European Midday Briefing: Shares Gain as China Moves to Jolt Ailing Economy

MARKET WRAPS

European stocks were gaining on Tuesday after China announced economic stimulus measures and Federal Reserve officials signaled further interest-rate cuts.

Shares in London-listed miners traded higher, with Rio Tinto, Antofagasta, Glencore and Anglo American among the biggest gainers on the FTSE 100, all rising at least 5%.

Beijing's move led to a 5.9% increase in iron ore prices on the Singapore Exchange steel index, which is the main driver of the miners' stocks, XTB said.

Meanwhile Fed officials including Neel Kashkari, Austan Goolsbee and Raphael Bostic, backed last week's 50 basis points rate cut and showed support for further cuts.

U.S. Markets:

Stock futures were rising, following markets around the globe.

Data wise, consumer-confidence data for September are due Tuesday along with the S&P CoreLogic Case-Shiller series of home price indexes.

Car-parts retailer AutoZone is due to report results before the bell.

Forex:

The euro rose against the dollar after China's announcement as the eurozone economy is more tightly linked to China than the U.S, MUFG said.

"It comes at a time when the eurozone economy appears to be slowing after the pick-up in growth in the first half of this year."

However, Monday's weaker-than-expected eurozone purchasing managers' surveys encouraged speculation that the ECB could accelerate the pace of interest rate cuts and this might prevent the euro from rising much further against the dollar, it added.

The China measures are slightly negative for the dollar, ING said.

The measures, which include cuts to its benchmark interest rate and support for the stock market and property market, add to reflationary sentiment, according to ING.

"For the dollar itself, a reflationary environment is mildly negative as investors rotate into more pro-cyclical and emerging market currencies."

Sterling hit a near two-and-a-half-year low against the euro following purchasing managers' surveys on Monday that showed the U.K. economy outperforming the eurozone.

While the earlier drop in EUR/GBP was mostly driven by weak eurozone PMI data, the market is also looking at headlines from the U.K. Labour Party conference where finance chief Rachel Reeves hinted at loosening fiscal rules to allow for greater investment, ING said.

"Sterling has enough support at the moment without these potential investment plans."

EUR/GBP could fall toward 0.8300 while GBP/USD could rise to 1.35, it added.

Bonds:

The 10-year German yield was trading higher than the 2-year yield, echoing a re-steepening of the Treasury yield curve, Deutsche Bank said.

Increased expectations of an ECB rate cut in October following weak purchasing managers data "also mean the German 2-10-year yield curve disinverted for the first time since November 2022," it said, describing this as a significant milestone.

The 10-year French OAT-German Bund yield spread is getting close to the crucial 80 basis point mark, hit by budget worries, according to Commerzbank Research.

"The recent news flow explains the widening (talk about a 6% deficit this year and delays of submitting next year's budget)."

More broadly, eurozone government bond yield spreads have been unable to capitalize on renewed speculation about ECB interest-rate cuts.

Energy:

Oil rose, and its positive momentum reflects elevated tensions in the Middle East, fresh hurricane threats in North America and China's supportive fiscal measures, ING said.

Angel One also said crude prices were likely to trade higher on fresh monetary stimulus from top importer China.

It sees WTI support at $66.30-$68.50/bbl and resistance at $72.50-$74.80/bbl and pegs technical support for Brent at $70.20-$72.00/bbl and resistance at $77.70-$79.60/bbl.

Metals:

Gold futures were flat, having reached a record early Tuesday trade on the back of soft Treasury yields and rising safe-haven demand.

The record of $2,664.6 an ounce reflects sliding yields after the Fed's jumbo rate cut, as well as rising geopolitical worries in the Middle East, Swissquote Bank said.

It added that the Relative Strength Index indicator points to gold being overbought, suggesting it has been bought too rapidly and that a downside correction would be healthy at the current levels.

Angel One projected support for spot prices at $2,565-$2,604 and resistance at $2,695-$2,738.

UBS said record prices , up more than 27% since the start of 2024, could still rise further.

China's new measures have provided a fresh boost for industrial metals and the wider commodities complex, with copper, aluminum, nickel and zinc gaining.

EMEA HEADLINES

German Business Is Getting More Pessimistic as Recession Angst Grows

German companies are feeling ever less confident, adding to concerns that Europe's largest economy could be slipping back into recession.

The Ifo Institute's business-climate index slipped to 85.4 in September from 86.6 a month earlier, the think tank said Tuesday. That marks a fourth straight month of worsening sentiment, and comes in below economists' expectations for a shallower decline, according to a poll compiled by The Wall Street Journal.

BOE's Bailey Sees Key Interest Rate On Gradual Downward Path

The Bank of England is likely to continue to cut its key interest rate, but is not in a rush to do so, Governor Andrew Bailey said in an interview published Tuesday.

The BOE left its key rate unchanged Thursday, having cut by a quarter of a percentage point in August for the first time in more than four years.

TUI Reaffirms Earnings Guidance as Bookings, Prices Rise

TUI reaffirmed its full-year earnings guidance after reporting an increase in bookings supported by higher pricing.

The Frankfurt-listed German travel operator said that the positive booking trend so far was enough for it to reaffirm its guidance of achieving at least 25% growth to its underlying earnings before interest and taxes for the year ending in September.

AkzoNobel to Cut Around 2,000 Jobs Globally

AkzoNobel plans to cut about 2,000 jobs globally, around 5.6% of its workforce, as it moves to cut costs and increase efficiency.

The Dutch paints company-which houses the Dulux, Polycell and Cuprinol brands-said Tuesday that it aims to simplify operations and streamline its management structure in a bid to drive growth.

GLOBAL NEWS

BOJ Governor's Cautious Comments Damp Speculation of October Hike

OSAKA, Japan-Bank of Japan Gov. Kazuo Ueda reiterated his cautious tone on Tuesday and said the central bank can wait to act until economic uncertainties become clearer, dampening speculation over another rate increase in October.

"In making policy decisions, the bank will need to carefully assess factors such as developments in financial and capital markets at home and abroad and the situation in overseas economies underlying these developments. We have enough time to do so," Ueda said in a speech to business leaders in Osaka.

Trump Issues Fresh Trade Threats, Targeting Deere

Donald Trump threatened to slap hefty tariffs on farm-equipment maker Deere & Co. in a reprise of his tactics as president.

At a campaign event in Pennsylvania Monday the Republican presidential nominee said, if he were elected, Deere would face tariffs of 200% if it sold made-in-Mexico equipment previously made in the U.S. Trump said that Deere is moving a majority of its production to the country, a point which the company disputed.

Lebanese Flee Homes as Israeli Strikes Targeting Hezbollah Intensify

Thousands of Lebanese are fleeing their homes in the country's south as Israel intensifies its military campaign against Hezbollah, raising fears of an all-out war a day after a barrage of strikes killed hundreds in the country.

In the early hours of Tuesday, the Israeli military launched dozens more airstrikes against Hezbollah after downing projectiles fired from Lebanon. The attacks followed roughly 1,600 Israeli strikes Monday against Hezbollah's military infrastructure and militants.

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September 24, 2024 05:50 ET (09:50 GMT)

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