EMEA Morning Briefing: Investors Await Fresh Stock Catalysts

MARKET WRAPS

Watch For:

No major economic or corporate events expected

Opening Call:

European stock futures were lower ahead of Tuesday's open. Asian stock benchmarks advanced; the dollar and Treasurys steadied; while oil and gold futures edged lower.

Equities:

Stock futures fell early Tuesday after a mixed day on Wall Street amid concerns that a tech rally may be losing steam.

Markets continue to watch for moves in French assets, with traders remaining cautious ahead of the first round of French legislative elections on Sunday.

Key U.S. economic data due later this week and the upcoming slate of Federal Reserve speakers are also in focus. The week's most anticipated report will come Friday, when the U.S. Commerce Department will release data on personal income and spending as well as the Fed's favored inflation gauge, the personal-consumption expenditures price index.

Forex:

There is room for the USD to come off should U.S. PCE be in line with consensus, which would suggest further progress towards the Fed's 2% target, Maybank said.

"We argue that weaker JPY, CHF and the EUR drove much of the gains of the greenback in recent sessions given dovish policy outcomes for BoJ and SNB," Maybank said, adding that "sufficiently strong" intervention to prop up JPY may help soften the DXY index.

However, Maybank said "the stars are not aligned for a swift USD decline as French, UK election uncertainties continue to provide the greenback support on dips."

Bonds:

The week in bond markets got off to a quiet start on Monday amid a dearth of new market catalysts, although political risks in the U.S., U.K. and France loom large over the next few weeks.

Traders are watching for the May reading of the personal-consumption-expenditure price index, the Fed's favored inflation gauge, which is due Friday.

"The second revision to first quarter GDP will be released on Thursday and income, consumption and the PCE deflator are on Friday. May PCE inflation is expected to be unchanged headline and up just 0.1% core, reflecting the same kind of moderate price pressure evident in the CPI," said Chris Low, chief economist at FHN Financial.

Energy:

Oil futures fell slightly early Tuesday, as traders focused on signs of escalating geopolitical tensions. Russia blamed the U.S. for a Ukrainian missile strike on occupied Crimea and warned of unspecified consequences, ANZ noted. Meanwhile, the European Union imposed sanctions on more than two dozen vessels, including 17 that hauled oil for Moscow, ANZ said.

Metals:

Gold edged lower in Asia, though analysts remain positive on the precious metal over the long run despite a recent dip. Investors are awaiting U.S. PCE price index data due Friday for more clues on the timing and extent of Fed rate cuts.

UOB expects renewed ETF buying to propel gold higher once the Fed starts its anticipated rate cuts from September. Gold could reach $2,400/oz by 3Q, UOB added.

-

While unrest in New Caledonia is clouding the near-term outlook for global nickel supply, Indonesia will remain the center of attention for nickel supply growth, Commonwealth Bank of Australia said.

Indonesia's nickel pig iron output fell 4.9% on quarter in 1Q, and ore supply issues may result in more downgrades to the International Nickel Study Group's surplus forecast "if mining quotas don't pick up more aggressively in H2 2024," CBA added.

Indonesia's nickel industry has otherwise experienced explosive growth in recent times, swamping the global market. "Near-term supply disruption risks aside, Indonesia's ability to further integrate supply chains still looms as a key risk in lowering nickel costs and keeping nickel markets well supplied in coming years," CBA said.

-

Iron ore fell as traders digested steel output data. Global steel production rose 1.5% on year to 165.1 million tons in May, according to the World Steel Association, following increased output from major producers such as China, India and Turkey, ING said.

For the first five months of 2024, global steel output was nearly flat at 793.2 million tons, ING noted.

TODAY'S TOP HEADLINES

Fed's Goolsbee lays out dovish case for rate cuts, flags 'a couple of warning signs' for economy

Federal Reserve Bank of Chicago President Austan Goolsbee on Monday laid out a dovish case for considering potential cuts in interest rates in coming months.

In an interview on CNBC, Goolsbee said there are new signs of stress on the economy that should make the U.S. central bank at least wonder if its policy rate needs to be as high as it currently is.

Fed Official Says High Interest Rates Still Needed to Lower Inflation

San Francisco Federal Reserve President Mary Daly sees more work for higher interest rates to do to slow demand and inflation in the U.S. economy. She said the Fed is ready to respond to both a softening labor market that needs a boost and to inflation remaining stuck above its target-but it's unclear which scenario is more likely.

For now, interest rates aren't going anywhere, Daly said in remarks before the Commonwealth Club World Affairs of California on Monday. "The bumpiness of inflation data so far this year has not inspired confidence, " She said. "Recent readings are more encouraging, but it is hard to know if we are truly on track to sustainable price stability."

Bank stocks gain after report about lighter capital requirements

Bank stocks gained Monday after Bloomberg News reported that the U.S. Federal Reserve is circulating a lighter version of its proposed capital requirements that have drawn opposition from the industry.

The report said the Federal Reserve is sharing with other regulators a three-page list of potential revisions to the so-called Basel III endgame proposal that has been under study since last year.

EU Hits Russia With First Sanctions on LNG Shipments

The European Union slapped a raft of new sanctions on Russia over its full-scale invasion of Ukraine, targeting the Kremlin's liquefied natural gas shipments for the first time.

The sanctions package-the 14th since the outbreak of the war in 2022-bans the re-export of Russian LNG shipments destined to third countries through EU ports, covering ship-to-ship and ship-to-shore transfers, as well as re-loading operations.

Airbus to Miss Plane-Delivery Annual Goals, Citing Technical Challenges

Airbus said it won't be meeting its annual targets for the year, including the number of commercial aircraft it planned to deliver, after its space-systems management team identified further commercial and technical challenges.

The European plane maker on Monday said that it will also book charges of about EUR900 million ($962.5 million) in the first half of 2024 following an extensive review of its space-systems programs.

Boeing Talks to Buy Back Spirit AeroSystems Have Last-Minute Twist

Boeing has proposed funding its acquisition of partsmaker Spirit AeroSystems with stock rather than cash, according to people familiar with the matter, a last-minute twist in deal talks that comes as the jet maker burns through more than $1 billion a month.

Boeing and Spirit, a jet fuselage maker it split off two decades ago, were closing in on an all-cash deal this weekend when Boeing switched to an offer consisting largely of company stock.

Novo Nordisk to Invest $4.1 Billion in New Facility in North Carolina

Novo Nordisk plans to invest $4.1 billion to build a second fill and finishing manufacturing facility in Clayton, N.C., as demand for weight-loss drugs show no signs of letting up.

The Danish drug maker - known for its weight-loss drugs Wegovy and Ozempic - said the new plant would be its largest in the state, doubling the combined square footage of its three existing facilities.

Write to singaporeeditors@dowjones.com

Expected Major Events for Tuesday

06:00/NOR: May Credit Indicator C2

07:00/SPN: 1Q Final GDP

07:00/SPN: May PPI

08:00/POL: May Unemployment

09:00/LUX: Apr Trade

15:59/UKR: 1Q Unemployment

15:59/UKR: May PPI

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

June 25, 2024 00:17 ET (04:17 GMT)

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