MARKET WRAPS

Stocks:

European stocks traded lower on Tuesday after higher-than-expected French and Spanish inflation figures furthered the probability of a European Central Bank rate hike of 50 basis point in May.

In France, core inflation heated up, with services inflation and manufacturing goods inflation creeping up. It suggests France's HICP core inflation picked up to around 4.5% from 4.2% in January, furthering the chance that eurozone figures released Thursday come in even higher than consensus forecast, Pantheon Macroeconomics said.

Read French Inflation Unexpectedly Rebounds

In London shares were lower as investors weighed a set of disappointing earnings and digested the new Brexit deal with the EU.

Track the latest analyst comments on the new trading arrangements.

Stocks to Watch

Adidas has scope to turn things around more quickly than many investors might think, Berenberg said, upgrading its rating on the German sportswear major to buy from hold.

Adidas sentiment and share price have collapsed over the last year on a series of profit warnings and a break with Kanye West's Yeezy label.

But after a clearing exercise in 2023, Adidas can rebound in 2024, with pricing dynamics, inventory levels and cost efficiencies supporting recovery in the group's top line and margins, Berenberg said.

Rebound in China also looks underappreciated, Berenberg said, adding that new boss Bjorn Gulden is "the best CEO investors could have hoped for."

Berenberg raised its target price to EUR180 from EUR160.

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Moncler is likely to have suffered from China's coronavirus situation at the end of 2022 but should be upbeat on recovery in the key market in the coming year, Equita Sim said in a note ahead of the Italian premium-fashion firm's 4Q update.

Group sales should rise 11% at constant currency in the year's final quarter to EUR992 million, according to Equita's estimates.

Margins in 2H may be pressured by the demand pressures already reported by some luxury peers amid strict pandemic measures in China at the end of last year, but Moncler should expect a boost from a reopening China ahead, Equita said.

Equita has a buy rating and a EUR56.50 target on the stock.

U.S. Markets:

Index futures were drifting lower, suggesting the pressure on stocks would continue.

Stocks to Watch

Zoom reported higher quarterly sales on strong growth from enterprise customers and forecast profit ahead of expectations. Its stock gained nearly 7% premarket.

Fisker shares surged 30% yesterday after it said deliveries for its first vehicle would start in the spring. Its stock was little changed premarket.

Major retailer Target will release results before the opening bell, and Goldman Sachs will host an investor day with presentations from CEO Solomon and others.

On the macro front, releases are due on home prices and consumer confidence. Chicago Fed President Austan Goolsbee is due to speak.

Forex:

The euro trimmed its losses against the dollar slightly after data showed inflation in France and Spain accelerated in February.

Inflation in France rose to an annual rate of 6.2% in February from 6.0% in January while inflation in Spain increased to 6.1% in February from 5.9% in January.

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The agreement on a new trading arrangement for Northern Ireland is a welcome development for markets, but won't have a lasting impact on sterling where the interest-rate outlook remains paramount, ING said.

"The direct impact on the U.K. economy should not be significant, but markets are probably welcoming the conciliatory steps in U.K.-EU trade relationship."

Instead, the Bank of England outlook should remain "the most central driver" of sterling, although the prospect that U.K. rates may need to rise beyond March could mean it proves "more resilient than other pro-cyclical currencies," ING added.

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The dollar rose after suffering a downward correction yesterday which was likely due to some month-end flows and reduced demand for safe havens as global equities rebounded, ING said.

"We have recently highlighted how the narrative for the [dollar] has turned more structurally supportive, meaning that a return to a USD downtrend will take time and may only be very gradual," ING said.

That is unless incoming data start showing a weaker U.S. economic outlook and cooling inflation, which would force some unwinding of market bets on the Federal Reserve raising interest rates further, ING added.

Read Rate-Rise Bets Outside US Limit Dollar Gains

Bonds:

The 10-year German Bund yield touched 2.60% in early trade, a level last seen in 2011, according to Refinitiv data.

"The trend of falling Bund yields that was still dominant at the beginning of the year has therefore reversed," Landesbank Baden-Wuerttemberg said.

This is due to dampened hopes of a rapid end to interest-rate rises by the European Central Bank and the Federal Reserve, LBBW said.

Energy:

Oil prices rose almost 1% early in the session, as traders hoped Chinese data due later this week will show the nation's economy picking up steam.

PMI data on China's manufacturing sector due tomorrow will be closely watched for signs that the nation's reopening is lifting its economy and with it demand for oil.

"Most continue to hold the view that pent-up demand in 2Q amid more normalized Chinese consumer operating conditions will hold sway," SPI Asset Management said.

Metals:

Copper prices weakened slightly as the dollar firmed, and few signs have emerged of extra demand from China, the world's largest consumer of raw materials.

Commodity Supply Gaps

Miners and investors are cognizant of a widening supply shortfall expected for some metals vital to the energy transition, Quilter Cheviot told WSJ.

"Mindful of the opportunity that pivoting to more energy transition-oriented metals might bring, investors are becoming slightly more open to the idea of potential deals that have robust and defendable financial returns under conservative commodity price assumptions," it said.

Still, memories of a deep industry downturn in the middle of the last decade remain fresh for company executives and investors, which could influence the speed miners respond to rising demand, said Quilter.

There's also a shortage of large and profitable projects in places that are relatively low risk to operate to fill projected supply gaps, it added.

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French Inflation Unexpectedly Rebounded in February on Higher Food, Services Prices

French inflation unexpectedly edged higher in February, matching October's multidecade high, on accelerating food and services prices.

The consumer price index increased 6.2% in February compared with a year earlier measured by national standards, up slightly from the 6.0% increase recorded in January, preliminary data from the country's statistics office Insee showed Tuesday.


Santander to Raise Payout Policy to 50% From 40% in Next Three Years

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Erste Bank Beats 4Q Profit Expectations on Stronger Net Interest Income

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U.K., EU Reach Deal in Bid to Resolve Northern Ireland Trade Issue

WINDSOR, England-The U.K. and the European Union agreed Monday on a new trading arrangement for Northern Ireland, a move aimed at ending years of friction caused by Brexit and allowing greater cooperation between both sides at a time of mounting geopolitical risk to Europe from Russia's war in Ukraine.

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02-28-23 0614ET