EMEA Morning Briefing : Shares Poised for Slight Gains; Focus on U.S., Eurozone Inflation Data

MARKET WRAPS

Watch For:

EU flash estimate euro area inflation; Germany foreign trade price indexes, retail trade, unemployment; France PPI, provisional CPI, consumer spending; Italy provisional CPI, cities CPI, industrial turnover; UK balance of payments, business investment revised results, GDP 2nd quarterly estimate, money and credit; trading update from Carnival

Opening Call:

Shares could edge up in Europe on Friday, as the recent rally in bond yields paused. In Asia, stock benchmarks were mixed; Treasury yields mostly rose; the dollar slipped; while oil advanced and gold was steady .

Equities:

European stocks could inch higher on Friday after the rise in Treasury yields paused overnight.

However, worries about higher oil prices and high bond yields haven't gone away, analysts said.

Treasury yields remained at relatively high levels, despite overnight declines, as the increasing risk of a U.S. government shutdown offset strong economic indicators.

More inflation data out of the U.S. and eurozone are expected on Friday, when the Fed's preferred gauge of consumer prices, the PCE Price Index, will offer more insight into whether price pressures in the U.S. are intensifying once again.

Forex:

The dollar faltered in Asia, which could be a snapback from the past few days' rally, or also a reflection of concerns about the possibility of a U.S. government shutdown.

Either way, the greenback still has some short-term tailwinds, VanEck said.

"Not sure this run of strength is over." In 12 months or more, however, "we see lots of reasons why the dollar should cool off," VanEck added.

Bonds:

Treasury yields were mostly higher, following their overnight decline.

A slowing U.S. economy will keep the Fed from raising rates again and force it to cut sooner than expected, Capital Economics said.

"We think the 'higher-for-longer' narrative that has taken hold in the market won't last through 2024," it said.

Markets are resisting to price in another hike, despite hawkish Fedspeak, and are pricing cuts to start by mid-2024 and run a little faster than the FOMC's projections.

Capital Economics think cuts will start sooner and run faster than what is baked in Fed Funds futures.

That would cause a decline in long-term interest rates and a rally in risky assets, Capital Economics said.

Energy:

Oil prices recovered from earlier losses caused by possible profit-taking.

Oil was ripe for a pullback, said Oanda. After oil reached just a few dollars short of the $100/bbl level, traders appeared to be locking in profits given turbulence in the bond market, it added.

"Heading into winter, worries about supply tightness may continue pushing prices north, but whether this will evolve into a long-lasting uptrend is questionable," said XM.

"The challenges facing China and Europe, the two largest oil consumers in the world behind the U.S., could further dent demand, something that may start being reflected in prices at some point in the future," it said.

Metals:

Gold was steady in Asia, as metal prices remain under pressure amid macroeconomic headwinds.

Given the market's positioning, technical and energy-price pressures, it wouldn't be surprising for gold to fall into the low $1,800s/oz area if inflation quickens and economic data remains firm, said TD Securities.

The U.S. core PCE deflator-the Fed's favorite inflation indicator-due later today will likely be a focus, as it could be a catalyst for more downside if it is hotter than expected, it added.

Macquarie said it doesn't expect metal demand to recover until the second half next year, with mild recessions in the U.S. and Europe keeping prices capped. That said, it is more bullish on precious metals like gold, expecting demand to rise when interest rates start to fall.

---

Copper rose amid weakness in the dollar, which typically has an inverse correlation with the red metal.

The industrial-metal sector is poised to benefit from stabilizing growth in China in the fourth quarter, ANZ said.

Even though disappointing economic activity has capped the upside for industrial-metal prices, demand from the new-energy sector is a "sweet spot," it said.

Also, the renewed focus on electric vehicles and power-grid extensions should revive demand for downstream metals, it added.

TODAY'S TOP HEADLINES

Kevin McCarthy Faces Late-Night Test Ahead of Government Shutdown

WASHINGTON-House Republicans moved to pass a series of annual spending bills late Thursday night, trying to show that the often fractured conference can stay united on legislation headed into any last-gasp negotiations with Democrats to avert a government shutdown this weekend.

