European Midday Briefing : PMIs Contract Further; Nvidia Earnings in Focus

MARKET WRAPS

Stocks:

European stocks were moderately higher on Wednesday, as investors digested data that showed business activity in the eurozone weakened further in August.

Read Eurozone Activity Contracts Further in August, PMIs Suggest

Investors looked ahead to earnings from Nvidia.

"The market is looking for more confidence for the trajectory of AI adoption. There's going to be a lot of focus on the demand for the chips Nvidia produces for AI functions and how quickly actual orders are coming through," Pictet Asset Management said.

Read Nvidia Earnings Will Gauge Strength of AI Boom

Stocks to Watch

Antofagasta's share price isn't likely to rise in the near term due to weak global demand for copper, Peel Hunt said, keeping a hold rating on the stock, while lowering its price target to 1,400 pence from 1,435 pence. Read more .

European car makers are still struggling in China and will probably focus electric-vehicle growth in the U.S. and Europe, Bernstein said, expecting less emphasis on Chinese EV market share and more on the U.S. and EU in the medium term. Read more .

Ubisoft Entertainment could still make Activision Blizzard's videogames available on Microsoft's Xbox Cloud Gaming service, though its plans are unclear for now, Raymond James said. Read more .

Read Ubisoft's Cloud-Streaming Deal Sees Question Over Financial Impact

U.S. Markets:

Stock futures traded higher as Wall Street awaited earnings from Nvidia, which dominates the market for producing chips used for artificial-intelligence projects.

Treasury bonds gained, as the benchmark 10-year Treasury yield declined after closing Tuesday at 4.327%, the second-highest level this year. Shorter-dated bond yields also edged down.

Economic updates set for release include the S&P services and manufacturing PMIs for August, followed by the July new home sales report.

Stocks to Watch

Nvidia was rising 1.8% premarket. Shares set an all-time intraday high on Tuesday but ended the session down 2.8%.

Second-quarter sales at Urban Outfitters jumped 7.5% to a record $1.27 billion, beating analysts' expectations of $1.25 billion. Shares rose 6%.

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Forex:

In the near-term, Danske Bank Research expects the current general appreciation of the dollar to continue on the back of the better footing of the economy, as well as due to risks to the ongoing narrative of slowing inflation and soft landing.

"Any deviation from that narrative could cause risk-off events, likely benefitting the dollar in most cases, e.g. if U.S. inflation surprises to the topside during Q3."

Danske forecast EUR/USD at 1.08 in one month and at 1.07 in three months.

Read EUR/USD to Fall to 1.03 in 12 Months, Danske Bank Says

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Sterling and gilt yields dropped after the provisional purchasing managers' data.

"A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector's spring revival," S&P Global Market Intelligence said.

The data "will add to speculation that rates could soon peak."

Bonds:

German Bund yields slid, adding momentum to broad falls in eurozone government bond yields, after purchasing managers data added to concerns about the outlook for Europe's largest economy.

Read German Business Suffered Steep Fall in Activity in August, PMIs Suggest

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French government bond yields extended falls after the provisional purchasing managers' index for France came in slightly better than expected, albeit still showing activity in contractionary territory.

The French flash composite PMI index came in at 46.6 in August, unchanged from July, and marginally stronger than the 46.5 expected in The Wall Street Journal's poll of analysts.

Energy:

Oil prices weakened as they faced headwinds from stronger supplies and concerns about a challenging macroeconomic backdrop.

"The rally in oil appears to have run out of steam for now," ING said, pointing to concerns about China's economy and fears that U.S. interest rates could remain elevated for longer than expected.

Iranian oil exports have quietly risen to their highest level since 2018, according to ING, easing tightness in the market.

Natural Gas

European natural gas prices edged lower as the market awaited news from a round of talks aimed at avoiding a strike at a key Australian LNG export facility.

Workers had said Wednesday would be a deadline to reach a deal before turning to strike action.

Workers at two other LNG facilities were similarly considering striking, raising fears that a key supply of gas globally could suddenly be turned off.

Read Brief Strikes at Australian Gas Plants Would Have Short-Lived Impact

Metals:

Base metals and gold prices were higher in early trading as pressure from the dollar started to wane.

Amid thin summer markets, price action in base metals markets continues to be in thrall of macro drivers, risk appetite, U.S. dollar moves and China macro data flow," Standard Chartered said.

It said that weak sentiment especially in China is capping prices, despite this week's rise, adding however that prices are still below where they were at the beginning of the year.

DOW JONES NEWSPLUS

EMEA HEADLINES

UBS Stock Rises as Outlook for Credit Suisse Deal Improves

Investors who were startled by UBS's hastily agreed takeover of Credit Suisse in March appear to be seeing more upside.

UBS opened new vistas in reaching the global rich by buying its crosstown rival for $3.6 billion in a Swiss government-engineered rescue. The purchase propelled it up the ranks of global wealth managers, lifting the invested assets it manages to around $5 trillion.

Ukraine Hatches Plan to Reopen Black Sea Grain Route, Defying Russian Blockade

Kyiv is devising a plan with global insurers to reopen a crucial grain-export route for vessels navigating the Black Sea, a shipping lane blockaded by Russia for the past month.

The Black Sea Grain Initiative had secured the wartime shipment of 32 million tons of food in less than a year until Moscow backed out of the deal in July and escalated attacks on the infrastructure underpinning the Ukrainian grain industry, the country's economic heart.

Mining Companies Want to Turn Scrap Metal Into Green-Energy Treasure

Some global mining companies are taking their hunt for materials that can power the energy transition to city scrapyards.

Rio Tinto and Glencore have signed deals this year to expand critical metals recycling, branching out from investments over the past decade that involve running giant mines in countries including the U.S., Australia and Congo.

GLOBAL NEWS

Recession Fears Have Been 'Blown Out of the Water,' Long-Serving Fed President Says

James Bullard, who was the longest tenured of the 12 regional Federal Reserve Bank presidents when he stepped down last month, thinks the U.S. economy faces new risks of stronger growth that could require higher interest rates to keep up the fight against inflation in the months ahead.

Bullard took over as the dean of Purdue University's Daniels School of Business this month. In an interview Monday, ahead of the Kansas City Fed's annual economic symposium in Jackson Hole, Wyo., he said central bankers ought to be pleased with the economy so far this year.

Wall Street's China Dreams Slip Away

BlackRock became the first global asset manager to operate a wholly owned mutual fund business in China in 2021, roughly a year after Chief Executive Larry Fink called the country "one of the biggest opportunities."

Two years later, the world's largest asset manager is struggling to compete in the market. BlackRock ranks 145th among nearly 200 Chinese mutual fund houses in terms of domestic assets under management, according to Wind, a financial data provider. Fidelity International and Neuberger Berman's wholly owned China subsidiaries rank even lower.

Ukraine's Reset: A Slow and Bloody Advance on Foot

ZAPORIZHZHIA, Ukraine-The Ukrainians on the front lines of the counteroffensive were crouched in the woods when they spotted the Russian patrol.

Mar-a-Lago IT Director Flipped on Trump After Switching Lawyers, Prosecutors Say

WASHINGTON-A witness against Donald Trump in the Mar-a-Lago documents case recanted false testimony and provided new information implicating the former president after dropping a lawyer paid for by Trump's political-action committee, special counsel Jack Smith said on Tuesday night.

The allegations by Smith's office, outlined in a 12-page court filing, were meant to highlight the Justice Department's concerns over potential conflicts of interest arising from Trump's financing of lawyers for a number of co-defendants and potential witnesses.

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

(END) Dow Jones Newswires

08-23-23 0630ET