EMEA Morning Briefing: Shares to Start Mixed Ahead of Rate Decisions

MARKET WRAPS

Watch For:

Eurozone flash consumer confidence indicator; Bank of England rate decision; trading update from DS Smith

Opening Call:

Shares may open in mixed territory in Europe on Thursday. In Asia, stock benchmarks were mostly in the red; Treasury yields ticked up; the dollar consolidated; while oil was mixed and gold was steady.

Equities:

European shares are off to a mixed start on Thursday ahead of a raft of European interest-rate decisions, with investors remaining nervous ahead of France's snap elections.

Data showed U.K. inflation fell back to the Bank of England's 2% target for the first time in nearly three years in May, though price pressures in the services sector remained high. The data reinforced investors' expectations that the BoE will hold interest rates unchanged on Thursday.

The Swiss National Bank, which kick-started the continent's rate-cutting cycle in March, also meets Thursday. Investors are divided on whether it will cut rates again.

Norges Bank, Norway's central bank, also announces a decision on Thursday and is widely expected to hold interest rates at 4.5% and to reiterate that rates will stay unchanged for some time ahead due to elevated inflation and a solid economy.

Forex:

The dollar consolidated in Asia amid a lack of catalysts, mostly owing to the U.S. holiday on Wednesday.

There has been an absence of tier-one economic data, Maybank said.

However, the USD Index continues to be somewhat supported on dips owing to two factors--Fed officials' wait-and-see attitude as they seek comfort from benign inflation readings before deciding to cut rates, and EUR possibly staying under pressure because of uncertainty about France's snap elections, it said.

Bonds:

Treasury yields ticked higher in Asia after U.S. bond markets were closed for the Juneteenth holiday.

Political uncertainty in France is expected to maintain a floor under government bond spreads in the near term, not only in France but also in other vulnerable eurozone countries, Capital Economics said.

Further ahead, however, Capital Economics sees scope for spreads to fall back in Greece, Portugal and Spain, given the improving fiscal dynamics in those countries.

Energy:

Oil prices were mixed amid divergent signals.

Rising geopolitical tensions in Europe and the Middle East may continue to support prices on disruption risks to global supply chains, said EA Trading.

However, prices may be tempered by recent cautious remarks from the Fed on rates and inflation trends, it said.

Metals:

Gold was steady as investors await more cues from Fed officials on the U.S. central bank's future monetary policy path.

Recent comments from Fed officials have provided mixed signals over the timeline and pace of rate cuts in 2024 and 2025, which is capping any significant upswing in the precious metal's price, said Phillip Nova.

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Copper edged higher in Asia.

However, the metal may consolidate in the $9,500/ton-$10,500/ton range near term, owing to a more balanced market following increased scrap supply and reduced copper usage intensity for solar energy, Citi Research said.

The next leg higher for copper is expected to stem from a Fed rate cut and improving macroeconomic conditions renewing a tighter physical copper market with funds' purchases providing more tailwinds, it said.

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Iron ore rose, with the market likely supported by hopes of a recovery in Chinese steel demand, ANZ Research team said.

Beijing's property rescue package was introduced last month, while Shanghai, Shenzhen and Guangzhou all rolled out easing measures for home buyers, it said.

Higher crude steel production in May likely supported steel prices, and in turn iron ore prices, it added.

TODAY'S TOP HEADLINES

Jobless Claims Forecast to Decline From High Levels of Previous Week

Economists surveyed by FactSet forecast that 235,500 initial unemployment claims were filed for the week ended June 15. That would reflect a decrease from the previous week's 242,000, the highest level in 10 months.

Jobless claims reported for the week ended June 8 lifted the four-week moving average to 227,000 after it had trended roughly between 208,000 and 213,000 since February. If higher levels persist, that could point to a sustained softening in the labor market and prompt the Federal Reserve to speed up the timetable on interest rate cuts.

Why the Far Right Is No Longer an Existential Threat to Europe

Veterans of European crises got a sickening sense of deja-vu this past week.

After French President Emmanuel Macron called snap parliamentary elections, European stock markets sold off, the euro dipped and, most ominously, the yield on French government bonds jumped, with the spread over German yields hitting its highest since 2017.

Russia Says It Is Awaiting U.S. Response on Prisoner Swap

Russia said it is awaiting a response from Washington to its proposals for a possible exchange of prisoners, an apparent reference to U.S. citizens detained in Russia such as Wall Street Journal reporter Evan Gershkovich.

Russia's deputy foreign minister, Sergei Ryabkov, Wednesday told the state news agency TASS that "the ball is in the U.S.'s court, we are waiting for their response to the ideas that were presented to them."

How Putin Rebuilt Russia's War Machine With Help From U.S. Adversaries

WASHINGTON-Russia's military cooperation with Iran, North Korea and China has expanded into the sharing of sensitive technologies that could threaten the U.S. and its allies long after the Ukraine war ends, according to U.S. defense and intelligence officials.

The speed and depth of the expanding security ties involving the U.S. adversaries has at times surprised American intelligence analysts. Russia and the other nations have set aside historic frictions to collectively counter what they regard as a U.S.-dominated global system, they said.

Escalating Clashes Between Israel and Hezbollah Raise Risk of Wider War

Tensions heated up along Israel's Lebanese border, as the Israeli military approved a plan for a possible invasion of its northern neighbor and Hezbollah showed off what it said was drone surveillance of northern Israeli cities.

The Israeli military plans outline an assault into Lebanon should a larger-scale conflict between Israel and Hezbollah break out. The operation would need approval from the Israeli government. Hezbollah's video showed what it claimed were sensitive sites located miles inside Israeli territory and was perceived as a warning that the militant group has intelligence about where to strike Israel.

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Expected Major Events for Thursday

04:30/NED: May Unemployment

04:30/NED: Jun Consumer confidence survey

06:00/SWE: 1Q Financial accounts

06:00/GER: May PPI

06:00/SWI: May Trade Balance

06:00/EU: May New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)

06:00/DEN: Jun Consumer expectations

07:30/SWI: Swiss National Bank monetary policy assessment

08:00/ICE: May Harmonized CPI

08:00/POL: May Average gross wages

08:00/POL: May PPI

08:00/POL: May Industrial Production Index

08:00/NOR: Norges Bank monetary policy decision and presentation of Monetary Policy Report

08:30/GER: Ifo Economic Forecast

09:00/LUX: May Unemployment

09:00/MLT: May RPI

09:00/BEL: Jun Consumer Confidence Survey

10:00/POR: May PPI

10:00/UK: May Aluminium Production report

11:00/UK: Agents' Summary of Business Conditions

11:00/UK: UK interest rate decision

14:00/EU: Jun FCCI Flash Consumer Confidence Indicator

15:59/GRE: Apr Balance of Payments

17:59/POR: Mar ICSG Copper Report

23:01/UK: Jun UK Consumer Confidence Survey

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(END) Dow Jones Newswires

June 20, 2024 00:20 ET (04:20 GMT)

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