European Midday Briefing : Investors Eye Central Bank Speakers

MARKET WRAPS

Stocks:

European stocks edged higher on Thursday, as investors again were focused on commentary about interest rates from global central bankers.

On the agenda were speeches by the Federal Reserve's Jerome Powell and the European Central Bank's Christine Lagarde after markets close.

U.S. long-term bond yields have fallen sharply, which could raise concerns about the Fed needing to raise interest rates again, Swissquote said.

Shares on the Move

AstraZeneca rose in early trade after the company raised its full-year guidance for core earnings per share and total revenue excluding Covid-19 medicines after beating core EPS guidance for the third quarter.

Stocks to Watch

Airbus posted a set of third-quarter results below analysts' expectations and confirmed what looks like ambitious guidance for the year , Berenberg said. "In our view, while 4Q is normally seasonally strong, given the supply chain complexities, there appears to be growing downside risk."

Unilever's new CEO Hein Schumacher inspires confidence as the executive generational change was necessary and healthy, Barclays said, after upgrading the stock rating to overweight from equalweight.

U.S. Markets:

Stock futures pointed to a mixed start for Wall Street ahead of the Powell speech.

Stocks to Watch

Arm Holdings gave a muted revenue forecast. Its shares tumbled 6% premarket.

Disney reported fiscal fourth-quarter adjusted earnings of 82 cents a share, beating analysts' estimates of 71 cents, as Disney +added nearly 7 million "core" subscribers in the period. Disney also announced a more ambitious cost-cutting plan. The stock was rising 4.3%.

Forex:

Sterling has performed relatively well this year but now looks "tired" particularly with the U.K. "edging towards recession," Societe Generale Research said.

The Bank of England "won't want to ease too soon but may be forced to ease earlier than the market prices."

It's appealing to take a short position in sterling against the Norwegian krone and Swedish krona, which have performed badly since the start of this year, "as global rates turn lower and Scandi headwinds ease," SocGen added.

Natixis said the Norwegian krone could benefit from better risk appetite but the currency remains at the mercy of Brent crude oil prices.

The dollar's sharp selloff at the end of last week looks unlikely to be sustained, especially as U.S. rate-cut expectations priced in by the market "appear relatively more aggressive" than those for the eurozone, MUFG said.

"The U.S. economy would have to start slowing more notably in the coming quarters and/or inflation continue to fall more quickly than expected for the U.S. rate market to price in even deeper rate cuts."

This should help prevent a sharper selloff for the dollar in the near term, MUFG said.

Bonds:

Italian government bonds look to have priced in a scenario whereby Fitch Ratings leaves the country's 'BBB' credit rating and stable outlook unchanged at Friday's review, Citi Research said.

"The likelihood of any change seems low given Fitch expects Italy's debt/GDP ratio to continue to decline in coming years, albeit at a slower pace than before the recent increase in deficit targets," Citi said.

"We think this is probably partly in the price, based on yesterday's spread tightening, but investor concerns persist around the Moody's review on 17 November."

Energy:

Crude oil prices steadied as worries over fundamentals overshadow the risk presented by the Israel-Hamas wa

The relative price weakness is being driven by rising supply rather than demand weakness, UBS said.

U.S. and Brazilian production are at record highs, while Iranian production is rising, it added.

Still, the market is likely to remain volatile, with the market undersupplied, UBS said.

It expects prices to recover to trade in a $90 to $100 a barrel range amid falling oil inventories.

Metals:

Base metals and gold prices were falling as a strong dollar and weak demand added pressure to commodities.

Deutsche Bank said that investors have become increasingly concerned about economic demand, not least after several weaker-than-expected data releases since the start of the month.

It highlighted several falling commodity prices amid the weak demand including gold, which is now down 2.2% this month. That said, lower commodity prices were helping to push down inflation expectations-a boost for central bankers, it added.

EMEA HEADLINES

Germany's Rheinmetall Backs Guidance After Boost in Ammunition Sales, Orders

Rheinmetall confirmed its guidance for the year after third-quarter sales and orders grew on the back of strong demand for ammunition in a defense landscape significantly altered by Russia's invasion of Ukraine and, more recently, the Israel-Hamas war.

