European Midday Briefing : Stocks Rise as Investor Mood Improves

MARKET WRAPS

Stocks:

European stocks traded higher on Friday, tracking gains in Asia and Wall Street as U.S. recession fears eased after lower-than-expected weekly jobless claims data.

"The fact that the figure landed at 233,000 instead of the expected 240,000 is not a big deviation and the reaction probably says more about how sensitive the market is at the moment," SEB said.

SEB added that even if the market's interest has shifted from inflation to the economy/labor market, next week's U.S. inflation figure will still be important. A high number could make it hard for the Fed to cut, but a low number could prop up markets.

Stocks to Watch

Novo Nordisk share-price pullbacks have historically represented great buying opportunities, and Citi argues this continues to be the case.

Citi said this view is confirmed when considering that only 1.4 million people globally are currently on weight-loss drug Wegovy, versus scaling ambitions in the double to triple digit millions and an addressable market approaching 1 billion by 2030.

U.S. Markets:

Stock futures crept higher as the most volatile week in years in markets reaches its last day.

Benchmark Treasury yields held above 3.9%.

Stocks to Watch

Expedia posted higher-than-expected earnings but warned of weakening travel demand in the current quarter. Shares rose 10%.

Paramount Global wrote down the value of its cable-TV networks, which include Comedy Central, MTV and Nickelodeon, by nearly $6 billion. It also said it would cut 15% of its U.S. workforce. Shares rose 5%.

Forex:

The dollar fell having gained briefly following the jobless claims data, which ING said was a likely overraction since the data provide lasting support, and the currency still needs to realign with more aggressive Fed rate cut expectations.

The reaction was a "testament to markets' extremely elevated sensitivity to all sorts of indications on the U.S. macro outlook right now," ING said. The market reaction to U.S. inflation data on Wednesday will likely be significant, it added.

Sterling is likely to strengthen against the dollar over the remainder of 2024 as the Fed looks set to cut interest rates more aggressively than the Bank of England, UBS Global Wealth Management said.

"With our updated view that the Fed will now cut rates by 100bps by year-end and an unchanged BOE outlook for only 50bps over the same period, fixed income investment flows should increasingly shift in favor of a higher GBP/USD," UBS said.

Bonds:

Eurozone government bonds look too rich, especially at the short end of the yield curve, which is pricing in a much faster interest-rate cutting cycle than the European Central Bank would be willing to consider, unless the macro outlook deteriorates materially, Barclays Research said.

"The euro curve has been in a steady steepening phase over the past two months, as markets have increased expectations for the scale of monetary easing across various developed market central banks, primarily the Fed."

The 10-year German Bund yield is expected to settle close to current levels, Citi Research said, which adopts a neutral stance.

Low risk appetite in August often coincides with a peak in Bund richness which then fizzles out, Citi added.

Citi Research maintained its forecast of 2.25% for the average yield level of 10-year Bunds in the fourth quarter, near the current level of 2.23%.

If U.S. economic growth begins to slow sharply, market pricing of the Fed's terminal rate could decline sharply from the current 3.2%, TD Securities said. "This would likely drive longer-dated yields lower in tandem."

Energy:

Oil prices were broadly stable and on track for a weekly gain due to persistent geopolitical risks and a gradual recovery in financial markets following Monday's selloff.

China's consumer inflation rose more than expected last month, highlighting some improving trends in the country.

Crude prices were also supported by a greater risk premium due to fears of a broader war in the Middle East and Ukraine's incursion into Russia's Kursk region, as well as the halt of production at Libya's Sharara oil field this week.

European gas benchmark futures hit their highest level since last December after rallying for a third consecutive session Thursday on fears of disruption to Russian gas flows crossing Ukraine.

Metals:

Gold futures were broadly flat, holding ground as the broader financial market stabilized and as recession fears cooled, ING said.

Expectations of a U.S. interest-rate cut in September continue to support gold fundamentally, ING added.

