A look at the day ahead in U.S. and global markets from Mike

Dolan

Seeking some calm, markets remain edgy following the volatility

jolt of the past week and traders now seek some re-assurance the

real economy has not shifted underneath them.

Volatility spikes like the one seen on Monday rarely

disappear instantly and, with the VIX 'fear gauge' still

above historical averages of about 20, some turbulence remains.

At less than half Monday's peak, however, some healing is

underway.

The jangled nerves were evident on Wednesday as an initial

bounce in Wall St stocks faded by the close, with anxiety fed by

another red flag on the artificial intelligence theme from Super

Micro's poor results and after a messy 10-year Treasury auction.

To be sure, the 10-year note sale was allocated

at 3 basis points above pre-auction levels and demand at 2.32

times the paper on offer was the lowest in almost two years. But

that mostly reflected the week's sudden swoon in yields below 4%

and the $42 billion sale went off with funding for Treasury

almost 15bp cheaper than it would have got a week ago.

Some $25 billion of 30-year bonds are up for grabs later on

Thursday and provide the latest test - with the 2-to-30-year

Treasury yield curve now positive to the tune of 27bps, having

hit its steepest in two years on Monday. The 2-to-10 curve

remains slightly inverted.

Attention now turns back to whether the U.S. labor market is

weakening at a pace that Friday's payrolls report suggested and

the release on Thursday of the weekly jobless claims report

takes on elevated significance for markets still largely priced

for a Federal Reserve rate cut of up to 50bps next month.

New unemployment claims have been rising and hit their

highest since August last year in the most recent week.

Stock futures were steady ahead of the open

today, however, with the VIX remaining below 30.

European and Asian benchmarks were slightly lower

- but with far less movement than earlier in the week. China's

mainland index was marginally higher.

It was nervy still in Japan - the epicentre of much of the

past week's angst due to unwinding short yen 'carry trades' that

seeded wild 10%-plus swings in the Nikkei stock index.

But with a loss on Thursday of less than 1%, it appeared almost

serene by comparison with Monday and Tuesday.

There were some concerns from the minutes of last week's

rate-raising Bank of Japan meeting, which showed board members

calling for the need to keep raising interest rates.

But that was recorded before the market turbulence that has

since seen BOJ top brass say they would stall on that if it were

just to fuel more market disruption.

And Finance Minister Shunichi Suzuki said on Thursday the

authorities were closely watching stock market developments,

even if not yet planning specific actions yet.

With estimates that most of the outstanding yen carry trades

had now been unwound, the dollar/yen exchange rate steadied and

retained a perch above 146. The dollar index more broadly

edged lower as two and 10-year Treasury yields subsided once

more in early trading on Thursday.

In earnings, there will be a close look at pharma giant Eli

Lilly's results.

European rival Novo Nordisk on Wednesday reported

weaker-than-expected quarterly sales of its popular weight-loss

drug Wegovy, stirring worries among investors about stiffening

competition from Eli Lilly and sending its shares down 8%.

Novo is spending billions of dollars to lift Wegovy

production to meet demand and fend off Lilly, which launched its

rival therapy Zepbound in the U.S. last December. While the two

companies are now going head-to-head with obesity treatments in

a number of markets - the most lucrative one by far is the U.S.,

where more than 70% of adults are obese or overweight.

Key developments that should provide more direction to U.S.

markets later on Thursday:

* US weekly jobless claims, June wholesales sales; Mexico July

inflation

* Richmond Federal Reserve President Thomas Barkin speaks

* Central Bank of Mexico policy decision

* US corporate earnings: Eli Lilly, Gilead Sciences, News Corp,

Paramount Global, Expedia, Insulet, Solventum, Take-Two

Interactive Software, Akamai Technologies, Epam Systems,

Viatris, Martin Marietta Materials, Parker-Hannifan, NRG Energy,

Vistra

* US Treasury sells $25 billion of 30-year bonds, $95 billion of

4-week bills

(By Mike Dolan; Editing by Toby Chopra

[email protected])