EMEA Morning Briefing : Stock Futures Lower at Start of Week

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Opening Call:

European stock futures fell at the start of the week, tracking Asian equities lower. The dollar and Treasury yields steadied; while oil futures fell and gold edged higher.

Equities:

Stock futures were lower early Monday ahead of Tuesday's U.S. CPI data, widely watched for signals on the Federal Reserve's rate-cut path.

Friday's jobs report showed U.S. employers added 275,000 jobs in February, topping the 198,000 expected by economists polled by The Wall Street Journal. The unemployment rate ticked up to 3.9%, and wage growth slowed. Some strong readouts from recent months were revised downward.

Analysts were mostly encouraged by the report, arguing that robust new job numbers combined with slowing wage growth shows the Fed can curb inflation without tipping the economy into a downturn.

"Labor is rolling, and wage inflation is rolling over. The Fed is threading the needle on its dual mandate," said Jamie Cox, managing partner at Harris Financial Group, referring to the Fed's goals of maximizing employment and keeping prices stable.

Forex:

USD could continue its recent downtrend this week, according to CBA. While U.S. CPI data this week are likely to show another solid increase in February, there are risks of weaker-than-expected outcome, which would weigh on USD, CBA added.

Bonds:

Investors are optimistic about the strength of the U.S. economy and the profitability of high-quality corporate bond issuers, which is driving demand and valuations for dollar investment-grade bonds, AXA IM Investment Institute chair Chris Iggo said.

"Corporate balance sheets are strong, interest coverage is manageable despite higher yields and companies have a lot of cash, so their net interest burden is lower than in previous cycles."

Credit spreads have tightened to pre-pandemic levels, Iggo said. Corporate bonds remain attractive unless unforeseen events like slower economic growth or a credit event happens, he said.

Energy:

Oil futures fell early Monday, weighed by worries over China demand for crude oil.

Estimates from Chinese commodities consultancy JLC showed that the capacity utilization of refineries in the key oil-processing Chinese province of Shandong in February was nearly 5 percentage points lower than in January and 9.6 pct pts lower from a year earlier, which suggest that demand is subdued, Commerzbank said.

Metals:

Gold rose slightly in Asia amid bullish sentiment. Mounting geopolitical concerns in the Middle East continue to support safe-haven demand, while signs of a Fed rate cut later this year is also aiding market sentiment, ANZ said.

"It seems some macro funds are rotating their money from equity to gold to diversify risk." The precious metal has maintained its rising momentum and has been hitting fresh record highs toward $2,200/oz.

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After a challenging 2023 for the metals industry, Jefferies analysts "believe we are at the foothills of the next commodity cycle." The bank said that there is early evidence of a recovery in global manufacturing PMIs and reckon a rally in copper, in particular, could happen sooner than envisaged, partly due to the resilience of the U.S. economy.

Jefferies reiterated a preference for copper producers over miners of iron ore, and highlighted Anglo American and Glencore as two of their top picks due both to company specific factors and commodity mix.

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Lithium is getting closer to finding a floor as supply cuts pick up, Morgan Stanley said, estimating that roughly 78,000 metric tons of production has been cut following a slump in prices. That equates to about 6% of global production.

MS continues to expect an oversupply in 2024, but a smaller one than previously envisaged. "We may still see more downside for now, but if production cuts continue to materialize and EV volumes hold up, prices are likely closer to a trough."

TODAY'S TOP HEADLINES

It Isn't Just Big Tech Propelling Gains in the Stock Market Anymore

Strong U.S. growth is prompting investors to scoop up a broader set of stocks, rather than just the handful of giant technology companies that drove indexes to record heights.

With heavyweights including Apple and Tesla sinking this year, a larger group of companies has helped power recent gains. The equal-weighted S&P 500, which measures each company equally rather than by its market capitalization, rose to a record this past week. Almost one-fifth of the stocks in the index hit new 52-week highs on a recent day, the largest share since May 2021, according to research by Bespoke Investment Group.

Fed and ECB Tee Up June Interest Rate Cuts. What Happens After That.

Whisper it, but the path to lower interest rates is finally taking a clear shape on both sides of the Atlantic.

Federal Reserve Chairman Jerome Powell spent the week telling Congress that interest rates will come as soon as there's enough evidence that inflation is under control. The strength of the economy, of which the better-than-expected jobs report Friday is just the latest surprise, is of secondary importance.

