European Midday Briefing : Investors Brace for Another BOE Rate Rise

MARKET WRAPS

Stocks:

European stocks retreated again on Thursday as America's credit downgrade continued to rattle markets and as investors anticipated another interest rate rise from the Bank of England.

"In a nutshell we can expect to see a hawkish 25bps as a bare minimum, and we could also see a split with some pushing for 50bps," CMC Markets UK said.

Read The Bank of England Will Likely Follow the Fed. But Its Work Is Far From Done

U.S. Markets:

Stock futures fell, suggesting markets could come under pressure for a second day, while Treasury yields rose further, as government bonds remained on the defensive.

A busy week for corporate earnings continues. Hasbro, Kellogg and Moderna are due to report before the open, while Amazon and Apple are set to release earnings after the close.

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Forex:

Wednesday's significantly stronger-than-expected U.S. ADP private payrolls data revealed a robust labor market which should enable the dollar to continue rising, Danske Bank Research said.

The data "underscores the resilience of the U.S. labor market" ahead of Friday's closely-watched non-farm payrolls figures, and although there isn't a reliable correlation between ADP and nonfarm payrolls they showed private sector payrolls growth is "still relatively strong," Danske Bank said.

The decision by the BOE later will be a key driver for the GBP/USD pair and any indication the central bank is considering a pause or nearing the end of its hiking cycle potentially translates to some downside risks for the pair, IG Research said.

Any breakdown of the 1.264 level may pave the way toward the 1.239 level next.

Read Mood Seen Different Ahead of BOE Decision Vs June Despite Similar Pricing, Citi Says

Bonds:

Government bond markets are in wait-and-see mode, Generali Investments said, adding that while inflation rates should continue to decline moderately, the resilient U.S. economic data and 10-year yields well below the policy rate argue against a noticeable decline in yields in the short term.

Energy:

Crude prices declined for a third session with oil markets being driven by broader risk-off moves after the U.S. credit downgrade, ANZ said.

Metals:

Base metals and gold were weaker due to a stronger dollar and with markets in risk-off mode ahead of the U.S. nonfarm payrolls, Peak Trading Research said.

It added that investors were profit taking after a strong July in crude oil and gasoline markets, while firm U.S. jobs data and the country's credit downgrade were helping to boost the dollar.

DOW JONES NEWSPLUS

EMEA HEADLINES

Bud Light Boycott Sparks Big U.S. Profit Drop for AB InBev

Anheuser-Busch InBev said its U.S. sales and profit plunged in the second quarter as drinkers abandoned Bud Light, but the beer giant defended the brand, saying it is still viewed favorably by consumers.

The world's largest brewer has suffered through a difficult few months in the U.S., where Bud Light's sales have tanked after transgender influencer Dylan Mulvaney posted an image on Instagram of a personalized can AB InBev had gifted her. The post sparked an uproar, angering Bud Light's core consumers and propelling AB InBev to put the marketing executives who oversaw the collaboration on leave.

Lufthansa Posts Surge in Profit on Booming Air Travel

n 0625 GMT - Deutsche Lufthansa's second-quarter figures were broadly in line with forecasts, but expenses were higher than the year before as inflation offset strong yields, Citi analysts write in a research note. High demand, especially in premium cabins, led to a 13% increase in yields for the German carrier group's passenger airlines compared with the previous year, with a load factor-a measure of seats sold-at 83%, the same as in 2019. However, Lufthansa said its expenses had increased, particularly for air-traffic control and airport charges and the cost for maintenance and spare parts. ([e-mail]; @MauroOrru94)

Adidas Boosted by China Recovery, Easing of Inventories

Adidas's recovery in China and easing of inventories helped its performance in the second quarter, the company said Thursday.

Greater China revenue rose 16% in the second quarter, marking a return to growth in the vital market after successive quarters of decline.

