EMEA Morning Briefing : Stock Futures Advance at Start of Week; Gold Extends Gains

MARKET WRAPS

Watch For:

No major economic data expected; trading update from Ryanair

Opening Call:

European stock futures rose at the start of the week, following Asian equities higher. The dollar edged higher; Treasury yields steadied; oil futures were mixed; while gold advanced.

Equities:

Stock futures advanced early Monday, tracking Asian peers higher. Sentiment has been buoyed by China's boldest steps yet to address its property-sector woes, as well as U.S. equities closing at new records on Friday.

This week, key data from the U.S., Europe and U.K. will share the stage with a raft of central bank decisions out of Asia-Pacific, as the timing of interest-rate cuts stays front of mind for investors.

Investors will continue to scrutinize eurozone economic data as they seek confirmation that the European Central Bank will start cutting interest rates in June, as is widely expected, while they will also look for evidence that the economy is gradually recovering.

Provisional purchasing managers' surveys for Germany, France and the eurozone due on Thursday will be a key indicator of how the economy has fared in May.

"We expect eurozone data to confirm the high likelihood of a first [ECB] rate cut in June as the momentum in quarterly wage growth probably eased further in 1Q24," UniCredit Research said.

Forex:

This week may give the USD some breathing room, as the U.S. economic data calendar is light, other than the FOMC minutes due Wednesday, HSBC said. USD had shown some signs of fatigue as the pricing out of Fed rate-cut expectations was running its course, it added.

Also, should the message from coming Fed speakers appear hesitant over inflation, that could help steady the dollar, HSBC added.

Bonds:

Rates on U.S. government debt finished slightly higher Friday even after new Conference Board data pointed to softer economic conditions ahead.

Elevated inflation, high interest rates, rising household debt and depleted pandemic-era savings are all expected to keep weighing on the economy in 2024, according to the Conference Board. It said it sees "serious headwinds to growth ahead," and expects real GDP growth to slow to under 1% over the second quarter to third quarter.

"We enter the weekend with another round of inflation behind us. A weak retail-sales number. Slowing economic data. And a chorus of Fed speakers reiterating a Fed that's firmly on hold. Markets [are] now pricing in a full cut by the September meeting and the window for 2024 [is] closing quickly," said Gregory Faranello, head of U.S. rates trading and strategy at AmeriVet Securities.

Energy:

Oil futures were mixed in Asia as traders keep an eye on the Middle East after a helicopter carrying Iran's president crashed in the northwestern part of the country amid heavy fog.

Meanwhile, recent oil-price declines likely reduce chances of OPEC+ scaling back production cuts in June, said Capital Economics. However, while the OPEC+ decision will be a close call, the cartel will probably gradually increase production from 3Q onward, CE said, noting mounting pressure within the cartel to increase production.

Metals:

Gold futures advanced early Monday amid haven demand and Fed rate-cut hopes. As investors often turn to gold during periods of instability, recent conflicts and tensions in the Middle East are fueling demand for the metal, said Muhammad Umair, founder & financial markets analyst at Gold Predictors, on FXStreet.

Expectations of rate cuts by the Fed also lend support. Umair notes the FedWatch tool indicates a 49.8% probability of the Fed starting to cut in September. Falling rates are usually bullish for gold and other precious metals that don't pay interest, he added.

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Copper prices rose amid supply tightness and the prospect of Fed easing. Cooling inflation in the U.S. has boosted sentiment across the commodities sector, while investors now await speeches by Fed officials this week, ANZ said.

"We expect members to affirm that monetary policy is restrictive ... and to acknowledge that it will be appropriate to cut rates later in the year," ANZ said. A copper short squeeze on the New York-based Comex exchange has also supercharged the rally, ANZ added.

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Iron ore futures gained amid renewed optimism over Beijing's efforts to tackle China's property crisis. Improved expectations on the macro environment will gradually be reflected in demand for iron ore, China Galaxy Futures said.

TODAY'S TOP HEADLINES

Stocks may rise into the summer. These 3 risks could derail the rally.

Bad news for the economy is once again good news for the stock market. So is good news, market analysts say.

Given how U.S. stocks reacted this week to the latest flurry of mixed economic data, a summertime rally feels almost inevitable.

