EMEA Morning Briefing : Stock Futures Muted as Traders Look Ahead to U.S. CPI

MARKET WRAPS

Watch For:

EU long term interest rates statistics; Germany Balance of Payments; trading updates from Vodacom Group, BAE Systems, British Land, Solvay

Opening Call:

European futures were little changed early Monday. Asian stock benchmarks were mixed; the dollar and Treasurys steadied; while oil futures fell and gold rose.

Equities:

Stock futures were muted at the start of the week, as investors looked ahead to U.S. CPI data and the first Biden-Xi summit in a year later this week.

"Markets will continue to be very choppy until we get better clarity of what the next policy action is," said Amanda Agati, chief investment officer for PNC Asset Management Group.

After Federal Reserve officials kept rates unchanged at their policy meeting earlier this month, traders had priced in higher odds that the central bank could start cutting rates early next year, according to CME Group's federal-fund futures. Traders now see a greater probability of the Fed holding rates steady through at least the first half of the year.

"It's a really strange dance between the Fed and the market," said Ronald Temple, chief market strategist at Lazard. "But we should expect that dance to continue"

Forex:

The dollar was little changed in Asia. USD could be supported by a solid U.S. October core CPI reading, which is due this week, CBA said. An on-month core CPI reading higher than 0.3% could spur financial markets to price in a higher probability of another Fed rate increase and lift USD, CBA added.

Bonds:

With the Fed holding its benchmark interest rate at the highest level in 22 years, Goldman Sachs Group said the "big question" for investors is whether the return to bond yields seen before the global financial crisis of 2008 proves persistent.

"For the U.S., we have more confidence that longer-run rates will ultimately settle higher than the Fed expected last cycle," Goldman said. "Resilience in the U.S. looks surer than in some other economies."

Energy:

Oil futures fell in Asia amid growing worries about demand and waning geopolitical risk premium. Concerns about crude oil supply due to the Israel-Hamas conflict have eased significantly, and the geopolitical risk premium has subsided, Ping An Securities said.

Metals:

Gold edged higher early Monday amid strong central-bank gold purchases. "Central banks have bought 800 tonnes of gold over the last three quarters, well above our expectations," ANZ said. The bank said strong purchases by central banks should reduce the burden on physical and investment demand for clearing the market surplus.

Meanwhile, with the U.S. monetary cycle nearing an end, the macroeconomic backdrop is becoming more price supportive, ANZ added.

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Copper rose slightly in trading thinned by holidays in parts of Asia. Despite bearish macroeconomic sentiment on China, apparent consumption for copper and aluminum has been much stronger than expected, bolstered by green-energy demand and property completions, Morgan Stanley said.

Morgan Stanley is constructive on copper on the back of stronger-than-expected China demand, and forecasts pricing at $9,000/ton for 4Q 2024 under its base-case scenario.

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Iron-ore futures rose on hopes for Chinese demand. A number of major cities in China have recently removed maximum price limits on land auctions, which could help investment in the country's property sector, ANZ said. Any improvement in this sector would need a significant restocking of raw materials, ANZ added.

TODAY'S TOP HEADLINES

This week's October inflation data looms large on Washington's economic radar

U.S. inflation data for October is clearly the economic highlight for markets, economists and policymakers this coming week. That's because if price pressures continue their cooling trend from the summer, the Fed might be able to refrain from any more interest-rate hikes.

China's Spending on Green Energy Is Causing a Global Glut

China's newest solar-energy manufacturers include a dairy farmer and a toy maker.

The new entrants are examples of a green-energy spending binge in China that is fueling the country's rapid build-out of renewable energy while also creating a glut of solar components that is rippling through the industry and stymying attempts to build such manufacturing elsewhere, particularly in Europe.

Moody's Changes Outlook on U.S. Ratings to Negative

Moody's Investors Service on Friday said it was revising the outlook on the U.S. government's ratings to negative, while affirming the long-term issuer and senior unsecured ratings at Aaa.

Moody's said a key driver to the outlook change was its assessment that downside risks to the nation's fiscal strength have increased "and may no longer be fully offset by the sovereign's unique credit strengths."

Fed's Daly says she's not sure interest rates are high enough to finish the job on inflation

San Francisco Federal Reserve President Mary Daly said Friday she wasn't sure the central bank has raised interest rates high enough to bring inflation back down to the 2% target.

In an interview on CNBC, Daly was asked if rates were "sufficiently restrictive" to bring inflation down.

Israel Pushing for Hamas to Surrender Stricken Al-Shifa Hospital

Israel said it is pressuring Hamas to surrender its position inside Gaza's largest hospital on Sunday, as it engaged in intense fighting with militants in the area.

Israel alleges that Hamas hides underground complexes and a key command center at Al-Shifa Hospital in northern Gaza, a claim Hamas denies. "The ultimate goal is for them to come out and surrender while we're in the vicinity of the hospital," said Lt. Col. Richard Hecht, a military spokesman, referring to Hamas militants. "We haven't gone in yet."

Ukraine War Slips Toward Violent Stalemate

Ukraine's 47th Mechanized Brigade was equipped with Western armored vehicles and trained for a lightning summer counteroffensive that was supposed to tip the war firmly in Kyiv's favor.

These days, after advancing only a few miles over several months in the south, the brigade is fighting to fend off a Russian attack on a small industrial city in eastern Ukraine.

Microsoft's Next Act: Bending the Videogame Business Without Breaking It

Microsoft now owns some of the biggest videogames in the world. What it does with them could ripple across the entire industry-for good and bad.

The biggest of those games is in the spotlight this week, as Activision Blizzard's latest "Call of Duty" sequel went on sale Friday. Called "Modern Warfare III," the new game is notable for a couple reasons. The first is that much of its development took place during a period in which Activision's future structure was uncertain, as the $75 billion acquisition by Microsoft took nearly two years to close. Intense opposition from regulators made the deal far from a sure thing; it closed last month almost immediately after U.K. regulators ended their extended probe following concessions from Microsoft.

Nvidia Develops New AI Chips, Again, to Keep Selling to China

Nvidia is working on a new lineup of artificial-intelligence chips customized for China as the semiconductor giant tries to maintain access to a huge market while adjusting to shifting U.S. regulations.

After U.S. restrictions cut off chips that Nvidia had previously developed for the market, the company told distributors in China early this week that three new chips could become available as soon as the end of this year, according to people briefed on the matter.

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Expected Major Events for Monday

00:01/UK: Oct UK Regional PMI

00:01/UK: Nov Rightmove House Price Index

07:00/ROM: Oct CPI

07:00/TUR: Sep Balance of Payments

07:30/HUN: Sep Construction

08:00/SVK: Sep Construction production

09:00/EU: Oct Long term interest rates statistics

09:00/CZE: Sep Monthly Balance of Payments

11:00/POR: Oct CPI

13:00/POL: Sep Balance of payments

16:59/GER: Sep Balance of Payments

16:59/AUT: Nov OPEC Monthly Oil Market Report

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

(END) Dow Jones Newswires

11-13-23 0018ET