EMEA Morning Briefing : Futures Rise Ahead of U.S.-Iran Talks

MARKET WRAPS

Watch For:

Germany CPI; trading update for Sodexo

Opening Call:

European stock futures were higher, after Asia stocks rose. U.S. Treasurys were flat, the dollar strengthened. Gold fell and oil edged higher.

Equities:

European futures were higher after Asia stocks rose. Overnight, the U.S. stock market closed higher on optimism that a temporary cease-fire agreement in the Middle East might hold--signaling that the worst of the conflict could be over.

"If you stayed long though this whole thing, you are good," said Mark Malek, chief investment officer at Muriel Siebert & Co.

"But my fear is that people are coming in here thinking this is the slingshot," he added. "Something tells me this market is getting ahead of itself."

Much still hinges on the return of freely flowing shipping and tanker traffic through the crucial Strait of Hormuz, a central focus on day two of the U.S.-Iran cease-fire deal.

"The story is not over," said Jamie Patton, co-head of global rates at TCW. "We just turned the page to a new chapter."

Forex:

The dollar strengthened after U.S. data showed an unexpected downward revision in fourth-quarter economic growth and higher-than-forecast weekly jobless claims.

The economy grew 0.5% in the fourth quarter, revised from the previous estimate of 0.7%. Initial jobless claims rose 16,000 to 219,000 last week, versus the 210,000 expected by economists in a WSJ survey.

Meanwhile, the core personal consumption expenditures price index, a key inflation measure for the Federal Reserve, eased to 3.0% in February from 3.1% in January although this meets expectations and doesn't reflect the energy price spike since the Iran war.

Bonds:

The yield on the 10-year U.S. Treasury held steady, as UBS remained cautious on U.S. duration while expecting better performance from German Bunds.

Duration is the measure of a bond's sensitivity to interest-rate changes. UBS said that it expects 10-year U.S. Treasury yields to test higher levels in 2026 before settling below current spot levels in 2027.

"We expect U.S. 10-year [Treasury yield] to test at least 4.50%," they said. UBS goes long German Bunds, targeting 2.75% for the 10-year Bund and setting a stop at 3.15% and anticipate the 10-year U.S.-German yield spread to widen further this year.

Energy:

Oil futures were higher in a rocky session with risks to the U.S.-Iran truce and the reopening of the Strait of Hormuz mitigated by Israel's decision to negotiate with Lebanon.

Israeli attacks on Hezbollah positions in Lebanon threatened to derail the cease-fire. The rebound underscores the fragile sentiment around the geopolitical environment in the Middle East, said Naga Markets' Frank Walbaum.

Constraints on tanker flows through the waterway leave near-term supply expectations tight and "oil could remain elevated during this period of uncertainty amid diplomatic talks," he said.

Metals:

Gold edged lower amid lingering inflation concerns spurred by higher oil prices stemming from the Middle East conflict.

The precious metal "could come under pressure if oil prices rebound significantly," said Critical Metals' Tony Sage in an email.

This "could reinforce concerns about inflationary risks and support the prospect of higher interest rates," the CEO said, adding, "This backdrop could reduce gold's appeal."

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Copper was little changed. Rising inventories are casting a pall over the market, ANZ Research analysts said in a note.

The base metal's stockpiles in LME warehouses climbed to an eight-year high, suggesting demand has been subdued, they added.

TODAY'S TOP HEADLINES

Fed's Preferred Inflation Metric Was Stubborn Before Iran War

Monthly price increases as measured by the Fed's preferred gauge sped up in February, the Commerce Department said Thursday, showing that inflation remained persistent even before the Iran war began.

The personal-consumption expenditures price index rose by 0.4% in February, up from a 0.3% increase in January. Excluding volatile food and energy prices, the monthly increase in the core version of the index was also 0.4%, in line with analysts' expectations.

IMF Chief Expects Slowdown on Global Economic Growth Even if Peace Is 'Durable'

The global economy is set to grow more slowly than previously expected even if the truce in the Middle East proves lasting, the head of the International Monetary Fund said Thursday.

In a speech ahead of twice-yearly meetings of the IMF's member governments next week, Managing Director Kristalina Georgieva said central banks should leave their key interest rates as they are while they assess the impact of the conflict that began with U.S. and Israeli attacks on Iran in late February.

Volkswagen to End U.S. Production of Its Only American-Made EV

Volkswagen will stop producing the ID.4 electric crossover at its Tennessee assembly plant, the latest casualty in the U.S. auto industry's retreat from EVs.

Production of the crossover will stop in mid-April as the plant prepares to change its higher-volume gas SUV, the Atlas, to the 2027 model year, the German automaker said Thursday. The ID.4 is VW's lone EV built in the U.S.

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Expected Major Events for Friday

04:30/NED: Feb Manufacturing output

05:00/FIN: Feb Industrial Production

06:00/NOR: Feb Industrial Production Index

06:00/DEN: Feb Industrial production & new orders

06:00/SWE: Feb New orders & deliveries in industry

06:00/SWE: Feb Industrial Production Index

06:00/NOR: Mar CPI

06:00/DEN: Mar CPI

06:00/GER: Mar CPI

07:00/TUR: Feb Industrial Production Index

07:00/AUT: Feb Production Index

07:00/SVK: Feb Industrial production

07:00/SWI: Mar Consumer Sentiment Index

08:00/ICE: Mar External trade, preliminary figures

08:00/CZE: Mar Unemployment data

08:00/ITA: Feb Industrial Production

09:00/MLT: Feb Registered Unemployed

09:00/CRO: Mar PPI

09:00/LUX: Feb Industrial Production

09:00/MLT: Feb Industrial Production Index

16:59/GER: Feb Balance of Payments

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

04-10-26 0018ET