EMEA Morning Briefing: Stocks May Fall; Focus on U.S. PPI, Retail Data

MARKET WRAPS

Watch For:

Germany balance of payments; trading updates from Bollore, Hapag Lloyd, RWE, Eni, Deliveroo, Halma

Opening Call:

European stock futures were lower early Thursday. In Asia, stock benchmarks were mixed; the dollar and Treasury yields were steady; oil futures rose; while gold declined.

Equities:

European stock futures were tracking lower early Thursday ahead of more U.S. economic data and a mixed overnight lead from Wall Street.

With the Fed in a quiet period ahead of its policy decision next week, traders are now looking ahead to the producer-price index for February, due later in the day, for signs of inflationary pressures in the pipeline while retail-sales data will offer fresh clues on the health of the U.S. consumer.

Doug Evans, chief investment officer of Callan Family Office remains bullish on the market overall. He reckons that the rally, which last year was largely concentrated in a few tech stocks, could keep broadening out.

"I don't think you need a big correction like in 2022. There's still a lot of the market we feel constructive about," he said, citing investment opportunities in drugmakers and real estate.

Forex:

The U.S. dollar was steady but may weaken as overnight declines in measures of market volatility support risk appetite.

Sentiment generally seems to be buoyant, with the VIX index settling back below 14 and the MOVE index dropping below 100, said RBC Capital Markets.

Market participants appear to be becoming very comfortable with a soft-landing scenario "lubricated by almost-synchronized global central bank easing," it said.

The VIX index is considered Wall Street's fear gauge, while the MOVE Index is a measure of interest-rate volatility.

Bonds:

After a decent rally, the news flow needs to outperform expectations for the rally in U.S. Treasurys to continue, pushing yields lower in the anticipation of interest-rate cuts, Felipe Villarroel, a partner in portfolio management at TwentyFour Asset Management, said.

Moves in U.S. Treasurys have been volatile lately.

However, the overall trend remains of inflation declining--albeit not in a straight line--which should allow central banks to cut rates in the context of some sort of economic soft landing, he said.

Markets are pricing in a 99% probability that the Fed will leave interest rates unchanged at between 5.25% and 5.5% at its meeting next Wednesday, according to the CME FedWatch Tool.

Energy:

Oil futures gained in Asia after the Energy Information Administration reported a weekly fall in domestic crude supplies.

Rising tensions between Russia and Ukraine following reported attacks on Russian energy infrastructure and continued uncertainty tied to the Israel-Hamas war also contributed to the rise in oil prices, analysts said.

Production cuts by OPEC+ will remain one of the key drivers of oil's price support into the second quarter of this year, said Rohan Reddy, director of research at Global X.

The demand outlook for oil is "supportive," he said, "as the continued outperformance in the U.S. economy, coupled with a recent uptick in demand from Chinese refiners, has helped solidify gains."

Metals:

Gold prices edged lower after gaining overnight. "The recent price rally came well ahead of our expectations and is beyond justification from macroeconomic or geopolitical developments," ANZ analysts said.

They reckon a pullback in gold prices is likely in the short term before the precious metal moves higher towards $2,300/oz by the end of 2024. The timing and pace of the Fed's rate cuts will be a long-term driver for gold, they added.

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Copper rises, extending overnight gains. The price rally is likely due to media reports that China's copper smelters have agreed to joint production cuts, Sucden Financial said.

Prices are expected to remain supported over the next few months in part due to a weaker U.S. dollar, it added.

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Iron ore prices were lower as worries over China's economic prospects continue to weigh on iron ore prices, ANZ Research analysts said.

The lack of supportive measures from China's recently concluded NPC meeting raised concerns about steel demand, they said, adding that "a weak start of the construction season will see steel demand contracting."

TODAY'S TOP HEADLINES

Now Lawyers Are Suffering From China's Deal Slump

China's dealmaking slump has already hurt Wall Street banks. Now, lawyers are feeling the pain, with some of the world's biggest law firms laying off staff in anticipation of a prolonged slowdown.

