EMEA Morning Briefing : Shares Seen Higher Ahead of BOE Decision

MARKET WRAPS

Watch For:

U.K. interest rate decision; trading updates from Enel, Pirelli, Telefonica, Salvatore Ferragamo, Airtel Africa, 3i Group, Wood Group, ITV

Opening Call:

European stock futures were higher despite a negative lead from across the Atlantic. Asian stocks largely advanced; the dollar weakened; Treasury yields edged higher; oil futures gained and gold declined.

Equities:

Shares in Europe were on track to open higher on Thursday ahead of the Bank of England's rate decision and the ongoing corporate earnings.

Some investors are in a wait-and-see mode ahead of reports on consumer and producer inflation next week.

Recent remarks from Fed officials have suggested interest rates may have to stay elevated for longer.

"I think the main message is that they are just not ready to cut right now," said Kevin Gordon, senior investment strategist at Charles Schwab, of recent remarks from Fed officials.

The Bank of England is widely expected to keep interest rates unchanged later today. As with the Fed, investors will be looking for clues as to when the first cut will come.

Forex:

The U.S. dollar weakened but retains its upside potential on mostly higher U.S. Treasury yields that increase the appeal of U.S. fixed-income assets and demand for the greenback.

There appear to be two-way risks for the USD, with some bias to the upside for now, Maybank analysts said.

At this juncture, forex markets and the Fed's projections could be rather aligned, they added..

Bonds:

Yields on U.S. government debt edged higher maintaining Wednesday's upward trajectory after lackluster demand at a 10-year-note auction left the Treasury market's selling momentum intact.

On Wednesday, Boston Fed President Susan Collins, said she wasn't surprised by recent unwelcome news on inflation given the rapid progress seen last year, and that the U.S. economy needs to slow further in the coming months to cool price pressures.

"Hawkish comments could push bond yields to the upside," Milad Azar, market analyst at XTB MENA, said.

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Gilt yields could rise if the Bank of England rules out the possibility of starting interest-rate cuts in June at its policy meeting later in the day, XTB research director Kathleen Brooks said.

"The market will be looking to see if the BOE is a little more confident about the outlook for inflation at [Thursday's] meeting," she said.

Energy:

Oil futures advanced early Thursday aided by the Energy Information Administration's report on Wednesday that showed a decline of 1.4 million barrels for the week that ended May 3.

The commodity complex has been benefiting from improving global demand sentiment, though the "gravitational pull" on energy supply risk premia has been to the downside, said Daniel Ghali, senior commodity strategist at TD Securities.

Metals:

Gold declined as investors continue to weigh Fed signals on rate cuts.

"Gold is experiencing a moment of uncertainty," said Antonio Ernesto Di Giacomo, market analyst at xs.com.

Along with rates, markets are looking at U.S. economic data, and USD strength, which also pressures gold prices. The yellow metal's trajectory will largely depend on how these factors unfold in the coming days, he added.

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Copper edged lower in Asian trade. The base metal could be heading towards a correction unless China unveils sustained stimulus measures or if its smelters cut output, ING analysts said.

China's property market hasn't shown signs of bottoming out yet, with housing completions--a good measure of copper demand--down more than 20% this year, it said, adding that Chinese smelter-refined output was also heading for a record.

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There are divergent views over exactly where the price of iron ore is headed next, Citi analysts said, citing discussions at the Singapore Iron Ore Forum.

While bulls predict policy support from Beijing will spur a rebound this year in China's property industry--a big buyer of steel, made with iron ore--bears point to a structural oversupply in the Chinese property market and low consumer confidence.

The Citi analysts reckon iron-ore prices could head back to roughly $120/metric ton within the next three months.

TODAY'S TOP HEADLINES

China's Exports Rebounded in April

China's exports rose last month after declining in March, supported by a low comparison base and signs of improved global demand.

Outbound shipments rose 1.5% in April from a year ago, reversing a 7.5% decline in March, the General Administration of Customs said Thursday.

BOJ's Policy Board Becoming More Concerned About Effects of Weaker Yen

TOKYO-The Bank of Japan's board is becoming more concerned about the inflation outlook as a sharply weaker yen threatens to drive up import prices, a summary of its latest meeting showed.

