EMEA Morning Briefing : Stock Futures Rise as Investors Await Economic Data

MARKET WRAPS

Watch For:

Germany ZEW indicator of economic sentiment, WPI; UK monthly unemployment figures, Mortgage Lenders and Administrators Return statistics, Scottish Retail Sales Monitor; trading update from Siemens Healthineers

Opening Call:

European stock futures were higher as attention turns to data releases scheduled for today. In Asia, stock benchmarks advanced; the dollar edged lower; Treasury yields steadied; while oil and gold futures rose.

Equities:

Stock futures rose early Tuesday ahead of a number of economic data releases, including U.K. unemployment, Germany ZEW economic sentiment and U.S. CPI data.

Market strategists generally expect today's U.S. inflation data, if it comes in as expected, not to be strong enough to substantially change the message from Jerome Powell at Wednesday's FOMC meeting.

Matthew Weller, global head of research at StoneX, said that "regardless of what this week's U.S. inflation report shows, Jerome Powell and company will want to see at least a few more months of job and inflation data before tweaking the current monetary policy settings."

Whether the Fed cuts rates in the spring or later in the year, "we think the trajectory is by far what's most important," said Yung-Yu Ma, chief investment officer at BMO Wealth Management.

Forex:

The dollar fell slightly early Tuesday amid mild risk appetite spurred by Wall Street's overnight gains.

Positive risk sentiment continues to predominate, said RBC Capital Markets. Market participants are awaiting U.S. November CPI data due out later today, though inflation trends there have been well-behaved recently, RBC noted.

Bonds:

S&P Global Ratings said its ratings outlook on covered bonds remains stable, "despite geopolitical tensions, market turbulence, the economic slowdown, and deteriorating asset performance." In 2023, benchmark European covered bond issuance hit a 10-year high, according to S&P.

"The trends supporting covered bond issuance may be slightly weaker in 2024, but issuance will likely remain close to recent highs, at about EUR160 billion," said S&P Global Ratings credit analyst Antonio Farina.

Energy:

Oil futures rose slightly early Tuesday on possible position adjustments. Brent crude oil futures may find support in the $70s per barrel area, with price risks tilted toward the upside, Commonwealth Bank of Australia said.

These upside risks are driven by OPEC+ delivering its pledged supply cuts and stronger-than-expected oil demand growth, CBA added.

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Renewable projects in the EMEA region could face delays and challenges including higher costs of new projects, higher interest rates and lengthy and complex permitting processes, Fitch Ratings said. Meanwhile, "operational projects are largely insulated from fluctuations in market prices through long-term, fixed-price contracts or regulated tariffs," Fitch said.

Metals:

Gold edged higher in Asia after the front-month Comex gold contract fell for the third straight session overnight. However, the precious metal's price gains may be capped.

Market participants appear to be cautious ahead of key global economic data and meetings of major central banks this week, ANZ said.

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Iron ore futures strengthened but overall sentiment remained negative as concerns over China's economic recovery linger.

China's National Development and Reform Commission recently held a meeting to promote the development of mine resources, but investors are concerned about the domestic economy, Nanhua Futures said.

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Chinese lithium futures may remain volatile in the near term, according to Macquarie, who reckons the GFEX's use of physical delivery instead of cash settlement will exacerbate jolts.

Lithium carbonate futures prices have become increasingly wild, with two down limits and two up limits recorded for the GFEX January contract over the past week, the bank said.

TODAY'S TOP HEADLINES

What to Watch in CPI Report: Firm Underlying Inflation Could Complicate Prospect for Interest-Rate Cuts

Lower prices for gasoline, cars and furniture likely cooled inflation last month, but underlying price pressures have remained more stubborn, analysts estimate.

U.S. Companies Are Finding It Hard to Avoid China

HONG KONG-American companies, under heavy pressure to reduce their exposure to China, are increasingly turning to factories in places such as Vietnam, Indonesia and Mexico.

Many are finding it hard to avoid China, however.

When Bond Yields Dropped, the Everything Rally Kicked Off

Investors spent most of 2023 fretting about inflation and interest rates. Now they are snapping up everything from stocks and bonds to crypto and even gold.

The simultaneous surge across assets has sparked debate about whether the "everything rally" marks the arrival of a lasting bull market-or just a fleeting sugar high at the end of the Federal Reserve's tightening cycle.

Commodities Carriers Star Bulk and Eagle Bulk Shipping Agree to $2.1 Billion Merger

Star Bulk Carriers and Eagle Bulk Shipping said they agreed to merge in an all-stock deal that would create the world's fourth-biggest commodities carrier and make it more attractive to large investors.

Star Bulk, which is based in Athens, Greece, and Eagle Bulk shareholders will own 71% and 29% of the combined entity, respectively, the companies said Monday. The deal, which values the merged company at roughly $2.1 billion, is slated to close next year.

BP Asks U.S. Regulator to Intervene in Escalating Natural-Gas Feud

British oil giant BP asked U.S. energy regulators to intervene in an escalating dispute with a startup U.S. natural-gas exporter whose feud with customers has become one of the industry's nastiest battles in years.

BP in a Monday filing with the U.S. Federal Energy Regulatory Commission accused Venture Global LNG of skirting FERC disclosure rules while maintaining "a veil of secrecy around its operations" to the detriment of long-term customers.

Putin Critic Alexei Navalny Missing From Prison

Alexei Navalny, Russia's leading opposition figure, is missing from the penal colony where he has been imprisoned and his whereabouts are unknown, his spokeswoman and other allies said, prompting concern in Washington about his condition.

Navalny, a fierce critic of President Vladimir Putin, hasn't been heard from for nearly a week, his team said on X. In recent weeks he had become ill and was put on an IV by prison staff. The team said that when his lawyers asked on Monday about his whereabouts in two penal colonies in the Vladimir region, east of Moscow, where he had been recently held, they were told he wasn't at either one.

Google Loses Antitrust Case Brought by Epic Games

Google lost an antitrust case over the market power of its app store on Monday, a blow to the search giant as it faces other legal challenges to its search dominance and ad tech business.

Videogame maker Epic sued the search giant in 2020, alleging it used its dominant position to squeeze excess profits from app developers. The San Francisco jury reached a unanimous verdict after deliberating for less than four hours.

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Expected Major Events for Tuesday

00:01/UK: 1Q Manpower UK Employment Outlook Survey

05:30/NED: Nov CPI

05:30/NED: Oct International trade

07:00/NOR: Oct Monthly GDP

07:00/UK: Nov UK monthly unemployment figures

07:00/GER: Nov WPI

08:00/SVK: Oct Construction production

09:00/BUL: Sep Trade with EU Member States - preliminary data

09:00/BUL: Oct Trade with third countries - preliminary data

09:30/UK: 3Q Mortgage Lenders and Administrators Return (MLAR) statistics

10:00/GER: Dec ZEW Indicator of Economic Sentiment

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

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

(END) Dow Jones Newswires

12-12-23 0016ET