EMEA Morning Briefing: Investors Await U.S. Jobs Report as Mideast Tensions Linger

MARKET WRAPS

Watch For:

France industrial production index; trading update from Norwegian Air

Opening Call:

European stock futures were mixed despite a broadly positive lead from Asian stock benchmarks; the dollar edged lower; Treasury yields were mixed; oil futures were also mixed and gold advanced.

Equities:

Stock futures were mixed early Friday as investors continued to track developments in the Middle East and await the U.S. jobs report.

U.S. stock indexes faltered Thursday as investors weighed the risk of escalating conflict in the Middle East against largely upbeat data that has helped ease worries about the U.S. labor market. The weekly jobless claims came in a little higher than expected on Thursday.

"The U.S. labor market has been cooling over time and is no longer overheated. But the million-dollar question for investors is whether the labor market stabilizes at these levels or whether it cools to a more concerning level," said Russell Investments' BeiChen Lin. "Friday's jobs report could help settle the debate."

"It is tempting to look to payrolls to cast the definitive vote in the 25 bp versus 50 bp debate but, alas, it is unlikely to be so dramatic as to lock in either outcome," Ian Lyngen from BMO said.

Forex:

The euro faces a hit from the prospect of the European Central Bank delivering back-to-back interest-rate cuts, Monex Europe said.

"We expect the ECB to accelerate the pace of easing in light of softening inflation," Monex forex analysts said.

Recent purchasing managers' surveys suggest weak economic growth could see further disinflation, they said, adding that the ECB could deliver 25 basis points rate cuts at every meeting until mid-2025, and the euro could fall to $1.09 over the next three months from $1.1039 at present.

--

The U.S. non-farm payrolls expected later tonight is likely to be a "rather binary event," Maybank analysts said.

A stronger reading could give the greenback another boost, while a softer print might weaken the U.S. dollar, the analysts said.

The conflict in the Middle East could also see a sustained haven bid for the dollar while the U.S. presidential election might be marginally positive for the currency given the prospect of tariffs if Donald Trump wins, Monex Europe said.

The DXY dollar index could rise to 101.900 by month-end and reach 102 around Christmas.

Bonds:

U.S. government debt were mixed after being sold off on Thursday, pushing 10- and 30-year yields to almost five-week closing highs.

Market participants were looking ahead to Friday's non-farm payrolls report for September. The median estimate of economists polled by the Wall Street Journal is that the report will show 150,000 new jobs were created.

Energy:

Oil futures were mixed as traders awaited Israel's response to a missile barrage earlier this week by Iran. Concerns have been growing about a wider Middle East conflict that could disrupt flows of crude from the region.

"This week's move higher in oil prices should be considered a counter-trend move fueled by geopolitical angst in an otherwise still downward trending market," said Tyler Richey, co-editor at Sevens Report Research.

That trend is "driven by concerns of a surplus in the global physical markets in the quarter ahead" due to declining demand estimates amid lingering recession fears and firming expectations that OPEC+ is poised to open the spigots again.

Metals:

Gold prices gained in Asia. The U.S. Fed's recent 50 bp interest cut and the prospect of more cuts married with rising geopolitical tensions have fuelled bullish momentum, and should limit near-term selling, said Dilin Wu, research strategist at Pepperstone.

However, gold bulls appear to be holding back on taking up more long positions ahead of the risk of a hotter U.S. nonfarm payrolls print on Friday, and with Fed Chair Jerome Powell adopting a more patient stance on further monetary policy easing, Wu said.

That said a breakout higher seems more likely than a pullback in prices, Wu said.

--

Copper prices drifted higher in Asia, recovering from another selloff.

Sucden Financial head of research Daria Efanova tips base-metal prices to soften slightly in the coming days, citing China concerns. "The upside is being exhausted as markets are digesting China's economic reality," Efanova said.

Still, she doesn't expect a significant retreat. "There is little impetus in the market to breach the July lows, and prices are likely to remain elevated."

TODAY'S TOP HEADLINES

U.S. Port Workers Agree to End Their Strike

U.S. dockworkers agreed to return to work after port operators sweetened their contract offer, ending a three-day strike that threatened to disrupt the American economy.

The breakthrough Thursday came after port employers offered a 62% increase in wages over six years, according to people familiar with the matter.

Investors fearing a scary start to October should focus instead on Friday's jobs report

Investors soothed by the quick recovery for stocks following a rough start to August and September were jolted once again in early October by unnerving developments at home and abroad.

Iran launched a missile attack against Israel on Tuesday, briefly sending stocks and bond yields lower, while the International Longshoremen's Association also began a U.S. port strike, unleashing potentially powerful ripple effects from Maine to Texas.

Stellantis Stock's Selloff Deepens. Why Wall Street Is So Worried About the Jeep Maker.

After a record 2023, Chrysler and Jeep parent Stellantis has hit a rough patch of road. Wall Street is growing concerned.

Problems for Stellantis came to a head earlier this week when the auto maker slashed full-year 2024 guidance. The company now expects adjusted operating profit margins to come in between 5.5% to 7%, down from a prior call for double-digit growth. Free cash flow is expected to be negative 5 billion euros ($5.6 billion) to 10 billion euros ($11.2 billion) from a prior expectation of positive free cash flow.

Nvidia Stock Rises. Its OpenAI News Is Driving Shares.

Nvidia stock picked up some gains on Thursday as investors digested the news that the chip maker has invested in ChatGPT developer OpenAI.

Shares in the chip maker climbed 3.4% to $122.85, compared with a 0.2% decrease for the benchmark S&P 500 index.

Spirit Airlines Explores Bankruptcy Filing

Spirit Airlines has been in discussions with bondholders over the terms of a potential bankruptcy filing in the wake of its failed merger with JetBlue Airways, according to people familiar with the matter.

The budget carrier has also been exploring restructuring its balance sheet through an out-of-court transaction, though recent talks have been more focused on reaching an agreement with bondholders and other creditors to support a chapter 11 filing, the people said. The timing of such a filing, should it happen, wouldn't be imminent, they said.

Write to singaporeeditors@dowjones.com

Expected Major Events for Friday

05:45/SWI: Sep Unemployment

06:30/HUN: Aug Preliminary Industrial Production

06:45/FRA: Aug Industrial production Index

07:00/SPN: Aug Industrial Production

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

08:00/ITA: 2Q General Government Quarterly Accounts

08:00/UK: Sep UK monthly car registrations figures

08:30/UK: Sep S&P Global UK Construction PMI

09:00/MLT: Aug Registered Unemployed

09:00/ITA: 2Q GDP revised

09:00/CYP: Sep Registered Unemployed

09:00/EU: 2Q Quarterly sectoral accounts

09:00/EU: 2Q Quarterly Balance of Payments

10:00/ITA: Aug Retail Sales

10:00/IRL: Sep Irish Live Register latest monthly figures

All times in GMT. Powered by Onclusive and Dow Jones.

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

October 04, 2024 00:15 ET (04:15 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.