European Midday Briefing : Stocks Rise With BOE Rate Decision in View

MARKET WRAPS

Stocks:

European stocks traded higher on Thursday as investors awaited another rate decision, this time from the Bank of England.

Earlier in the session, the Swiss National Bank lowered its key rate, and Norway's Norges Bank kept borrowing costs on hold, as did the PBoC .

The Bank of England is widely expected to leave interest rates on hold at 5.25% but all eyes will be on any comments about the likely timing of any interest-rate cut.

"We expect the [BOE] Monetary Policy Committee to vote 6-3 to leave the bank rate unchanged at 5.25% when it announces its monetary policy decision, with one more member voting for a cut than at the May meeting, " Unicredit Research said.

MPC members are likely to exercise caution as U.K. services inflation and wage growth remain elevated even as headline inflation has decelerated to the 2% BOE target, UniCredit added.

U.S. Markets:

Stock futures and bond yields rose, as U.S. investors returned from the Juneteenth holiday and eyed the latest update on the health of the jobs market.

The weekly jobless benefit claims report is due at 12:30 GMT.

Traders will be keen to see if claims again signal a softening in the labor market that may make it easier for the Federal Reserve to start cutting interest rates in coming months.

Stocks to Watch

Nvdia rose more than 3% in premarket trading. Its advance rubbed off on other semiconductor companies, including Micron, which rose more than 2% before the bell.

GameStop fell almost 3%, making it one of the worst premarket performers among bigger stocks.

Forex:

The Swiss franc turned lower against the euro after the Swiss National Bank cut its key interest rate by 25 basis points to 1.25%.

The SNB will continue to monitor inflation developments closely and adjust policy if necessary, the central bank said as it cut its inflation forecasts for 2024-26.

The Norwegian krone rose to a four-month high against the euro after the Norges Bank held its benchmark interest rate at 4.5% and said rates will remain high for some time and are unlikely to be cut this year.

Bonds:

Ten-year Treasury yields are expected to be stable in the coming quarters at higher levels than they are currently, while 10-year German Bund yields are expected to ease slightly, Barclays Research's updated global yield forecasts showed.

Ten-year Treasury yields are expected to trade at 4.50% in the third and fourth quarters of 2024 and in the first and second quarters of 2025.

The 10-year German Bund yield, meanwhile, is expected to decline to 2.35% by 2Q 2025 from 2.50% in 3Q 2024.

Energy:

Oil prices were broadly steady after a low-volume trading session on Wednesday due to a U.S. holiday, as expectations of a tighter market balance over the summer and persistent geopolitical risks continue to support sentiment.

Traders await official data from the Energy Information Administration on U.S. inventories for insights into the pace of the top consumer's demand.

Phillip Nova said oil prices are in a tug of war between supply and demand risks.

Oil prices are caught between geopolitical risks from the Gaza crisis, which could dent oil supplies from the key oil-producing regions on one hand, and concerns over the increase in U.S. oil inventories on the other, it said.

LNG

Shell 's planned acquisition of LNG trader Pavilion Energy reflects its confidence in the prospects of LNG demand growth as an energy transition fuel, especially in Asia, DBS Group Research said.

Shell projects global demand for LNG will rise by over 50% by 2040, as industrial coal-to-gas switching gathers pace in China, South Asian and South-east Asian countries.

Metals:

Gold futures rose, finding tentative support from a gauge of U.S. retail sales in May pointing to greater financial strain among consumers, as such increasing the likelihood of an interest rate cut, MUFG said.

A slew of Fed officials have recently emphasized the need for more evidence of cooling inflation before lowering rates, MUFG added.

Separately, almost 60% of developed markets' central banks believe that gold's share of global reserves will rise in the next five years, according to an annual survey conducted by the World Gold Council, adding further support, it said.

Saxo Bank said gold's long-term outlook remains bullish despite the recent volatility.

The recent setback to gold prices was mainly due to the pause in bullion purchase by the People's Bank of China in May. That said, the analyst believes retail demand for gold in China will remain strong amid the country's property sector downturn and struggling economy.

Copper is likely to face more downside than upside risks over the next year, StoneX Intelligence said.

Copper prices are at an elevated level and aren't justified by current fundamentals, with China's economic recovery still facing huge hurdles and geopolitical tensions weighing on demand, and as the Chinese property sector still faces structural issues, it added.

