EMEA Morning Briefing: Stock Futures Fall; Fed Speakers Awaited

MARKET WRAPS

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Opening Call:

European stock futures fell early Wednesday. Asian stock benchmarks advanced, extending gains fueled by China stimulus. The dollar fell slightly; Treasury yields steadied; oil fell and gold rose.

Equities:

Stock futures pulled back early Wednesday after global markets got a boost from China's stimulus blitz announced Tuesday.

Gains in stocks were undercut by disappointing U.S economic data, as the Conference Board said that its index of consumer confidence fell to 98.7 in September from 105.6 in August.

Investors generally are optimistic that the U.S. economy can avoid a recession, despite a recent uptick in the unemployment rate. After the Federal Reserve cut short-term interest rates by a larger-than-normal 0.5 percentage point last week, traders are betting that there is a better than 50% chance that the central bank will cut rates by the same amount at its next meeting in November, according to CME Group.

A number of Fed officials are scheduled to speak later this week, including Fed Chair Jerome Powell on Thursday. PCE price index data, the Fed's preferred gauge of inflation, are due Friday.

Forex:

High risk appetite is likely to keep the greenback offered, said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia.

Financial markets have also been buoyed by the slew of stimulus measures unveiled by Chinese authorities on Tuesday, Kong added.

Bonds:

Short-term U.S. bond yields logged a fresh one-year low overnight after a reading on consumer confidence in the U.S. economy showed its biggest monthly drop since mid-2021.

"It's never good to see consumer confidence fall this much," said Jamie Cox, managing partner at the Harris Financial Group.

"Consumers are clearly concerned about the implications of the upcoming election, the increasing conflict around the world, and the stubbornly high cost of food and credit," Cox said. "The Federal Reserve seldom reads the tea leaves correctly on when and how much to cut rates, but 50 seems more correct in light of these data."

Energy:

Oil futures fell in Asia after China's stimulus measures boosted prices overnight. Oil is likely to be volatile but in an upward trend, Nanhua Futures said. With the ongoing Middle East tensions and U.S. Fed cutting rates, the short-term focus will be the balance between supply and demand, Nanhua added.

Metals:

Gold rose early Wednesday, supported by prospects of more Fed rate cuts. According to Fed funds futures, rate cuts of 75 bps are priced in until year-end, Commerzbank said. With two meetings left, this means a rate cut of 50 bps in either November or December, the bank said.

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A rally by base metals following China's stimulus measures should be short-lived and unlikely to affect the short-term price trend significantly, Sucden Financial said.

Aluminum and copper breached key resistance levels, while zinc, as part of the construction complex, jumped over the $3,000/ton level, Sucden noted.

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Iron-ore prices rose on hopes that China's latest stimulus measures could support the real estate sector, ANZ said. However, ANZ reckons the gains are unlikely to be sustained.

"While they should stop conditions in the steel market getting worse, they are unlikely to provide any boost to demand in the short-term," the bank said. ANZ noted that steel output for this year remains on track to be lower than 2023.

TODAY'S TOP HEADLINES

China's Central Bank Adds to Easing Blitz With Another Rate Cut

China's central bank has delivered another policy rate cut, a day after announcing a slew of monetary easing measures to aid the economy amid concerns that Beijing's annual growth target is increasingly out of reach.

The People's Bank of China cut the interest rate on its 1-year medium-term lending facility to 2.0% from 2.3% in a widely anticipated move, while lending 300 billion yuan to financial institutions, equivalent to $43 billion.

Peak Oil Demand Isn't on the Horizon, OPEC Says

Global demand for oil is set to climb over the next two decades, with the fossil fuel expected to hold a nearly 30% share of the energy mix even as the world ramps up efforts to reduce emissions, the Organization of the Petroleum Exporting Countries said.

In its annual report on long-term energy trends, the cartel said oil demand is forecast to reach 120.1 million barrels a day in 2050 from 102.2 million barrels a day last year. Demand from non-OECD countries is projected to rise by 28 million barrels a day in the period, while OECD nations are expected to witness a 10% growth decline.

Zelensky Appeals for More Pressure on Russia in U.N. Speech

NEW YORK-Ukrainian President Volodymyr Zelensky told the United Nations Security Council that "Russia can only be forced into peace," as he presses allies for more support to resist intensifying Russian onslaughts.

Zelensky is in the U.S. to present what he has called a "victory plan," an effort aimed at refocusing waning Western attention on Ukraine as Russia's invasion slides toward the three-year mark.

Commerzbank CEO to Step Down; Finance Chief Bettina Orlopp Named Successor

Commerzbank said Chief Executive Manfred Knof is stepping down and will be succeeded by Chief Financial Officer Bettina Orlopp as it goes through a battle with UniCredit over the future of the bank.

The German bank on Tuesday said that early this month Knof informed Jens Weidmann, chairman of the supervisory board, of his decision not to seek a second term as CEO. He has served as Commerzbank's CEO since 2021.

Rio Tinto Aims to Increase Aluminum Margin, Return on Capital

Rio Tinto said it aims to improve the earnings margin and return on capital in its aluminum business over the rest of the decade by lowering costs, increasing its footprint in recycled aluminum and switching to lower-cost renewable power.

The world's second-biggest mining company by market value said it has a plan to raise both the earnings before interest, taxes, depreciation and amortization, or Ebitda, margin and return on capital employed for its aluminum business by 5 percentage points by 2030.

Nvidia CEO Jensen Huang Sold $713 Million of Stock. He's Done-for Now.

Nvidia CEO Jensen Huang just wrapped up the sale of six million shares of the chip maker, completing a trading plan he adopted earlier in the year-and grossing more than $700 million.

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Expected Major Events for Wednesday

17:59/POR: Jul ICSG Copper Report

23:01/UK: Aug UK monthly automotive manufacturing figures

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September 25, 2024 00:16 ET (04:16 GMT)

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