EMEA Morning Briefing: Shares Could Head Lower Amid Rate Anxiety

MARKET WRAPS

Watch For:

Unemployment data for EU, Italy; EU business & consumer surveys; trading updates from Auto Trader, SAS

Opening Call:

Shares seem set to retreat in Europe on Thursday. In Asia, stock benchmarks were in the red; Treasury yields were little changed; the dollar consolidated; while oil and gold both fell.

Equities:

European shares could head lower on Thursday after U.S. bond yields climbed to their highest level in a month amid growing expectations the U.S. Federal Reserve will hold rates higher for longer.

Investors continue recalibrating how the Fed might move on interest rates this year.

Investors now see a 54% chance the Fed keeps rates unchanged through its next three meetings, according to the CME FedWatch tool, up from 42% a week ago.

Forex:

The dollar consolidated in Asia, but may be supported by higher Treasury yields which boost the allure of U.S. fixed-income assets and demand for the greenback.

The dollar gets a double boost from higher Treasury yields and risk aversion, said NAB.

The rise in core global yields, together with apparent stalling progress on inflation, has dented sentiment, NAB added.

Bonds:

Treasury yields were barely changed in Asia after finishing at their highest levels in about a month on Wednesday, as another Treasury auction was met with poor demand and as concerns grow that the Fed may have to keep interest rates higher for longer.

Investors worry that demand for Treasurys may not keep up with supply, pressuring yields higher.

Economists surveyed by The Wall Street Journal forecast weekly jobless claims later in the day to rise to 218,000 from 215,000, which would be a sign of easing labor markets.

First-quarter GDP estimate is expected to be reduced to 1.2% from 1.6%. PCE inflation, due Friday, is expected to slow slightly.

Energy:

Oil ticked lower amid a cautious mood ahead of the OPEC+ meeting this weekend.

The group is expected to decide to extend oil production cuts, said XTB MENA.

However, the lack of such a decision could prove to be a significant disappointment for the oil market, it said, adding that compliance of output cuts with imposed limits is also important.

Metals:

Gold edged lower in Asia, with market participants shifting attention to the upcoming U.S. personal consumption expenditures data, the Fed's preferred inflation gauge, set to be released on Friday.

This data will be closely watched for indications of the Fed's forthcoming actions, with a reading above expectations expected to place additional downward pressure on gold prices, said online trading platform Exness.

"At the same time, central bank and Chinese purchases could continue to support gold prices in the medium term, with strong purchases witnessed in the first quarter," it said.

---

Aluminum rose, buoyed by property support measures announced by Beijing and new data suggesting a resilient U.S. economy, said ANZ.

It points out that the S&P Global flash May composite purchasing managers index rose more than 3 points to 54.4, its highest level since April 2022, indicating accelerated business activity in the U.S.

---

Iron ore fell in possible profit-taking after gains on Wednesday.

Investors are likely weighing efforts by the Chinese government to support the property sector to offset ample supply of iron ore, the ANZ Research team said.

TODAY'S TOP HEADLINES

U.S. economy keeps growing, Fed's Beige Book says, but businesses are less gung-ho

The U.S. economy expanded in the late spring, a Federal Reserve survey found, but persistent inflation, high interest rates and political uncertainty caused businesses to turn "somewhat more pessimistic."

The latest findings in the Beige Book suggest the economy is unlikely to speed up until inflation slows further and the Fed is able to cut high U.S. interest rates.

Meta Takes Down 'Inauthentic' Accounts on Facebook, Instagram Linked to Israeli Firm

Meta Platforms said its security team took down a network of hundreds of fake accounts on Facebook and Instagram linked to an Israeli technology firm that apparently used AI-generated comments to praise Israel and criticize campus antisemitism.

A network of more than 500 Facebook accounts and 32 Instagram accounts linked to an Israeli digital marketing and business-intelligence firm left comments on the pages of media organizations as well as political and public figures, including U.S. lawmakers, Meta said. The accounts posed as U.S. and Canadian locals, including Jewish students and African-Americans, but were actually fake or compromised.

Israel Says It Gains Control of Gaza Border With Egypt as Rafah Offensive Advances

Israel said it has secured control of Gaza's southern border with Egypt, achieving a key goal of the Rafah offensive as it seeks to eliminate Hamas without crossing red lines set by President Biden.

Israeli officials say taking control of the roughly 9-mile border, known as the Philadelphi Corridor, will allow Israel to prevent Hamas from rearming by smuggling weapons through tunnels that reach into Egypt. Israel last controlled the corridor in 2005, before relinquishing control of the enclave to the Palestinians.

BHP Abandons $50 Billion Anglo American Deal

BHP Group is walking away from its roughly $50 billion takeover bid for Anglo American after failing to convince its rival to further engage in talks on what would have been the largest-ever mining deal.

The Australian mining giant said Wednesday that it didn't intend to make a firm offer for its London-listed rival because the companies were unable to come to an agreement on how to handle regulatory risks and costs generated by the deal. Anglo had hours earlier rejected a request from BHP to extend a deadline under U.K. takeover rules for making a firm offer, saying it still had concerns about the structure of the all-share proposal.

BHP-Anglo Deal Is Off-the Mining Land Grab Is Still On

Mining's big deal is officially off, but an expensive race to reshape mining portfolios for a new era may be just getting started.

Iron-ore giant BHP said Wednesday that it wouldn't mount a formal offer for U.K.-listed Anglo American following a five-week courtship. Under Britain's takeover rules, BHP is now barred from approaching the company for six months.

Proxy Advisor Endorses Pay Package for Tesla CEO Elon Musk

A proxy advisor said shareholders should approve a pay package for Tesla CEO Elon Musk.

The electric vehicle maker's annual shareholder meeting is June 13, and shareholders are voting whether to reinstate Musk's 2018 pay package worth some $56 billion at the time of the award. In January, a Delaware judge voided the package citing inadequate disclosure for investors voting on the compensation.

Write to singaporeeditors@dowjones.com

Expected Major Events for Thursday

04:30/NED: May Producer confidence survey

04:30/NED: Apr PPI

05:00/FIN: Apr Retail sales

06:00/DEN: Apr Central Government Finance & Debt

06:00/SWE: 1Q GDP

06:00/DEN: Apr Unemployment

06:00/SWI: Apr Trade Balance

06:45/FRA: Apr Housing starts

07:00/SWE: May Monthly Business Tendency Survey

07:00/SWE: May Consumer Tendency Survey

07:00/SVK: May Business tendency survey

07:00/SVK: May Economic sentiment indicator

07:00/SWI: May KOF economic barometer

07:00/SPN: May Flash Estimate CPI

07:00/TUR: Apr Foreign Trade

07:00/SWI: 1Q GDP

08:00/ICE: May CPI

08:00/BUL: Apr PPI

08:00/ITA: Apr Unemployment

09:00/CYP: Mar Industrial Production Index

09:00/ITA: Apr PPI

09:00/GRE: Apr PPI

09:00/EU: May Business & Consumer Surveys - Business Climate Indicator & Economic Sentiment Indicator

09:00/MLT: Apr PPI

09:00/EU: Apr Unemployment

09:00/GRE: Apr Labour Force Survey

09:30/BEL: May CPI

15:59/UKR: Apr Industrial Production

23:01/UK: May BRC-Sensormatic IQ Footfall Monitor

All times in GMT. Powered by Onclusive and Dow Jones.

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

May 30, 2024 00:15 ET (04:15 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.