European Midday Briefing : Sentiment Improves on Nvidia Rebound

MARKET WRAPS

Stocks:

European stocks traded higher on Wednesday as sentiment improved after AI giant Nvidia rebounded after recent falls , lifting Nasdaq and in turn helped many Asian stocks.

"Positive vibes from the U.S. may help improve European investors' mood despite political uncertainties," Swissquote Bank said. Investors remain cautious due to nervousness ahead of Sunday's first round of the French legislative elections.

Stocks to Watch

LVMH is on track to deliver 2% organic revenue growth in the second quarter at both the group and fashion and leather goods levels, Barclays said. The bank expects EBIT margins to fall in the first half and cut its target price 2% to EUR915.

A partnership between Volkswagen and Rivian Automotive solves problems for both companies, giving much-needed liquidity to the U.S. electric-vehicle company and offering some help to the German giant with its software challenges, RBC Capital Markets said.

RBC Capital Markets also noted that Volkswagen's main gain from a partnership with Rivian Automotive will be in addressing well documented in-house software challenges, which is why the German car giant also decided to outsource automated-driving functions to Mobileye.

U.S. Markets:

Stock futures edged higher and bond yields rose, having settled at 4.237% on Tuesday.

Results from the Federal Reserve's annual bank stress test are due. Plus, earnings are expected from General Mills and Micron Technology.

Pending economic data include new home sales.

Stocks to Watch

Nvidia rose roughly 2.5% premarket. Its shares have been on a wild ride this week, sliding on Monday, before rising nearly 7% Tuesday.

Rivian Automotive shares rose roughly 40% in premarket trading. Volkswagen said late Tuesday it was investing up to $5 billion in Rivian as part of a software-development partnership.

Forex:

Caution ahead of Sunday's first round of the French legislative elections, in which the far-right National Rally party is expected to make strong gains, continues to weigh on the euro while the safe-haven dollar benefits, UniCredit Research said.

"End-of-the-month flows, still-sluggish equity markets, relatively stable consumer confidence in the U.S. and, above all, the approaching first round of the French parliamentary election continued to weigh on the euro across the board."

Ebury continues to see a mild pullback in the dollar against all G-10 currencies, save the Swiss franc.

"This view is largely centered around our assumption that the U.S. economy has far less room to surprise to the upside than its peers, while the repricing in Fed rates ensures that we now see a more dovish FOMC than priced in by markets."

Ebury expects politics to play an outsized role in FX trading in the second half of the year. November's U.S. presidential election, in particular, likely presents the biggest risk to Ebury's FX projections.

Bonds:

French government bonds are still struggling to build up recovery momentum, while yields of other eurozone bonds as well as spreads are in confined ranges, Commerzbank Research said.

"Confined moves across most rates and spreads seem again in store considering the quiet agenda."

Government bond issuance in the eurozone will be almost dormant, with only Lithuania lining up for the syndicated launch of a new seven-year bond.

The 10-year Treasury yield is expected to remain capped below 4.3% and the two-year Treasury yield to stay relatively flat, barring significant catalysts, BDSwiss said.

Treasury investors focus on upcoming data, in particular on durable goods on Thursday and PCE inflation on Friday, and Fed officials' speeches this week, it said. While a Fed rate cut this summer appears unlikely, markets are pricing in several rate cuts starting September, which could drive yields lower if they materialize.

Energy:

Oil prices edged higher with all eyes on the EIA's weekly inventory report for insights into demand trends ahead of the July 4 holiday weekend.

Analysts forecast a 2.3 million barrel draw in crude stocks and a 1.2 million barrel decrease in gasoline, while figures from the API reportedly showed oil inventories grew by 914,000 barrels last week.

European natural-gas prices traded higher on prospects of stronger demand in Asia and supply concerns in Norway.

Metals:

Gold prices edged lower as investors awaited PCE data later this week--a key U.S. inflation reading likely to factor in the Federal Reserve's monetary policy decision--amid recent signs of resilience in the economy.

Meanwhile, base metals prices were broadly flat. "Today saw another day with marginal movements within the base metals sector, even with the dollar strengthening," Sucden Financial said.

