EMEA Morning Briefing: Shares Set to Rise Ahead of U.S. PCE Data

MARKET WRAPS

Watch For:

Germany unemployment; France CPI, consumer spending; Italy CPI; UK balance of payments, GDP, business investment; no major corporate updates expected

Opening Call:

European stock futures rose ahead of a key U.S. inflation reading due later. Asian stock benchmarks gained; the dollar and Treasury yields edged higher; oil futures rose; while gold was little changed.

Equities:

Stock futures advanced early Friday, ahead of the release of the Federal Reserve's preferred inflation gauge later today.

Investors will get fresh insight into the U.S. economy with the personal-consumption expenditures price index, which is expected to rise 2.6% in May from a year earlier. That would be down from the 2.7% increase in April.

President Joe Biden and former President Donald Trump faced off in their first 2024 debate Thursday night, with U.S. futures erasing modest losses during the debate.

Forex:

French elections are in the driving seat for EUR, with polls showing Macron-led centrists are expected to fall behind both the far-right RN and left-wing NFP alliance, DBS said.

"If such an outcome eventuates, it implies higher risks to growth and the fiscal outlook for France, possibly weighing on EUR/USD," DBS added.

Bonds:

Treasury yields edged higher early Friday after rallying modestly overnight, as revised data showed first-quarter annual U.S. gross domestic product grew at a lackluster 1.4% rate.

"Both [first-quarter] GDP and May data feeding [second-quarter] GDP paint a picture of decent headline growth undermined by a weaker mix," said Chris Low, chief economist at FHN Financial.

Friday brings the U.S. PCE price index, the Fed's favored inflation gauge.

Energy:

Oil rose in Asia amid geopolitical tensions. Israel-Hezbollah tensions are overshadowing soft U.S. demand, supporting prices, UOB said. Hezbollah has intensified rocket and drone attacks in northern Israel in recent weeks, putting more pressure on the Israeli government.

Metals:

Gold was little changed early Friday. The yellow metal is supported by data suggesting a softening U.S. labor market, raising hopes that the Fed should be able to cut rates in 2H, ANZ said.

ANZ added that safe-haven demand has emerged in recent weeks while upcoming elections in France, the U.K. and the U.S. are raising concerns of policy shifts.

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Copper edged lower, as base metals are marginally softer after weak U.S. economic data, with copper testing the $9,500/ton level, said Sucden Financial.

However, the base metal will likely see upside soon due to stronger demand amid ongoing supply-side issues, with investments into electricity-driven cooling and increased spending on grid infrastructure driving demand up, ANZ said.

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Iron ore prices declined amid weak demand. As steel production enters the off-season, Chinese steel mills have limited space to increase production, Baocheng Futures said.

Together with China's production controls on crude steel, overall demand prospects for iron ore are limited, Baocheng said. Meanwhile, iron ore inventory will likely remain high as arrivals at domestic ports are picking up as expected, it added.

TODAY'S TOP HEADLINES

AI Frenzy Propels Stocks to Monster First Half

The AI fervor powering the stock market shows no sign of cooling down.

Much as in 2023, investors piled into bets in the first half of this year that the artificial intelligence boom is just getting started. They sent Nvidia shares soaring 150%, propelling the graphics-chip maker's market value above $3 trillion and briefly making it the most valuable company in the world.

Biden, Trump Spar Over Their Vision for the Economy

President Biden and former President Donald Trump clashed over the economy, abortion and immigration in their first presidential debate of the 2024 campaign, with the incumbent at times halting and uneasy in his delivery and his rival delivering a more steady performance-though it was at times marked with falsehoods.

The animosity between the rivals was evident immediately as they walked onto the stage declining to offer a traditional handshake, and they launched into competing arguments over who had a better record on the economy.

Fed's Bostic sees one rate cut as likely this year but says he isn't 'locked in'

Atlanta Federal Reserve Bank President Raphael Bostic said Thursday that he is sticking with his forecast of one quarter-point interest-rate cut this year, sometime in the October-December quarter.

"Taking all the circumstances into account, I continue to believe conditions will likely call for a cut in the federal funds rate in the fourth quarter of the year," Bostic said in a new essay published on his regional bank's website.

