European Midday Briefing : All Eyes on U.S. Inflation Data

MARKET WRAPS

Stocks:

European shares were higher on Thursday as investors awaited U.S. inflation data, which could give a key clue as to whether or not the Federal Reserve will raise interest rates again.

The consensus in a WSJ poll is for both headline and core inflation to rise by 0.2% on month in July, "consistent with inflation running closer to the Fed's 2% target," ING said, even as headline annual CPI is expected to rise.

"Any bad surprise on the inflation front could revive the Fed hawks, but we are far from pricing another hike in September just yet," Swissquote said.

Norway Interest Rates

Norwegian core inflation fell to 6.4% year-on-year in July, slightly higher than Norges Bank's expectations at 6.3% but not enough to force a change to the central bank's plan for a 25 basis-point interest-rate rise at next week's meeting, Nordea said.

While core inflation was higher in June than Norges Bank expected, the result in July was close to expectations.

Other important data is broadly in line with the central bank's view while the Norwegian krone is 2.5% stronger than expected, Nordea added.

Read Norwegian July Inflation a Relief for Norges Bank

U.S. Markets:

Stock futures rose ahead of the consumer inflation data.

Any signs of a further slowdown in inflation would likely boost stocks.

Bond yields drifted higher. The yield on the 10-year Treasury notes edged up, after ending at 4.011% Wednesday.

Pre-Market Movers

Applovin rose 23% as the company swung to a profit in the second quarter and revenue beat forecasts.

Capri Holdings was rising 19% following a report from The Wall Street Journal said Tapestry, the owner of Coach, was in talks to buy Capri, the parent company of Michael Kors, Jimmy Choo and Versace.

Disney said it would significantly raise prices for its Disney+ and Hulu streaming services as it looks to make its direct-to-consumer business profitable. Shares rose 1.9%.

Follow WSJ markets coverage here

Forex:

U.S. inflation data are expected to add to expectations that the Fed could refrain from raising rates further, but this shouldn't be enough to cause sustained dollar falls, ING said.

Activity data have been stronger than expected and will likely "keep the Fed on guard for longer," ING added.

Energy:

Oil prices rose to their highest level in almost nine months ahead of the U.S. inflation data.

"Supply concerns continue to underpin prices," Saxo said, pointing to the threat to oil shipments in the Black Sea from the war in Ukraine.

Natural Gas

European natural gas prices weakened after surging as much as 40% on Wednesday.

Reports that workers at key LNG export facilities in Australia were planning strike action meant the contracts closed up over 28% on Wednesday. The sharp jump highlights how volatile the market remains to supply disruption.

"Despite some supply and demand side factors indicating a tighter market, Europe's gas stockpiles will ultimately determine how shortage fears materialize in coming months," CBA said.

European gas storages are well above average levels and are predicted to be close to full well before winter begins.

Metals:

Base metals prices were tepidly rising, while gold was flat in early trading, as investors look to today's consumer inflation print in the U.S., and how it will affect the dollar and the Fed's outlook on interest rates.

"The impact of today's CPI print will ripple through our commodity markets via Fed interest-rate projections, the direction of the dollar, and the overall risk-on/risk-off vibe," Peak Trading Research said.

DOW JONES NEWSPLUS

EMEA HEADLINES

Siemens Shares Fall After 3Q Revenue, Earnings Miss

Shares in Siemens dropped after the company reported third-quarter revenue and earnings that came short of expectations.

At 0739 GMT, shares were down 2.5% at EUR142.80 after falling as much as 4.4%.

Novo Nordisk Raises Guidance Amid Surging Demand for Diabetes, Obesity Drugs

Danish pharmaceutical giant Novo Nordisk on Thursday raised its full-year guidance amid surging demand for its Ozempic diabetes drug and Wegovy obesity treatment.

The company said it will continue to hold back some lower-strength starter doses of Wegovy in the U.S. in an effort to safeguard supplies for current patients, while capacity limitations at some manufacturing sites will result in continued periodic supply constraints and related drug shortage notifications across a number of products and geographies.