"This indicates an increasing disconnection between macroeconomic factors and the pricing trends of base metals."

Phillip Nova said gold remains in a long-term bullish trend, with prices likely to consolidate in $2,300's ahead of the key inflation print on Friday.

EMEA HEADLINES

French Consumers Feel Bleaker Amid Political Turmoil

French consumers are feeling less confident about their prospects amid surprise elections, a fresh headwind for the country's fragile economic recovery.

A measure of confidence compiled by France's statistics agency fell to 89 in June from 90 in May, according to a survey released Wednesday, in which a reading of 100 represents the long-term average for consumer sentiment. Consumers reported worsening feelings for the quality of living in France in the months ahead, as well as for their own future savings' prospects and willingness to make major purchases.

Volkswagen to Invest Up to $5 Billion Into EV Maker Rivian

Volkswagen Group is investing $1 billion in electric-pickup maker Rivian Automotive, with plans to spend up to $5 billion as part of a software-development partnership.

The deal, disclosed Tuesday, should provide a lift for the balance sheet of the loss-making startup and help lower the cost of Rivian's next generation of vehicles. For VW, the deal is aimed at bolstering its software unit, which has struggled with quality issues.

Deliveroo shares jump on report of DoorDash's interest in takeover

Deliveroo shares jumped on Wednesday on news the London-listed food delivery firm held talks with DoorDash in regards to the San Francisco company's interest in a possible takeover.

Doordash approached Deliveroo about a possible takeover last month, before negotiations between the two companies reached a stalemate due to disagreements over valuations, Reuters reported, citing two sources.

Atos Gets Revised Restructuring Proposal After Withdrawal of Onepoint Consortium

Atos said it received a revised financial restructuring proposal from a representative committee of bondholders after the consortium that included shareholder Onepoint withdrew from discussions with the struggling French IT company.

Atos said the Onepoint consortium ended talks on Tuesday, weeks after it agreed to move forward with the consortium's restructuring proposal.

GLOBAL NEWS

Shipping Rates Are Soaring. Will They Refuel Inflation?

Sending goods around the world by ship is at least five times as expensive as it was last year, putting new cost pressures on companies and raising the specter of prolonged inflation.

Container ship rates from Asia to Europe have jumped to about $8,000 per 40-foot shipping container, up from an average of $1,500 last year, according to Jefferies analyst Omar Nokta. Rates from Asia to the U.S. have risen a similar amount.

Bitcoin Rises. Crypto Is Bouncing Back from Fears Over Mt. Gox Refunds.

Bitcoin and other cryptocurrencies were rising on Wednesday. The slump caused by the prospect of refunds linked to the collapsed cryptocurrency exchange Mt. Gox appears to be over.

Bitcoin was up 0.8% over the last 24 hours to $61,538. The largest cryptocurrency 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.

NATO's New Chief Is a Veteran of Europe's Fights With Trump

BRUSSELS-NATO's next boss is a political survivor who has said "no" to Donald Trump.

North Atlantic Treaty Organization members on Wednesday approved Dutch Prime Minister Mark Rutte to lead the 32-country alliance after current Secretary-General Jens Stoltenberg's term ends on Sept. 30th.

Falsely Accused Wall Street Journal Reporter Evan Gershkovich in Court for Start of Secret Russian Trial

Wall Street Journal reporter Evan Gershkovich appeared in a Russian court Wednesday to face a false accusation of espionage in a secret trial that will offer him few, if any, of the legal protections he would be accorded in the U.S. and other Western countries.

The 32-year-old American journalist has been imprisoned since March of last year, when he was arrested by the country's Federal Security Service, or FSB, while on a reporting assignment in Yekaterinburg, around 900 miles east of Moscow.

U.S. Talks Tough on Russia and Iran-So Long as It Doesn't Raise Gas Prices

The Biden administration wants to keep gas prices stable ahead of the election by encouraging oil to flow into global markets. The effort has run square into another priority: being tough on adversaries Russia, Iran and Venezuela.

The policy has led to softer-than-expected sanctions on major oil producers, according to diplomats, former government officials and energy-industry players briefed by current officials.

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

(END) Dow Jones Newswires

06-26-24 0601ET