EMEA Morning Briefing: Stock Futures Muted at Start of Week

MARKET WRAPS

Watch For:

CPI data for Germany, Bavaria, North Rhine Westphalia, Saxony, Brandenburg, Hesse, Baden-Wuerttemberg; UK Nationwide House Price Index, balance of payments, GDP, business investment, money and credit; Italy CPI; no major corporate trading updates expected

Opening Call:

European stock futures were little changed at the start of the week. Asian stock benchmarks were mixed; the dollar and Treasury yields were steady; while oil and gold futures rose.

Equities:

Stock futures were muted fell early Monday as traders await a number of economic data releases this week, including eurozone inflation and the U.S. jobs report. Ahead of that, provisional inflation figures for Germany and Italy today will be watched for clues on the overall eurozone outcome.

Meanwhile, the final estimate of U.K. second-quarter gross domestic product comes today, giving further details and alongside current account data.

The release could garner more attention than usual as it will incorporate Blue Book 2024 revisions for GDP growth in 2021 and 2022 and apply new 2022 industry weights to quarterly growth in 2023 and 2024, HSBC said.

Markets will also keep an eye on escalating tensions in the Middle East, with the potential for the war to expand beyond Israel, the Lebanese militia group Hezbollah, and the Palestinian militant group Hamas.

Forex:

"USD bears have yet to feel any fatigue and it seems like USD bulls cannot catch a break," Maybank said. "While we do see a weaker USD in the long term, we caution of USD rebound risks with some technical patterns forming in certain pairs (EUR) and heading into the elections where USD could find some support," it added.

Bonds:

Mergers and acquisitions are rising in the European banking industry which benefits holders of bank bonds, said Jakub Lichwa, portfolio manager at asset management company TwentyFour.

The M&A process often involves stronger banks acquiring peers with tighter margins, which lowers the risks associated with expensive capital and enables banks to obtain cheaper funding, Lichwa said. "The ongoing M&A activity has added to already strong performance in the credit markets so far this year," he added.

Energy:

Oil futures edged higher early Monday. Prices have found some support due to lingering supply risks for oil markets, OCBC said.

"Supply disruptions from Hurricane Francine, slumping Libyan oil exports, and escalating Middle East tensions have supported this upward momentum, " OCBC said. Israel struck targets in Yemen on Sunday while pressing on with an air campaign against Hezbollah in Lebanon.

Metals:

The Fed's recent larger-than-expected 50bp rate cut has boosted gold's appeal, OCBC said. Apart from rate cuts, rising geopolitical tensions in the Middle East have also contributed to gold's appeal, OCBC said, noting the recent flare-up between Israel and Hezbollah.

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The Fed rate cut and Chinese stimulus are likely to accelerate demand for metals and other mined commodities, said Jefferies analyst Christopher LaFemina.

"This provides for a very good fundamental backdrop for the mining sector, and it is happening just as sentiment had reached levels of extreme bearishness," he said. LaFemina reckons iron ore and met coal will be standout performers between now and year end, helped by seasonal tailwinds, while "copper should perform best over a 6-12 month horizon."

TODAY'S TOP HEADLINES

China Manufacturing Gauge Signals Continued Weakness in Economy

China's manufacturing activity continued its run of decline for a fifth straight month, backing the case for stronger policy to tackle deepening economic challenges.

The country's official purchasing managers index stood at 49.8 in September, pointing to continued fatigue in the world's second-largest economy, according to data released Monday by the National Bureau of Statistics. That compared with August's 49.1 reading, which was also under the 50 threshold that separates expansion from contraction.

Stock-market rally faces crucial question: Will jobs data back case for big Fed rate cuts?

Stock-market investors got what they wanted when the Federal Reserve delivered an extra-large September interest rate cut. A risk now is that strong jobs data in the week ahead could prove to be too much of a good thing, at least as far as Wall Street is concerned.

"If you do come up with a very strong jobs number...that will definitely spook the equity market," Komal Sri-Kumar, president of Santa Monica, California based Sri-Kumar Global Strategies, Inc., told MarketWatch in a phone interview.

The Stock Market Isn't All About AI Anymore

AI fever has loosened its grip on the stock market.

Gone is the first half of 2024, when investors' passion for artificial intelligence drove the market skyward even as stubbornly high inflation dashed hopes that the Federal Reserve would begin cutting interest rates.

This $2.4 Billion Lithium Mine Is Caught Between Russia and the West

This summer, tens of thousands of protesters in Serbia took to the streets to oppose a proposed lithium mine. Fueling the protests: suspected Russian disinformation.

