MARKET WRAPS
Stocks:
Europe's major stock indexes wavered on Friday, with investors focused on the latest economic data and the prospects of rate cuts in 2024.
"The jury's still out on whether a recession is coming next year, but everyone seems to agree that growth and consumer activity will be sluggish at best..." Hargreaves Lansdown said.
Stocks to Watch
The underrepresentation of food delivery stocks among older demographics is a structural growth opportunity and there are further potential profits in introducing new areas like groceries and medicine, Shore Capital said.
Deliveroo and Just Eat still have plenty of space in terms of market penetration, and lifetime value of customers has increased since the pandemic--though further tightening on delivery-rider classification and road safety is likely to burden logistic model operators like Deliveroo the most, Shore added.
Just Eat has a compelling growth story and Dominos offers a high-quality compounding cash investment, though Deliveroo has a lower-quality growth mix and demanding market expectations.
Shore has started coverage on Just Eat and Dominos stock with a buy rating at 2,400 pence and 430 pence, respectively, and has Deliveroo at sell, with a 130-pence target price.
U.K. consumer confidence improved in November ahead of expectations, with all measures of the headline Major Purchase Index improving--good news for house builders, RBC Capital Markets said, citing new GfK data.
The index showed the largest on-month increase since June 2020, and mortgage approvals have tended toward a positive correlation with this sub-index in the past, RBC said.
"Confidence has not recovered to prepandemic levels and remains in negative territory due to the cost of living crisis--however, we see today's print as a positive step forward, which bodes well for the spring selling season."
Economic Insight
Germany's economy teeters on the brink of a recession, with economic momentum poor and with little evidence to suggest a strong rebound in the fourth quarter, Pantheon Macroeconomics said.
Survey data is now improving marginally, but it remains consistent with downside risks to growth and effectively a recession, it added.
However, growth should improve from 1Q, as the balance between income and inflation lifts consumption. But the chaos over a court ruling, which said that using pandemic emergency funds to finance other fiscal measures is unconstitutional, is now a clear downside risks for growth next year, even if its impact remains unclear, Pantheon said.
"The big question, and debate, will now be over what to do about the now-stalled 2024 budget."
U.S. Markets:
Investors will be watching what is typically one of the busiest shopping days of the year for signs that U.S. households are potentially growing more cautious on spending.
Meantime, index futures were muted in early trading, ahead of a holiday-shortened session. Bond yields were rising after a recent pullback.
Also coming up: S&P Global's closely watched purchasing managers index surveys on U.S. manufacturing and services for November.
Forex:
The dollar was marginally lower as it struggles to recover from a slump triggered by the October inflation data.
"The U.S. dollar index struggles to gain traction above the 200-DMA," Swissquote Bank said.
In the U.S, despite warnings that the falling U.S. long-term yields will, at some point, trigger a hawkish reaction from the Federal Reserve and eventually reverse, the Fed doves remain in charge of the market.
USD/JPY's corrective rebound from its Nov. 21 low has begun to show signs of exhaustion at its 20-day and 50-day moving averages, based on technical analysis, Oanda said.
The short-term hourly relative strength index has continued to indicate bearish momentum readings after a bearish divergence at the overbought territory on Nov. 22, it said.
Bonds:
Eurozone government bond yields rose in early trading as European Central Bank officials pushed back against rate cut expectations and after Germany announced a suspension of the debt brake for 2023.
Further potential market drivers include the German Ifo business sentiment index for November, due for release at 0900 GMT, which is expected to show a slight improvement, according to The Wall Street Journal's poll of analysts.
Danske Bank Research said Danish and Swedish inflation-linked bonds could benefit from the German Finance Agency's decision to discontinue the issuance of inflation-linked bonds.
"The immediate reaction has been positive, but longer-term the bonds are likely to become illiquid and inflation-linked funds would scale up on alternatives."
Energy:
Brent futures were a touch higher as the market remained on edge over OPEC+'s output policy for next year and as Israel and Hamas began a temporary pause in fighting.
ING said the OPEC+ spat is likely to increase volatility within the market over the next week, and it was unclear how this would affect broader policy.