"While the yen's depreciation is likely to push down the economy in the short run through price rises driven by cost-push factors, it could push up underlying inflation in the medium to long run" through increases in inbound spending and domestic production, one of the BOJ's nine policy board members said at the meeting held on April 25 and 26.

Fed's Collins says she's not surprised by unwelcome inflation data

Boston Federal Reserve Bank President Susan Collins said Wednesday that she wasn't surprised by the unwelcome news on inflation given the rapid progress seen last year, but she added that the U.S. economy still needs to slow more in order to cool price pressures in the coming months.

Inflation surprised to the upside in the first quarter, with the core personal consumption expenditures price index going up at a 3.7% annual rate after two straight quarters at a 2% rate of increase.

BOE to Keep Rates Unchanged This Month. It May Still Cut Sooner Than Fed.

The Bank of England will probably keep interest rates unchanged on Thursday. As with the Federal Reserve, investors will be looking for clues as to when the first cut will come.

Like the Fed, BOE policymakers stopped raising interest rates last year and have kept them unchanged ever since. In the U.K., unlike in the U.S., the inflation rate is still falling, which could give the BOE scope to lower borrowing costs sooner than the Fed.

Campari CEO Bets on Growth in U.S., Asia-Pacific Despite Sector Struggles

Italy's Davide Campari-Milano is focused on growing in the U.S. and Asia-Pacific at a time when other European drinks makers are facing a challenging environment in both markets.

After benefiting from a postpandemic boom in demand, drinks makers are grappling with a rocky return to more normalized trends, marked by a softened consumer sentiment in China and high inventories in the U.S.

How Netanyahu Pushed Biden to the Edge of His 'Red Line'

WASHINGTON-It was a decision President Biden didn't want to make.

He had warned Israel nearly two months ago against a full-scale assault on Rafah, the Gaza city whose population had swelled to more than one million as Palestinians sought shelter from the fighting. Finally, Biden took a step he had long resisted.

U.K. Expels Russian Diplomat It Says Is a Spy

LONDON-The U.K. government Wednesday launched its latest salvo against Russia's intelligence service, expelling the serving Russian defense attaché on allegations of spying and removing diplomatic protection from several Russian government-owned properties that it said were being used for intelligence gathering.

The move is a retaliation against what the U.K. government called a "pattern of malign activity" by Russia in the past year, including allegedly orchestrating an arson attack on a Ukrainian-linked business in east London and hiring six U.K.-based Bulgarians as part of an alleged Kremlin plot to abduct individuals.

Apple Sees Growing Backlash Against Ad Depicting Crushed Creative Tools

An Apple advertisement that depicts a patchwork of creative tools being crushed and revealing a new iPad in their place is facing broad criticism on social media.

The ad, which Chief Executive Tim Cook posted on X after Apple unveiled new iPads Tuesday, depicts a studio filled with musical instruments, a record player, cans of paint with vibrant colors and other items being physically crushed by what appears to be a giant compressor.

GM Is Shutting Down the Chevy Malibu After 60 Years

General Motors is saying goodbye to the Chevrolet Malibu.

After selling more than 10 million Chevy Malibu cars worldwide over several decades, the automaker said Wednesday it would stop making the sedan in November.

Disney and Warner to Offer Bundle of Their Streaming Services

Disney and Warner Bros. Discovery said they are teaming up to offer a bundle of their streaming services, the latest move by media companies to try to simplify choices in the crowded streaming business.

Consumers will be able to sign up for a package that includes Disney's Disney+ and Hulu and Warner's Max service. The bundle will be offered for both the ad-free and ad-supported versions of those services and will be available in the U.S. beginning this summer.

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Expected Major Events for Thursday

07:00/CZE: Mar Retail trade

07:00/SVK: Mar Foreign trade

08:30/UK: 1Q Mortgage Arrears and Possessions data

09:00/CRO: Apr PPI

09:00/CRO: Mar Foreign Trade

10:00/IRL: Mar Industrial Production and Turnover

10:00/IRL: Apr CPI

11:00/UK: Bank of England Monetary Policy Report

11:00/UK: UK interest rate decision

16:59/POL: Polish interest rate decision

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

(END) Dow Jones Newswires

05-09-24 0016ET