Stock market's 2024 bull run faces looming inflation report

The U.S. stock market is facing an inflation reading that will test its 2024 bull run and offer clues as to whether the economy remains on course for an anticipated soft landing.

Many investors expect the Federal Reserve will start cutting interest rates in 2024 as it seems to be winning the battle with inflation even as the unemployment rate remains low. On Tuesday all eyes will be on the February inflation report from the consumer-price index, with traders seeking to discern how soon potential Fed rate cuts may arrive.

Two Canals, Two Big Problems-One Global Shipping Mess

More than 50 ships queued to cross the Panama Canal on a recent day-from tankers hauling propane to cargo ships packed with food. A prolonged drought has led the canal's operator to cut the number of crossings, resulting in longer waits. The tolls that ships pay are now around eight times more expensive than normal.

Over 7,000 miles away, vessels that move containers through Egypt's Suez Canal are waiting for naval escorts or avoiding the passage altogether to take a much longer voyage around South Africa. Ship operators fear that their crews could be imperiled on the journeys through the Red Sea by missile or drone attacks from a Yemen-based rebel group.

LVMH's Arnault Rivals Bezos and Musk in Wealth-and in Media Influence

PARIS-Bernard Arnault, head of handbags-to-Champagne behemoth LVMH, has significant sway over the luxury industry. Now he wants to boost his influence in the media too.

The billionaire, one of the world's richest people, already controls France's leading financial title, a daily newspaper and a classical radio station, among a host of other media investments. His latest target is Paris Match, a French magazine best known for spreads of politicians and celebrities.

JPMorgan Growth Arm Backs Cyber Business Eye Security

Banking giant JPMorgan Chase's growth equity investment arm led a new commitment to Eye Security, a European cybersecurity startup, as rising digital threats and regional rule changes pique investor interest in the sector.

The company, founded in 2020, received commits totaling EUR36 million, equivalent to $39 million, more than double the size of a previous EUR17 million investment round. Existing backers Bessemer Venture Partners and TIN Capital invested alongside JPMorgan.

Nvidia's Supercharged Investment Strategy Is About More Than Returns

Nvidia has become an investor darling thanks to an artificial intelligence boom built on its chips. More quietly, the company also has made itself into one of the business world's hottest venture-capital investors.

Nvidia invested in about three dozen startups last year, according to Dealogic figures, more than tripling its activity from the previous year. The value of its investments in other companies reached about $1.55 billion at the end of January, according to Nvidia's financial statements, up from $300 million a year prior.

TikTok Crackdown Shifts Into Overdrive, With Sale or Shutdown on Table

WASHINGTON-Legislation that would ban TikTok in the U.S. or force its sale is hurtling toward a vote in the House following months of behind-the-scenes efforts on Capitol Hill. The new push caught the service off-guard, ratcheting up interest from possible buyers and raising the possibility that one of the most popular apps in the country could soon be shut down.

Lawmakers have decried TikTok for years, expressing concern that the app's Beijing-based parent would share data about its users with the Chinese government or lean on TikTok to promote Beijing's propaganda and shape Americans' political opinions. But there were countervailing concerns that a forceful move against TikTok would spark a backlash from the millions of users who have embraced the app.

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Expected Major Events for Monday

00:01/UK: Feb KPMG and REC UK Report on Jobs

00:01/UK: Feb UK Regional PMI

06:00/FIN: Jan Balance of Payments

07:00/NOR: Feb CPI

07:00/NOR: Feb PPI

07:00/DEN: Feb CPI

07:00/TUR: Jan Employment / Unemployment

07:00/GER: 4Q Labour cost index

07:00/DEN: Jan External trade (provisional figures)

07:00/DEN: Jan Balance of payments (provisional figures)

07:00/ROM: Jan International trade

08:00/CZE: Feb CPI

08:00/SPN: Jan Retail Sales

08:00/SWI: Feb Consumer Sentiment Index

09:30/UK: Annual CPI Basket of Goods and Services annual review

10:00/CRO: Feb PPI

10:00/MLT: Jan International Trade

10:00/CYP: Jan Foreign Trade (provisional)

11:00/POR: Jan International trade statistics

15:59/UKR: Feb CPI

15:59/UKR: 4Q GDP

16:59/SVK: Jan Construction production

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

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03-11-24 0117ET