Metals:
Copper prices edged higher as a stronger yuan and China's latest efforts to support the property sector boosted sentiment over the metal's demand outlook.
Bloomberg reported on Thursday that the country may allow banks to offer unsecured short-term loans to qualified developers for the first time in order to ease the sector crisis, after finalizing a draft of 50 developers eligible for financial support.
Uranium prices are likely to remain strong thanks to buying by financial players and producers that need extra pounds heading into year-end, Jefferies said. Spot uranium this week climbed above $80 a pound, a 15-year high.
"Financial buyers are active, as we believe are producers and utilities, " Jefferies said. It reckons most large producers are short on pounds for customers.
"There are a number of ways near-term producer shortfalls can be met, but any spot purchases are likely to push the market higher given supply tightness."
Copper miners will likely see the current squeeze on cash flows lead to a phase of belt-tightening across the sector until prices recover, Deutsche Bank said, pointing to renewed focus on costs and delayed investment decisions in the near term.
"Our analysis of company cash flows and future projects shows that the copper industry is generating no cash flow at current levels, capital costs are likely to escalate by [more than] 30% and prices will need to rise by 15%-30%," Deutsche Bank said.
It anticipates a broadly balanced copper market in 2024, but for deficits to return in 2025 as the global demand-cycle recovers. It sees copper at $10,000 per metric ton by end-2024.
EMEA HEADLINES
German Business Sentiment Ticked Up in November Despite Recession Fears
Business sentiment in Germany improved for the third month in a row in November, according to a survey of companies, a signal that headwinds holding back the economy, such as high inflation, may be easing even if the country is likely in the midst of a recession.
The Ifo business-climate index rose slightly to 87.3 in November from a revised 86.9 in October, data from the Ifo Institute said Friday.
Germany's Economy Shrank in 3Q as Recession Looms
Germany's economy contracted 0.1% from July to September, confirming prior estimates, as the country languishes in a likely recession, according to data from the country's statistics office Destatis released Friday.
The fall in output in Europe's largest economy matched expectations of economists polled by The Wall Street Journal, as well as the preliminary data published in October. GDP contracted 0.4% on year in 3Q, on a price and calendar adjusted basis.
Wegovy-Maker Novo Nordisk to Spend More Than $2 Billion Boosting Production in France
Pharmaceutical giant Novo Nordisk said it will invest more than 16 billion Danish kroner ($2.34 billion) in its French production site as it seeks to meet rising demand for its blockbuster obesity and diabetes treatments.
The Danish company, which makes the Wegovy obesity drug and diabetes drug Ozempic, said Thursday that the expansion of its facility in Chartres, southwest of Paris, will more than double the size of the site and is expected to create more than 500 new jobs. Construction, which has already started and will employ up to 2,000 external workers, is set to complete between 2026 and 2028, it said.
U.K. Consumer Confidence Rebounds Ahead of Key Holiday Season
U.K. consumer confidence recovered in November, according to a survey published Friday, fueling hopes of a rebound in spending as the key festive shopping season draws near.
Confidence among British consumers rose six points to a level of minus 24, reversing much of the previous month's drop, according to an index compiled by consumer-research firm GfK.
GLOBAL NEWS
Oil-and-Gas Companies Account for Only 1% of Clean-Energy Investment Globally, IEA Says
As the world prepares to travel to the COP28 climate summit, hosted by the United Arab Emirates, a new report warns that the fossil-fuel industry isn't investing enough in decarbonization.
Despite earning average annual revenues of $3.5 trillion since 2018, oil-and-gas companies are spending just 2.5% of their investment on clean energy, which is about 1% of the global clean-energy spend, according to the International Energy Agency. And 60% of that comes from just four companies out of thousands of producers.
Israel-Hamas Cease-Fire Begins After 11th-Hour Talks Over Hostages
Israel and Hamas on Friday morning began a temporary pause of the nearly seven-week-long war, raising hopes that more than a dozen Israeli hostages would be freed later in the day in exchange for Palestinian prisoners.
(MORE TO FOLLOW) Dow Jones Newswires
11-24-23 0513ET
