EMEA Morning Briefing : Stock Futures Lower as Powell Speech Eyed

MARKET WRAPS

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Opening Call:

Stock futures were lower as investors await further cues on the interest-rate outlook. Asian stock benchmarks largely rose; the dollar weakened; Treasury yields steadied; oil futures rose and gold fell.

Equities:

European stock futures fell slightly early Thursday. Federal Reserve Chair Jerome Powell is due to deliver a speech later in the day, as are other Fed officials.

"Stocks may well pause for breath as investors balance the hope for rate cuts with building financial stresses in the economy. And it wouldn't be the first time in the current cycle of elevated interest rates that the market has been wrong about the timing of the Fed pivot," said Derren Nathan, head of equity research at Hargreaves Lansdown.

Forex:

The U.S. dollar fell slightly in Asia. The dollar has seen a major peak, topping out a cycle that began in 2011 and setting up a period of "messy" market action as exceptional U.S. economic performance fades, according to Kit Juckes of Societe Generale.

"The U.S. economy remains exceptional of course, but as it slows and rate differentials with other countries narrow, the dollar is set to fall back."

"The rest of 2023 is likely to be messy, as signs of a turn in the U.S. economic cycle come and go, and as we watch to see how much the global economy is set to slow in the months ahead," Juckes said, with the dollar then likely to weaken in 2024.

Bonds:

Treasurys were little changed after long-term yields finished at their lowest levels in more than a month on Wednesday after a 10-year auction went as expected and reaffirmed buying interest in government debt.

"The big catalyst today was the $40 billion 10-year auction," said Michael Reinking, a senior market strategist for the New York Stock Exchange.

Following a string of weak auctions and an increase in size, "this was closely watched," Reinking said. "Given the recent move lower in yields, it seems like markets were content with the results despite the auction being a little bit sloppy."

Energy:

Oil futures rebounded in Asia after sliding overnight. However, ANZ noted multiple signs of demand weakness, including the EIA's forecast that U.S. fuel consumption will hit a two-decade low next year. Meanwhile, in China, refining margins are shrinking and oil stockpiles are growing as air travel has yet to recover completely, ANZ said.

Russia is also shipping crude oil at near its highest rate in over four months, ANZ added.

Metals:

Gold prices edged higher after falling sharply overnight as Fed officials' hawkish comments weighed on investor sentiment. Investors are looking for fresh cues on the Fed's next move in the absence of fresh economic data.

Meanwhile, the yellow metal is struggling against a rebound in short-term U.S. yields following sharp falls last week, Oanda said.

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Zinc fell slightly, but is likely to be supported by signs of tightening supply. Recent LME data show that canceled warrants for zinc rose by 6,125 tons to 24,925 tons on Wednesday, the highest since Oct. 25, ING said.

Canceled warrants for zinc have climbed by nearly 80% this week, IND added. An increase in canceled warrants typically indicates more demand for the underlying commodity and its delivery.

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Iron ore prices rose amid strong demand and low supply and inventories. Supply has started to be limited as Brazil enters the rainy season, Nanhua Futures said. Meanwhile, China's supportive macro policy is boosting overall sentiment, lifting iron ore demand and prices of raw materials, the brokerage added.

TODAY'S TOP HEADLINES

China Falls Into Deflation Again Amid Demand Weakness

China's consumer prices slipped into deflation for the second time this year, according to official data, signaling weakness in domestic demand despite the government's stepped-up efforts to boost growth.

The consumer-price index fell 0.2% in October from a year earlier after being flat in September, the National Bureau of Statistics said Thursday. A Wall Street Journal poll of economists had tipped a 0.1% decline.

U.K. Hits Russian Gold, Oil Sectors With New Sanctions Package

The U.K. government has sanctioned 29 entities and individuals operating in and supporting Russia's gold and oil sectors, in an effort to cut off revenue streams funding its war in Ukraine.

Entities sanctioned Wednesday include Nord Gold and Highland Gold Mining, two of the largest producers of Russian gold, and Paloma Precious DMCC, a United Arab Emirates-based network the U.K. said has channeled more than $300 million in gold revenue to Russia.

Cleveland Fed Launches Search for President as Mester Approaches Retirement

The Federal Reserve Bank of Cleveland has launched a search for a new president and chief executive, as Loretta Mester reaches the central bank's mandatory retirement age.

The Cleveland Fed on Wednesday said Mester's tenure will conclude on June 30, 2024.

Airbus Sticks to Delivery Target, Ramps Up A350 Production Despite Supply-Chain Challenges

Airbus posted higher revenue and earnings for the third quarter and backed its guidance for the year, sticking to plans to deliver 720 commercial planes and ramping up production of its A350 wide-body aircraft despite lingering supply-chain snags.

The European plane maker had delivered 559 aircraft to customers by the end of October, meaning it will need to send out 161 planes in November and December to hit its annual target. Airbus had originally hoped to achieve 720 deliveries last year but was forced to shelve that goal due to supply-chain woes.

Qatar Pursues Oil Deal After Brokering End to Venezuela Sanctions

For more than a year, Qatar quietly hosted talks between senior U.S. and Venezuelan officials that led to a breakthrough last month when Washington lifted sanctions on Venezuela's crippled energy industry.

Now the tiny Arab state, and a Qatari conglomerate, are trying to cash in.

Fed Probes Morgan Stanley's International Wealth-Management Practices

Morgan Stanley's wealth-management arm is being scrutinized by the Federal Reserve, which is looking into whether the bank has sufficient controls in place to prevent rich foreign customers from laundering money.

The Fed has been probing how Morgan Stanley vets foreigners and the origins of their money before taking them on as customers, according to people familiar with the matter. What started out as a routine review a few years ago escalated after regulators found the bank's due diligence on clients and anti-money-laundering efforts lacking.

'Meta's Deception' About Instagram's Harmful Qualities Alleged in Massachusetts Suit

Meta Platforms Chief Executive Mark Zuckerberg repeatedly dismissed warnings from senior company officials that its flagship social-media platforms were harming young users, according to unsealed allegations in a lawsuit filed by Massachusetts.

According to the suit, as early as 2019, Meta's head of responsible innovation was telling Zuckerberg that mounting evidence showed the net effect of their platforms on user well-being was negative. Around that time, multiple executives, including Instagram head Adam Mosseri, were pushing for the company to ban filters that mimic plastic surgery due to concerns they were harming the mental health of women and teens.

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Expected Major Events for Thursday

00:01/UK: Oct RICS Residential Market Survey

07:00/NOR: 3Q Labour force survey

07:00/ROM: Sep International trade

07:00/DEN: Sep Balance of payments (provisional figures)

07:00/DEN: Sep External trade (provisional figures)

08:00/AUT: Aug Foreign Trade

08:00/SVK: Sep Foreign trade

09:00/BUL: Sep Trade with third countries - preliminary data

09:00/BUL: Aug Trade with EU Member States - preliminary data

09:30/UK: 3Q Mortgage and landlord possession statistics

09:30/UK: 3Q Mortgage Arrears and Possessions data

10:00/CRO: Sep Foreign Trade

10:00/CYP: Sep Foreign Trade (provisional)

10:00/MLT: Sep International Trade

11:00/POR: Sep International trade statistics

11:00/IRL: Oct CPI

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

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

(END) Dow Jones Newswires

11-09-23 0017ET