EMEA Morning Briefing: Markets Await U.S. PCE Inflation Data

MARKET WRAPS

Watch For:

EU Business & Consumer Surveys; France CPI, consumer spending; Germany unemployment; no major corporate events expected

Opening Call:

European stock futures were mixed but little moved. Asian stock benchmarks gained; the dollar gained slightly; Treasury yields were mixed; oil futures and gold edged lower.

Equities:

Stock futures in Europe were mixed and treading water with a slightly negative bias despite a positive lead from Asian equities which are riding the injection of stimulus from China's central bank-and promises of more government support from the Communist Party's top decision-making body.

U.S. stocks gained overnight on another wave of optimism about corporate earnings and the economy.

Risks of a U.S. recession have diminished and China's economic weakness is being counteracted by some impressive action on the part of the authorities there, said Chris Beauchamp, chief market analyst at IG.

Economists are optimistic that the Fed's preferred measure for inflation--personal consumption expenditures price index--will confirm that inflation is in check.

If inflation is falling, as jobs are holding up, it would be more positive data for stocks.

Meanwhile, French inflation data, also due Friday, will "give an early read on aggregate eurozone inflation which is due the following week," ABN Amro analysts said.

Forex:

Sterling might continue to outperform the euro in the coming months due to the Bank of England's cautious approach to cutting interest rates but October could prove a rocky month for both currencies, Rabobank said.

The U.K. budget on Oct. 30 could present a hurdle for sterling as the prospect of tax rises to address poor public finances might worry potential investors, it said.

The euro could also face volatility due to speculation that the European Central Bank could cut rates in October, while French budget difficulties could also weigh on the euro in the coming weeks, it added.

Bonds:

U.S. government bond yields were mixed after finishing mostly higher overnight, with the 2-year Treasury seeing its biggest daily yield gain in five weeks and the benchmark 10-year Treasury rate ending at its highest level since early September.

Investors were digesting fresh economic data, including a revised reading of second-quarter U.S. economic growth, showing that the economy remains in pretty good shape.

Market focus is on Friday's key inflation reading with expectations leaning toward a cooler, subtrend print, analysts said.

Energy:

Oil fell in Asia. Prospects of rising supply from Libya and Saudi Arabia have weighed on oil prices, ING commodities strategists said.

"Recent reports suggest that representatives from Libya's rival eastern and western administrations reached a 'compromise' on leadership for the central bank, paving the way to a potential revival in Libyan oil production," the strategists said.

There's also a media report that Saudi Arabia could seek to regain market share and begin to unwind voluntary production cuts from December, ING added.

Metals:

Gold edged lower in a likely technical correction after the front-month contract set yet another record high on Thursday. The daily relative strength index indicates overbought conditions and the weekly RSI is hitting extreme levels, said Fawad Razaqzada, market analyst at City Index and FOREX.com.

The RSI suggests gold could be due for a correction, though it isn't a clear sell signal on its own, the analyst said. Technically, gold remains in a strong uptrend, so it's difficult to predict just how high the precious metal could rise, the analyst added.

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Copper fell after surging overnight following China's pledge to offer more efforts to support the ailing economy. China's Politburo sent its strongest message yet to ease the persistent property crisis, pushing the red metal above $10,000 a ton for the first time since early June, ANZ Research analysts said.

Risk appetite received an additional boost after data showed the U.S. economy bounced back from the pandemic in a stronger position than previously estimated largely due to resilient consumer spending, they added.

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Iron-ore prices were higher in early Asian trade, supported by China's policy blitz to boost its economy. The Politburo has pledged more measures to revive the economy and stabilize the country's property sector.

The stimulus is boosting sentiment in the commodities market, helping push iron-ore futures above $100 a ton, ANZ Research analysts said.

TODAY'S TOP HEADLINES

China's Industrial Profits Fell in August

China's industrial profits swung to a decline in August, yet another sign of a broad-based economic slowdown that has already prompted leaders to introduce strong stimulus measures.

Industrial profits fell 17.8% in August from a year earlier, compared with the 4.1% increase recorded in July, the National Bureau of Statistics said Friday. For the first eight months of the year, industrial profits rose 0.5%, slowing from the 3.6% increase in the January-to-July period.

Fed's Inflation Measure Is Out Friday. Expect Another Benign Reading

The Federal Reserve's preferred inflation gauge is expected to offer more positive news about prices, allowing officials to keep focusing on the job market as they decide how aggressively to cut interest rates.

In cutting their target for the federal-funds rate by half a percentage point last week, Fed officials indicated that they have much more confidence that inflation is sustainably heading back to their 2% target. The personal consumption expenditures price index, due for release by the Bureau for Economic Analysis at 8:30 a.m. Eastern on Friday, is widely expected to provide additional support for that position.

U.S. Ports Try Last-Ditch Effort to Force Dockworkers' Union to Bargaining Table

Port operators and shipping lines are trying to force unionized dockworkers to the bargaining table days before a threatened strike that would shut down more than half the seaports in the U.S.

The group representing port employers filed an unfair labor practices complaint with the National Labor Relations Board late Wednesday and asked the regulator to order the International Longshoremen's Association to begin negotiations on a new contract covering ports from Maine to Texas before the existing agreement expires Sept. 30.

LVMH Stock Soars on China Stimulus Hopes. What to Do With Luxury Shares Now.

As the old saying goes, money shouts, but wealth whispers. China's recent stimulus is ricocheting across the luxury sector, but for noise in the market this week, the gains may not be long lived.

This week's stimulus package is China's largest since the pandemic, and far-ranging, including interest rate cuts by its central bank, the People's Bank of China, which also said it would further help local governments buy up unsold property amid the nation's real estate slump.

U.S. Safety Officials Urge Boeing, FAA to Address 737 Rudder System

A U.S. transportation safety agency urged the Federal Aviation Administration and Boeing to address a potential hazard on about 350 of Boeing's 737 models currently flying.

Accident investigators with the National Transportation Safety Board said a flaw led to cockpit pedals that control the jet's rudder getting stuck after a United Airlines 737 MAX landed at Newark Liberty International Airport in February.

First Novel Schizophrenia Treatment in Decades Gains FDA Approval

The first new kind of treatment for schizophrenia patients in decades is arriving.

The U.S. Food and Drug Administration approved the drug on Thursday, greenlighting the first of a new class of treatments that could help stabilize patients' symptoms without the uncomfortable side effects that accompany existing antipsychotics.

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Expected Major Events for Friday

04:30/NED: Sep Producer confidence survey

06:00/DEN: Aug Retail Sales Index

06:00/NOR: Aug Retail Sales

06:30/HUN: Aug Employment & unemployment

06:45/FRA: Aug Housing starts

06:45/FRA: Aug PPI

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

06:45/FRA: Sep Provisional CPI

07:00/SPN: 2Q Final GDP

07:00/SVK: Sep Business tendency survey

07:00/SVK: Sep Economic sentiment indicator

07:00/SPN: Sep Flash Estimate CPI

07:00/TUR: Aug Foreign Trade

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

08:00/ICE: Sep CPI

08:00/ITA: Jul Industrial turnover

09:00/CYP: Jul Industrial Production Index

09:00/EU: Sep Business & Consumer Surveys - Business Climate Indicator & Economic Sentiment Indicator

09:00/ITA: Aug PPI

09:30/BEL: Sep CPI

10:00/IRL: Aug WPI

10:00/UK: Sep CBI Distributive Trades Survey

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

September 27, 2024 00:16 ET (04:16 GMT)

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