EMEA HEADLINES

Tate & Lyle to Buy CP Kelco From Huber for $1.8 Billion

Tate & Lyle agreed to buy ingredients company CP Kelco from J.M. Huber for $1.8 billion, as it seeks to benefit from growing demand for healthier and more sustainable food and drinks.

The U.K. provider of food-and-beverage ingredients said Thursday that the transaction will be comprised of $1.5 billion in cash and the issue of 75 million new ordinary shares with an implied value of $645 million, based on Thursday's closing price of 677 pence a share. The deal is to be financed via new and existing debt and cash resources.

Danone Targets Health, Nutrition as Food Industry Braces for Ozempic Era

Danone plans to double down on health and nutrition in the coming years as food companies seek to tackle the effects of Ozempic and other blockbuster weight-loss drugs on eating habits.

Two years into its turnaround plan, the company behind Activia yogurt and Evian water is pivoting toward acquisitions from an initial phase in which it offloaded assets it saw as underperforming. Its efforts come at a time consumers in many places around the world are ditching big brands in favor of private-label products after years of inflation.

EasyJet Targets More Than $1.3 Billion in Pretax Profit Over Medium Term

EasyJet said it aims to achieve more than one billion pounds ($1.27 billion) in pretax profit as the London-listed low-cost airline outlined new medium-term targets.

The company said its profit target came as it was working to increase its capacity at an around 5% compound annual growth rate between 2023 and 2028.

J Sainsbury to Sell Core Banking Business to NatWest Group

J Sainsbury is selling its core banking business to NatWest Group for an undisclosed sum, as part of its previously announced plan to withdraw from the segment and focus on its retail business.

The U.K.'s second-largest grocer by market share said Thursday that the final consideration will reflect the value of assets and liabilities to be transferred to NatWest at completion. It expects to write down a net 45 million pounds ($57.2 million) on the business' assets and liabilities.

GLOBAL NEWS

Glynn's Take: Recession Fears Keeping RBA's Bullock Awake at Night

SYDNEY-Ask any good central banker what keeps them awake at night, and you'll be able to judge with far greater certainty where interest rates will go over the medium term.

For Michele Bullock, the Reserve Bank of Australia's governor, the response would of course be sustained high inflation, but she'd quickly add a deep-seated fear of a recession too.

Bitcoin Price Slips as ETF Outflows Continue. Why the Bears 'Are in Control.'

Bitcoin and other cryptocurrencies were mixed on Thursday, with outflows continuing from spot exchange-traded funds tied to the largest cryptocurrency.

Bitcoin was down 0.1% over the past 24 hours to $65,474. Bitcoin hit a record high near $74,000 in mid-March amid a surge of interest from new spot exchange-traded funds but its price has dropped since then.

Jobless Claims Forecast to Decline From High Levels of Previous Week

Economists surveyed by FactSet forecast that 235,500 initial unemployment claims were filed for the week ended June 15. That would reflect a decrease from the previous week's 242,000, the highest level in 10 months.

Jobless claims reported for the week ended June 8 lifted the four-week moving average to 227,000 after it had trended roughly between 208,000 and 213,000 since February. If higher levels persist, that could point to a sustained softening in the labor market and prompt the Federal Reserve to speed up the timetable on interest rate cuts.

Russia Says It Is Awaiting U.S. Response on Prisoner Swap

Russia said it is awaiting a response from Washington to its proposals for a possible exchange of prisoners, an apparent reference to U.S. citizens detained in Russia such as Wall Street Journal reporter Evan Gershkovich.

Russia's deputy foreign minister, Sergei Ryabkov, Wednesday told the state news agency TASS that "the ball is in the U.S.'s court, we are waiting for their response to the ideas that were presented to them."

Escalating Clashes Between Israel and Hezbollah Raise Risk of Wider War

Tensions heated up along Israel's Lebanese border, as the Israeli military approved a plan for a possible invasion of its northern neighbor and Hezbollah showed off what it said was drone surveillance of northern Israeli cities.

The Israeli military plans outline an assault into Lebanon should a larger-scale conflict between Israel and Hezbollah break out. The operation would need approval from the Israeli government. Hezbollah's video showed what it claimed were sensitive sites located miles inside Israeli territory and was perceived as a warning that the militant group has intelligence about where to strike Israel.

Write to [e-mail]

Write to us at [e-mail]

(MORE TO FOLLOW) Dow Jones Newswires

06-20-24 0609ET