Germany's Trade Surplus Grew More Than Expected in June

0740 GMT - German exports remain very sluggish,economist Carsten Brzeski at ING says in a note. Exports from the eurozone's largest economy rose just 0.1% on month in June, though the country's trade balance was boosted by even weaker imports. "Trade is no longer the strong resilient growth driver of the German economy, but rather a drag," Brzeski says. He notes supply-chain friction, a more fragmented global picture and China's manufacturing advances among the factors weighing on German exports. ([e-mail]; @joshualeokirby)

Infineon Posts Higher Revenue in Challenging Environment

Infineon Technologies backed its guidance for the year after posting higher revenue for its fiscal third quarter, despite a challenging market environment.

The German chip maker on Thursday reported revenue of 4.09 billion euros ($4.47 billion) in the three months ended June 30, up 13% on year. Its automotive business contributed EUR2.13 billion to the total.

Société Générale Swings to Profit in Second Quarter; Revenue Falls

Société Générale said Thursday that it swung to a second-quarter net profit from a year earlier when it registered a significant loss due to the disposal of its operations in Russia. But its revenue fell due to lower net interest margin in France and a less conducive global banking environment.

The French bank reported net profit of 900 million euros ($984.5 million) in the three months that ended in June, compared with a loss of EUR1.51 billion a year earlier.

ING Groep Net Profit Beat Views On Interest Income Boost

ING Groep beat expectations as it reported a jump in its net profit for the second quarter of 2023 after interest income boosted its revenue .

The Dutch bank on Thursday posted a net profit of 2.155 billion euros ($2.36 billion) for the three months to June 30 compared with EUR1.18 billion a year earlier and exceeding the EUR1.64 billion expected in a company-compiled consensus.

Zalando Narrows Guidance After Fall in 2Q Revenue

Zalando narrowed its guidance for the year after booking lower revenue for the second quarter in what it called a challenging environment as more consumers went back to in-store shopping.

The German online fashion retailer on Thursday posted revenue of 2.56 billion euros ($2.80 billion), down 2.5% on year. Gross merchandise volume-a key indicator of sales performance-slipped 1.8% to EUR3.72 billion.

GLOBAL NEWS

China Caixin Services PMI Strengthened in July

A private gauge of China's services activity edged up in July, pointing to continued recovery in the nation's services sector.

The Caixin services purchasing managers index climbed to 54.1 in July from June's five-month low of 53.9, Caixin Media Co. and S&P Global said Thursday.

BofA Dumps Its Recession Call. Why Economists Are Getting More Upbeat.

Economists at Bank of America became the first group at a major bank to back away from a forecast that a recession is on the way. Others may follow, possibly swiftly.

BofA's (ticker: BAC) Michael Gapen and his team said in a research note on Wednesday that given recent economic data, they now anticipate a "soft landing" for the economy rather than the recession they had expected to hit in the first half of next year. That is another way of saying they expect economic growth to slow down, rather than going into reverse.

Trump Is Being Prosecuted, but Justice Department Is on Trial, Too

WASHINGTON-The latest federal indictment of former President Donald Trump poses an unprecedented test of the Justice Department's ability to build a persuasive case not just for 12 jurors but also for the history books.

In seeking to do that, prosecutors will face a number of hurdles in court, including showing that Trump's actions were criminal as opposed to protected free speech. On the issue of whether it can persuade the public of the righteousness of its prosecution, the Justice Department has taken on a huge and politically polarizing target in an atmosphere already ripe with mistrust over its motivations.

Judge Assigned to Trump Federal Case Has Been Tough on Jan. 6 Rioters

U.S. District Judge Tanya Chutkan, the federal judge assigned to former President Donald Trump's latest criminal case, has been critical of the events on Jan. 6, 2021, and has imposed lengthy sentences on Trump supporters who stormed the Capitol that day.

At the same time, Chutkan, a former public defender, has shown a scrupulous concern for the rights of criminal defendants. During the final years of the Trump administration, she repeatedly frustrated Justice Department efforts to accelerate the execution of federal inmates. The Supreme Court reinstated the executions she had blocked.

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

(END) Dow Jones Newswires

08-03-23 0532ET