Russia is likely playing a major role in stoking opposition to the project, the U.S. and Germany say, seeking to undermine the development of what could be a key source of lithium for Europe's automakers.

Far-Right Freedom Party Wins Historic Support in Austria

Austria's far-right Freedom Party came in first in the general election Sunday, preliminary results showed, with a highest-ever showing amid growing anxiety about migration.

The party, which has been facing criticism over corruption scandals and using anti-Islam and anti-immigrant rhetoric, won over 29% of the vote, according to projections. The result topped its previous high of nearly 27% in 1999.

Israel Strikes Targets in Yemen as It Presses Air Campaign Against Hezbollah

TEL AVIV-Israel struck power plants and a sea port in Yemen Sunday after the Houthi rebel group launched two ballistic missiles at Tel Aviv in recent days, as the Israeli military continued an air campaign against Hezbollah in Lebanon.

The strikes in Yemen targeted the port city of Hodeidah as well as Ras Issa, the Israeli military said, and relied on dozens of aircraft, including jet fighters and refueling planes to hit the targets over 1,100 miles from Israel's border. The targets are used by the Houthis to import oil as well as Iranian weapons, the military said.

The Disruptive Bank Deal Everyone Wanted-Until It Happened

It is a deal that Europe has wanted for a generation: two big banks combining forces across borders, uniting economies and unleashing growth that has long eluded the region.

Instead, Italian banker Andrea Orcel's surprise attempt to combine his UniCredit with Germany's Commerzbank has turned into a case study on what holds Europe back from keeping pace with the U.S. in economic heft.

OpenAI's Complex Path to Becoming a For-Profit Company

OpenAI's plan to convert to a for-profit company is meant to simplify the world's leading artificial-intelligence startup. Making that happen will be enormously complex.

The ChatGPT maker is in the midst of raising $6.5 billion from backers including Microsoft and Nvidia, along with venture-capital firms and a United Arab Emirates state-backed company. An essential provision of talks is that OpenAI, currently governed by a charitable nonprofit, must within two years become a public-benefit corporation. That means its mission is to earn a profit while creating social good. If it doesn't, investors could take back their money.

How Telegram Became a Hunting Ground for Criminals-and Cops

When federal agent Chris Janczewski was trying to strangle the flow of money to an al Qaeda network in 2020, he first considered infiltrating an invite-only forum or hunting for clues on the dark web.

Then the Internal Revenue Service criminal investigator found the group talking openly about its scheme in a public forum on Telegram-one of the thousands of channels where people discuss illicit activities ranging from peddling child porn to selling stolen identities.

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Expected Major Events for Monday

04:30/NED: Aug PPI

05:00/FIN: Aug Retail sales

06:00/GER: Jun Retail Trade

06:00/GER: Jul Retail Trade

06:00/SWE: Aug Retail sales

06:00/UK: 2Q Balance of Payments

06:00/UK: 2Q Business investment revised results

06:00/DEN: 2Q Revised GDP

06:00/DEN: Aug Unemployment

06:00/UK: 2Q UK quarterly national accounts

06:00/GER: Aug Foreign trade price indices

06:00/UK: Sep Nationwide House Price Index

06:30/HUN: Aug PPI

07:00/CZE: 2Q LFSS Employment & Unemployment

07:00/SWI: Sep KOF economic barometer

08:00/GER: Sep Brandenburg CPI

08:00/GER: Sep Bavaria CPI

08:00/GER: Sep North Rhine Westphalia CPI

08:00/GER: Sep Saxony CPI

08:00/GER: Sep Hesse CPI

08:00/GER: Sep Baden-Wuerttemberg CPI

08:00/ITA: Aug Foreign Trade non-EU

08:00/BUL: Aug PPI

08:30/UK: Aug Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit

08:30/UK: Aug Monetary & Financial Statistics

08:30/UK: Aug Bank of England effective interest rates

09:00/MLT: Aug PPI

09:00/CRO: Aug Industrial Production Volume Index

09:00/CYP: Aug PPI

09:00/GRE: Aug PPI

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

09:00/ITA: Sep Provisional CPI

09:00/ITA: Sep Cities CPI

09:00/BEL: 2Q Balance of Payments

09:00/LUX: Aug PPI

09:00/CRO: Aug Retail trade

10:00/IRL: Aug Retail Sales Index

10:00/POR: Aug Retail trade

12:00/GER: Sep Provisional CPI

12:00/POL: 2Q Quarterly Balance of Payments

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September 30, 2024 00:15 ET (04:15 GMT)

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