Iran Election Pits Engagement With West Against More Confrontation

Iran's presidential election on Friday will decide not only who leads a country increasingly antagonistic to the West but also help shape succession plans for the next supreme leader and indicate whether Iranians are giving up on their system of Islamic governance.

The election pits a reformist candidate leading in the polls, Masoud Pezeshkian, who favors re-engaging with the West, against several hard-liners who want to deepen Iran's relationships with Russia and China, fortify its alliance of anti-Israel militias and forge ahead with its nuclear program. There is no clear favorite, and there would be a runoff between the two top vote-getters if no one wins a majority.

Nokia to Buy Infinera for $2.3 Billion to Boost Optical-Networks Arm

Nokia agreed to acquire Infinera in a deal valued at $2.3 billion as it pins more resources to its optical-networks business.

The Finnish maker of 5G cellular antennas and other telecom infrastructure said the combination with networking-solutions provider Infinera is expected to accelerate its path to double-digit operating margins in its optical-networks business. The transaction and the recent sale of submarine networks will reshape Nokia's Network Infrastructure business to be built around fixed networks, internet-protocol networks and optical networks, the company said.

Google, TikTok Ban Ads From ADHD Telehealth Company Amid Federal Probe

Google and TikTok have banned Done Global from running ads on their platforms amid a widening federal crackdown on the distribution of Adderall and other stimulants by the telehealth company.

The moves by the two tech companies, which followed inquiries this week by The Wall Street Journal, came nearly two years after Done lost a third-party certification it was required to have to advertise on the online platforms.

Uber, Lyft Agree to Minimum Wage, Other Benefits for Drivers in Massachusetts

Uber Technologies and Lyft agreed to pay ride-share drivers in Massachusetts a minimum wage and give them other benefits while continuing to classify them as independent contractors, the latest development in the companies' nationwide fight to defend their gig-worker models.

The agreement, reached with the state attorney general's office, caps a yearslong legal battle over how Uber and Lyft drivers are classified in the eastern state. Under the settlement, drivers will receive guaranteed minimum earnings of $32.50 per active hour spent on a trip as well as some benefits, including paid sick leave based on the number of hours they spend on the job.

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Expected Major Events for Friday

04:30/NED: May PPI

05:00/FIN: May Retail sales

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

06:00/SWE: May Foreign trade

06:00/NOR: May Retail Sales

06:00/SWE: May Retail sales

06:00/GER: May Foreign trade price indices

06:00/UK: 1Q Balance of Payments

06:00/UK: 1Q Business investment revised results

06:00/DEN: 1Q Revised GDP

06:00/DEN: May Unemployment

06:00/UK: 1Q UK quarterly national accounts

06:30/HUN: May Employment & unemployment

06:30/HUN: May PPI

06:45/FRA: May Housing starts

06:45/FRA: May Household consumption expenditure in manufactured goods

06:45/FRA: May PPI

06:45/FRA: Jun Provisional CPI

07:00/TUR: May Foreign Trade

07:00/SVK: May PPI

07:00/SPN: Jun Flash Estimate CPI

07:00/SWI: Jun KOF economic barometer

07:30/EU: Jun EuroCOIN indicator of euro area economic activity

07:55/GER: Jun Labour market statistics (incl unemployment)

08:00/ITA: Apr Industrial turnover

08:00/BUL: May PPI

09:00/ITA: Jun Provisional CPI

09:00/ITA: Jun Cities CPI

09:00/BEL: 1Q Balance of Payments

09:00/CRO: May Industrial Production Volume Index

09:00/CYP: May PPI

09:00/GRE: May PPI

09:00/GRE: Apr Turnover Index in Retail Trade

09:00/LUX: May PPI

09:00/CRO: May Retail trade

10:00/IRL: May Retail Sales Index

10:00/POR: May Retail trade

10:00/ITA: May Foreign Trade non-EU

12:00/POL: 1Q Quarterly Balance of Payments

16:59/SPN: May Budget deficit

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June 28, 2024 00:18 ET (04:18 GMT)

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