In the first of the votes, the House passed the annual State Department and foreign aid appropriations bill in a 216-212 tally.

Japan Finance Minister Pledges Appropriate Action Against Excessive Yen Moves

TOKYO-Japan's Finance Minister Shunichi Suzuki renewed his pledge to take action against sharp falls in the yen as it weakened to its lowest level in almost a year.

"There is no change to our stance that we will take appropriate action against excessive moves without ruling out any options," Suzuki said at a news conference on Friday. "We have a strong sense of urgency."

Chicago Fed's Austan Goolsbee Warns of Risk of Causing Downturn

A top Federal Reserve official said low unemployment could exist with lower inflation and central bank officials should be wary of making mistakes that trigger a recession.

"Believing too strongly in the inevitability of a large trade-off between inflation and unemployment comes with the serious risk of a near-term policy error," Chicago Fed President Austan Goolsbee said Thursday in a speech at the Peterson Institute for International Economics in Washington.

UBS Poised to Settle Mozambique's 'Tuna Bonds' Lawsuit Against Credit Suisse

UBS Group is close to settling a claim brought by Mozambique against Credit Suisse, people familiar with the matter said, a move that would resolve one of the many legal headaches it inherited through the rushed rescue of its Swiss banking rival earlier this year.

Striking a deal with the southern African nation would help UBS disentangle itself from the so-called tuna-bonds scandal, a decadelong mess mixing high finance, corruption and risky frontier-market investing.

Nvidia's French Offices Raided in Cloud-Computing Antitrust Inquiry

France's competition authority raided Nvidia's local offices this week on suspicion the company engaged in anticompetitive practices, the first significant regulatory scrutiny the company has faced since its rise to be the paramount supplier of artificial intelligence chips.

The French competition authority, which disclosed the dawn raid on Wednesday, didn't say what practices it was investigating or which company it had targeted, beyond saying it was in the "graphics cards sector." But people familiar with the raid said the operation had targeted Nvidia, which is the world's largest maker of chips used both for artificial intelligence and for computer graphics.

Write to [e-mail]

Expected Major Events for Friday

04:30/NED: Aug PPI

04:30/NED: Aug Retail turnover

04:30/NED: Sep Flash Estimate CPI

06:00/SWE: Aug Retail sales

06:00/UK: 2Q Balance of Payments

06:00/UK: 2Q Business investment revised results

06:00/DEN: 2Q Revised GDP

06:00/DEN: Aug Unemployment

06:00/UK: 2Q UK quarterly national accounts

06:00/GER: Aug Foreign trade price indices

06:00/GER: Aug Retail Trade

06:30/HUN: Aug Employment & unemployment

06:45/FRA: Aug PPI

06:45/FRA: Aug Household consumption expenditure in manufactured goods

06:45/FRA: Sep Provisional CPI

07:00/CZE: 2Q LFSS Employment & Unemployment

07:00/SWI: Sep KOF economic barometer

07:00/TUR: Aug Foreign Trade

07:30/EU: Sep EuroCOIN indicator of euro area economic activity

07:55/GER: Sep Labour market statistics (incl unemployment)

08:00/ITA: Aug Foreign Trade non-EU

08:00/BUL: Aug PPI

08:30/UK: Aug Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit

08:30/UK: Aug Monetary & Financial Statistics

08:30/UK: Aug Bank of England effective interest rates

09:00/CRO: Aug Industrial Production Volume Index

09:00/CYP: Aug PPI

09:00/GRE: Aug PPI

09:00/GRE: Jul Turnover Index in Retail Trade

09:00/ITA: Sep Provisional CPI

09:00/ITA: Sep Cities CPI

09:00/BEL: 2Q Balance of Payments

09:00/LUX: Aug PPI

09:00/CRO: Aug Retail trade

09:00/EU: Sep Flash Estimate euro area inflation

10:00/ITA: Jul Industrial turnover

10:00/POR: Aug Retail trade

12:00/POL: 2Q Quarterly Balance of Payments

15:59/UKR: Aug Industrial Production

16:59/SPN: Aug Budget deficit

All times in GMT. Powered by Onclusive and Dow Jones.

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

09-29-23 0016ET