Arms Maker Rheinmetall Backs Guidance As Orders Roll In

Germany's Rheinmetall confirmed its guidance for the year after posting higher sales for the second quarter as orders continue to roll in in a defense landscape altered by Russia's invasion of Ukraine.

The company, best known for its armored vehicles and munitions production, said Thursday that sales this year should still come in between 7.4 billion and 7.6 billion euros ($8.12 billion-$8.34 billion).

Persimmon Misses Pretax Profit Forecast; Tightens Sales Guidance Upward - Update

Persimmon first-half pretax profit fell short of market forecasts after the company sold fewer houses, though it expects to deliver on profit expectations for the full year, and tightened sales guidance upward.

Shares at 0851 GMT were up 43.0 pence, or 3.8% at 1,166.5 pence.

GLOBAL NEWS

What to Watch in July's CPI Report: Why an Uptick in Annual Inflation Might Not Worry the Fed

Economists estimate that the annual U.S. inflation rate ticked up in July from June but monthly price increases remained modest, which could possibly deter the Federal Reserve from raising interest rates in September.

Fed officials have lifted interest rates to a 22-year high to lower inflation by cooling the economy. They are watching inflation and other economic readings as they weigh whether to raise rates again when they meet in mid-September. Those include the Labor Department's coming report on its consumer-price index, one of the most widely followed measures of goods and services prices across the economy.

'It's Hard to Be an Activist These Days': Gadfly Investors Trail Stock-Market Returns

Activist hedge funds are clawing back their returns after a tough 2022, but they're still trailing the stock market.

These so-called activist shareholders have seen their investments climb about 14% through July, according to HFR, a hedge-fund data tracker. That trails the S&P 500's gains of about 20% through the same time period. But it's far better than 2022, when activists as a unit were down more than 16% for the full year, per HFR data.

U.S. and China Poised to Drift Further Apart After Investment Ban

WASHINGTON-After years of blacklisting Chinese companies and scrutinizing their investments in the U.S., the Biden administration is sending an unmistakable signal to American business to steer investment away from China.

An executive order President Biden issued Wednesday-while narrowly targeted at critical leading-edge technologies with military, surveillance and cyber capabilities-more broadly aims to reorder the flow of American capital and expertise away from its biggest global rival.

China's Economy Isn't Ailing-It's 'Evolving': IPO Lawyers Told to Watch Their Language

Regulators in China have become uncomfortable with how some companies are describing the country's risks to international investors.

Last month officials from the country's securities regulator told a group of domestic law firms to soften the wording of China-specific risk disclosures in overseas stock-listing documents, according to people familiar with the meeting. The officials suggested alternative descriptions of certain risks and said some should be dropped entirely.

A U.S. Ally Promised to Send Aid to Sudan. It Sent Weapons Instead.

ENTEBBE, Uganda-When a cargo plane landed in Uganda's busiest airport in early June, its flight documents said it was carrying humanitarian aid sent by the United Arab Emirates for Sudanese refugees.

Instead of the food and medical supplies listed on the aircraft's manifest, Ugandan officials said they found dozens of green plastic crates in the plane's cargo hold filled with ammunition, assault rifles and other small arms.

Europe Is Embarking on a Mining Renaissance. Winning Over Locals Is Proving a Challenge.

COVAS DO BARROSO, Portugal-Tucked away in the mountains of northern Portugal, about two hours northeast from the country's second-largest city of Porto, sits this idyllic farming village. It is home to under 200 people, most over the age of 60, with the surrounding region most famous for its Barrosão cattle, a protected species prized for its meat. The nearest town, Boticas, is a 20-minute drive away, and if you stand on the hilltop, the only sounds you hear are the cattle, song birds and insects.

Covas, however, is set to play host to the green-energy transition in its rawest form. Just a third of a mile away from the houses of Covas do Barroso is one of Europe's richest lithium deposits-the silvery metal used in electric-vehicle batteries-and a planned mining operation to dig out the mineral.

Write to [e-mail]

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

08-10-23 0603ET