EMEA HEADLINES

Hargreaves Lansdown Agrees to $6.9 Billion Takeover by Private-Equity Consortium

Hargreaves Lansdown said it agreed to a takeover offer from a CVC Advisers-backed private-equity consortium that values the retail-investment platform at 5.44 billion pounds ($6.94 billion).

The consortium-which also includes Nordic Capital and a subsidiary of the Abu Dhabi Investment Authority-will offer shareholders of the London-listed group 1,140 pence in cash for each share.

Generali Operating Profit Rises Despite Natural-Disaster Costs

Assicurazioni Generali posted a slight rise in operating profit for the first half, when better results in its life-insurance and asset-management segments offset higher natural-disaster costs at its property and casualty business.

The Italian insurer on Friday said its operating profit-a metric closely watched by analysts and investors-came in at 3.72 billion euros ($4.06 billion) for the six months ended June 30, 1.6% higher than the same period the previous year and roughly in line with expectations of EUR3.74 billion, taken from a company-compiled consensus.

France Books Downtick in Jobless Rate

French unemployment fell unexpectedly over the second quarter, a boon as the country looks to set itself on a recovery path.

Joblessness stood at 7.3% of the working population between April and June, down from 7.5% in the year's first quarter, data from national statistics agency Insee showed Friday. That was against expectations for unemployment to stay largely static, according to projections from economists polled by The Wall Street Journal.

Biden, Leaders of Egypt and Qatar Urge More Gaza Cease-Fire Talks Next Week

President Biden and his counterparts in Egypt and Qatar are preparing to make a last-ditch proposal, if needed, to bridge the differences between Israel and Hamas to reach a cease-fire agreement in Gaza and ensure the release of Hamas's hostages.

In a joint statement issued Thursday, the leaders urged Israel and Hamas to meet for negotiation on Aug. 15, an invitation the U.S. says Israel has welcomed.

Iran Wants to Strike Back at Israel but Can't Afford a Wider War

BEIRUT-Iran and its allies are weighing how to retaliate forcefully for a pair of killings attributed to Israel in Beirut and Tehran without igniting an all-out war none of them want.

Iran can't afford a war with Israel, which would likely pull in the U.S., just as a new presidential administration takes over in Tehran with problems including a reeling economy. Iranians still hold painful memories of the country's last extended conflict, an eight-year war with Iraq that decimated a generation, and for decades Tehran has preferred to harry its rivals in the region through a network of foreign militias.

GLOBAL NEWS

Trump's Plans Stir Fears for Fed Independence, Inflation

WASHINGTON-Donald Trump's assertion that as president he should have more say over how the Federal Reserve sets interest rates would, if carried out, reverse a longstanding custom by which the central bank enjoys political autonomy to fight inflation with often unpopular rate increases.

Trump's comments during a Thursday press conference were the former president's most direct acknowledgment of his longstanding desire to chip away at the central bank's independence. If he wins the election and follows through on his pledge to directly influence monetary policy, Trump would break with decades of precedent.

Fed Official Sees Labor Market in Normal State not Recession

Federal Reserve Bank of Richmond President Thomas Barkin sees the U.S. economy and labor market in a state of normalization-not barreling into a recession. He said on Thursday that the Fed is weighing both its employment and inflation mandates in considering its next move on interest rates, echoing recent comments by other policymakers including Fed chair Jerome Powell.

"At 4.3% unemployment and 2.5% inflation, you're closing in on a set of numbers that look kind of normal," Barkin said on Thursday, during a webinar hosted by the National Association for Business Economics. The conversation was moderated by Ellen Zentner, chief economic strategist at Morgan Stanley and president of the association.

Palestinian Deaths in Israeli Custody Fuel Allegations of Abuse

In the weeks after Oct. 7, orthopedic surgeon Adnan Bursh worked out of a series of northern Gaza hospitals as Israeli bombs rained down.

A prominent figure in elite Palestinian circles who had trained in London, he posted videos from darkened hospital rooms, praising colleagues who worked without electricity on wounded patients. Angry at Israel, he tweeted support for Hamas's attack on the country, which left 1,200 dead and took some 250 hostages.

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

(END) Dow Jones Newswires

08-09-24 0527ET