The world's second-largest economy was once a major source of revenues for international law firms, who helped structure overseas share sales for Chinese technology companies and dollar bonds for property developers overloaded with debt. But deal flow from China has virtually collapsed, the result of a slowing economy, a series of policy shifts in Beijing, and an increasingly fraught geopolitical situation.

Hot New Bitcoin Funds Are Still Waiting for Buy-In from Financial Advisers

Bitcoin exchange-traded funds have drawn billions of dollars from investors since they launched in January, but their target market-financial advisers who oversee trillions in client assets-has remained largely out of reach.

Fans of the world's largest cryptocurrency had hoped that the bitcoin funds would open the floodgates to a wave of new buyers, specifically U.S. financial advisers who collectively oversee $30 trillion in client assets.

European Lawmakers Pass AI Act, World's First Comprehensive AI Law

BRUSSELS-European lawmakers approved the world's most comprehensive legislation yet on artificial intelligence, setting out sweeping rules for developers of AI systems and new restrictions on how the technology can be used.

The European Parliament on Wednesday voted to give final approval to the law after reaching a political agreement last December with European Union member states. The rules, which are set to take effect gradually over several years, ban certain AI uses, introduce new transparency rules and require risk assessments for AI systems that are deemed high-risk.

Altria Group Plans to Sell Part of Anheuser-Busch Stake

Altria Group plans to sell more $2 billion of its stake in Anheuser-Busch InBev as it looks to return more cash to shareholders.

Altria currently holds a stake of about 10% of the company, or 197 million shares. The secondary offering would sell 18% of that stake. The company said it would use proceeds the sale to buy back its own common stock.

U.S. Probes Hamas's Use of Crypto Before Oct. 7

The U.S. Treasury Department is investigating $165 million in cryptocurrency-linked transactions that may have helped finance Hamas before the militant group's Oct. 7 attack against Israel, the agency said in a report to Congress.

Treasury officials say the U.S.-designated terror group's increasing use of digital financing underscores the need for Congress to approve new powers to oversee cryptocurrency as Hamas's access to traditional sources of funding is hit by Western sanctions.

Electric-Vehicle Startup Fisker Prepares for Possible Bankruptcy Filing

Electric-vehicle startup Fisker has hired restructuring advisers to assist with a possible bankruptcy filing, according to people familiar with the matter.

Fisker, which recently warned that it risked running out of cash this year, hired financial adviser FTI Consulting and the law firm Davis Polk to work on a potential filing, the people said. The car company reported last month that it had $273 million in sales last year and more than $1 billion in debt.

House Passes Bill to Ban TikTok or Force Sale of the Chinese Video App

WASHINGTON-The House voted overwhelmingly to approve a bill on Wednesday that would ban TikTok from operating in the U.S. or force a sale, setting the stage for a final showdown in the Senate, where lawmakers signaled a more cautious approach on the legislation.

The measure passed 352 to 65, with one member voting present, showing broad bipartisan support for cracking down on the app. The vote moved Congress closer to an unprecedented ban of one of the most popular apps in the U.S., with lawmakers balancing national-security worries with concerns about freedom of speech, the impact on TikTok users and creators, and misgivings about interfering with a company's business operations.

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Expected Major Events for Thursday

00:01/UK: Feb RICS Residential Market Survey

06:00/FIN: Feb CPI

07:00/SWE: Feb CPI

07:00/SWE: 4Q Financial accounts

07:30/SWI: Feb Import Price Index

07:30/SWI: Feb PPI

07:30/HUN: Jan Construction

08:00/SPN: Feb CPI

08:00/SVK: Jan Employment and average monthly wage in selected branches

08:00/SVK: Jan Turnover in selected branches of economy, incl Industry & Construction

09:00/POL: Jan Merchandise trade

09:00/BUL: Feb CPI

09:00/FRA: Mar IEA Oil Market Report

10:00/CYP: Jan PPI

11:00/FRA: Jan OECD Harmonised Unemployment Rates

11:00/IRL: Feb CPI

16:59/GER: Jan Balance of Payments

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(END) Dow Jones Newswires

March 14, 2024 01:15 ET (05:15 GMT)

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