The arms manufacturer continues to expect sales between 7.4 billion euros and 7.6 billion euros ($7.93 billion-$8.14 billion) this year, with an operating margin of roughly 12%.

Hapag-Lloyd Warns of Challenging Market Amid Subdued Freight Demand

Hapag-Lloyd warned it could face challenging quarters ahead if spot freight rates don't recover, and narrowed its 2023 earnings guidance toward the lower end of its prior range.

The German shipping company said Thursday that it now expects earnings before interest, taxes, depreciation and amortization for the full year to be between 4.1 billion and 5 billion euros ($4.39 billion-$5.36 billion), and earnings before interest and taxes of between EUR2.2 billion and EUR3.1 billion.

Airbus Sticks to Delivery Target, Ramps Up A350 Production Despite Supply-Chain Challenges

Airbus posted higher revenue and earnings for the third quarter and backed its guidance for the year, sticking to plans to deliver 720 commercial planes and ramping up production of its A350 wide-body aircraft despite lingering supply-chain snags.

The European plane maker had delivered 559 aircraft to customers by the end of October, meaning it will need to send out 161 planes in November and December to hit its annual target. Airbus had originally hoped to achieve 720 deliveries last year but was forced to shelve that goal due to supply-chain woes.

GLOBAL NEWS

Austan Goolsbee Says Fed Will Need to Monitor Risks of Overshooting on Rates

A Federal Reserve official said the central bank will need to pay close attention to the effects of higher longer-term bond yields to make sure they don't slow the economy more than expected over the coming year.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said in an interview Wednesday the recent run-up of longer-term borrowing costs could become more important as the central bank shifts its focus from how high to raise interest rates and toward how long to hold them near a 22-year high.

Goldman's chief economist downplays recession fears from past Fed rate hikes

Economists worried about a recession next year often cite the lagged effect of the Federal Reserve's 11 increases in interest rates over the past 20 months. But Goldman Sachs's chief economist, Jan Hatzius, is not concerned.

In an interview Wednesday with CNBC, Hatzius said he thinks "the biggest negative impact is already behind us."

China Falls Back Into Deflation, Reviving Fears Over Weak Recovery

HONG KONG-China slipped back into deflation in October after a brief reprieve, highlighting how hard it is for Beijing to reinvigorate domestic demand in the world's second-largest economy.

In contrast to the U.S. and many advanced economies where taming inflation remains a high priority for central banks, China has struggled to revive inflation through most parts of the year-the latest evidence that a string of stimulus measures so far have failed to boost consumer confidence in the midst of a drawn-out property downturn.

Democrats Grow More Confident in Campaign Message, but More Nervous About Biden

WASHINGTON-A year away from the 2024 election, Democrats see trends pulling in different directions: an electorate that appears motivated to vote in their favor, particularly on abortion, but is also deeply skeptical of handing another term to the party's standard-bearer-President Biden.

The 80-year-old incumbent faced flashing red warning lights this week in the form of fresh polling showing voters' concerns about his age and weak numbers in swing-state matchups against former President Donald Trump. But Biden's team and allies see no need for a course correction, pointing to the power of abortion politics and the value of having Trump as a foil.

Hamas Attack Gives South Korea 'Wake-Up Call' on Border Security

SEOUL-The Oct. 7 Hamas attack on Israel has revived a gut-wrenching question in South Korea: Could North Korea pull off a similar surprise assault?

In recent weeks, Seoul officials have vowed to learn from the Hamas attack and promised to beef up their defenses. Washington and Seoul recently held joint exercises simulating a response to a Hamas-style surprise attack.

Gaza Tensions Undercut Ukraine's Peace Summit Hopes

BERLIN-A Ukrainian push for a high-level summit aimed at bolstering international support for its fight with Russia is losing steam, a casualty of rising tensions in the Middle East, Western diplomats said.

Dozens of countries-including India, South Africa, Brazil and other major powers that have been neutral on the war between Ukraine and Russia-have for months sought to define core principles, such as the territorial integrity of states, that could underlie peace talks.

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

(END) Dow Jones Newswires

11-09-23 0606ET