Dimon Led Bank CEOs to Fend Off Tougher Capital Rules

WASHINGTON-JPMorgan Chase's Jamie Dimon and other big-bank CEOs played hardball with the Federal Reserve over proposals that the lenders hold more capital. Now, it looks like those tactics are paying off.

The Fed and two other federal regulators are moving toward a plan that would significantly lessen a nearly 20% mandated increase in capital for the biggest U.S. banks, according to people familiar with the matter.

Tariffs Push Up Costs. But Not Always Inflation

President Biden's decision last week to raise tariffs on roughly $18 billion of goods from China has revived a long-running debate in economics over who ultimately pays such tariffs.

The topic, usually consigned to the academy, is spilling onto the presidential campaign trail, as President Biden and rival Donald Trump jockey over trade policy. With trade barriers likely headed higher under either man, it also has consequences for economic performance and inflation in the U.S.

Gold Is at Record Levels. Its Future Still Looks Bright.

Yukon Cornelius, the self-proclaimed greatest prospector from the north in the TV movie Rudolph the Red-Nosed Reindeer, would be thrilled to learn that this year's bull run in gold shows no signs of slowing down.

The yellow metal is now trading above $2,400 an ounce, a record high. The popular SPDR Gold Shares ETF is also, unsurprisingly, at a peak. Both gold and the gold ETF are up about 17% this year.

Market Froth Is Getting Extreme. Just Look at Meme Stocks.

There are three common responses to the tripling in value of a bunch of meme stocks in two days. The first is to shake one's head in wonder at how badly broken the stock market is today. The second is to want to get in on the action. The third is concern that wild meme-stock price gains are a symptom of easy money that's propping up the entire market.

I think the first response is a mistake and the second is a surefire way to lose money, as plunging meme-stock prices from Wednesday onward showed. The last, the idea that easy money is supporting the market, is plausible and well worth worrying about.

Iran Says It Has Located Crash Site of Helicopter Carrying Its President

Iranian rescuers reached the site of a helicopter that crashed carrying President Ebrahim Raisi in the northwestern part of the country but found no signs of life, the interior minister said Monday, after a night-long operation to a mountainous area shrouded in heavy fog.

Rescue teams located the aircraft early Monday morning, state TV said, without providing any information on the president's condition. Also aboard the helicopter was the foreign minister, Hossein Amir-Abdollahian, state TV said.

Behind New Caledonia's Riots, a Fight Over Vast Reserves of Nickel

PARIS-Before riots swept New Caledonia last week, President Emmanuel Macron aimed to put the remote territory-and its massive reserves of nickel-at the center of France's push to secure raw materials for the clean-energy transition and compete against China in manufacturing electric vehicles.

Those plans are colliding with a hard-line local political movement that seeks independence from France and is refusing to go along.

The Properties High Interest Rates Can't Touch

Don't expect any fashion bargains on Rodeo Drive in Beverly Hills, or New York's Fifth Avenue. And property on these famous luxury shopping streets looks as overpriced as the clothes.

While the average commercial building is worth 20% less than in 2022, the world's most exclusive shops have barely been touched by the highest U.S. and European interest rates in two decades.

An Nvidia Co-Founder's Latest Bet: Making 'Quantum Valley' in New York

TROY, N.Y.-The co-founder of the AI chip maker Nvidia said he chose to study at Rensselaer Polytechnic Institute in the late 1970s because it had a state-of-the-art mainframe computer. Now, he is betting that a quantum computer at his alma mater could reinvigorate the region.

Curtis Priem, 64 years old, is donating more than $75 million so RPI can have a quantum-computing system made by International Business Machines-making it the first such device on a university campus anywhere in the world.

Facebook Parent's Plan to Win AI Race: Give Its Tech Away Free

Mark Zuckerberg has an unusual plan for winning the artificial-intelligence race: giving away his company's technology free.

Like many of its rivals, Zuckerberg's Meta Platforms is spending tens of billions of dollars on high-end computer chips, top-flight computer scientists and gigawatts of electricity to build the most powerful AI tools it can. Unlike any of those rivals, some of whom made AI announcements last week, Zuckerberg is giving away the fruit of that investment-Meta's most advanced chatbots and the technology that drives them.

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Expected Major Events for Monday

07:00/CZE: Apr PPI

07:00/SPN: Mar Trade Balance

10:00/POR: Apr PPI

10:00/UK: Apr Aluminium Production report

17:59/POR: Feb ICSG Copper Report

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05-20-24 0016ET