharp escalation of tensions between the two sides.

Taiwan’s coast guard said the captain of the Ta Chin Man 88 called it for help on Tuesday night after the Chinese coast guard stopped and boarded his vessel for inspection while he was fishing north-east of Kinmen, off China’s coast.

Taiwanese coast guard ships sent to provide emergency assistance to the fishing boat were blocked by Chinese coast guard vessels and told not to interfere.

“In order not to escalate the conflict, the pursuit was aborted,” Taiwan’s coast guard said.

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Eli Lilly is gearing up to launch its breakthrough Alzheimer’s drug at a price 20 per cent higher than a medicine produced by rival drugmakers after US regulators on Tuesday approved the treatment for use in early-stage patients. 

Kisunla, known scientifically as donanemab, will be sold at list price of $32,000 per year, more than rival treatment Leqembi, which was developed jointly by Biogen and Eisai and costs $26,500 per year.

Kisunla will enter the US market a year after Leqembi, the first fully approved medicine to treat the neurodegenerative disease, was launched. 

US President Joe Biden will address a group of Democratic governors on Wednesday, as concerns mount about his fitness for office in the wake of a disastrous debate performance against Donald Trump.

CNN reported earlier on Tuesday that several Democratic governors were seeking a meeting with the White House to discuss their concerns.

The effort was being led by Minnesota governor Tim Walz, according to CNN. The White House did not immediately respond to a request for comment.