European Midday Briefing: Skittish Mood Ahead of French Elections; U.S. Data Eyed

MARKET WRAPS

Stocks:

European stocks struggled for momentum on Thursday as caution dominated ahead of the French elections on Sunday and as investors awaited a slew of U.S. data later.

H&M shares fell 13% after it reported second-quarter results, sending the stocks of its European peers lower as well.

Stocks to Watch

Risks around Anglo American 's execution of its new strategy outweighs the reward potential, Berenberg said, downgrading the mining major to sell from hold.

STMicroelectronics should only be able to hit the low end of its sales guidance this year as the chip maker grapples with weak demand from customers in the automotive and industrial sectors, Stifel said.

IPOs

Over a hundred private companies are considering listing on the London Stock Exchange, boosting a cautious optimism about the market's future, EY said.

The LSE is lagging behind other markets like Nasdaq in appeal, but EY noted that capital raised quadrupled on year in the first half of 2024, although from a very low base.

The IPO market in Europe, the Middle East, India and Africa region saw a 47% increase in new listings in the second quarter of this year through to June 17 compared with the previous quarter, EY said, amid a 15% global downturn caused by a plummeting of activity in Asia-Pacific.

U.S. Markets:

Stock futures were lower following a disappointing revenue outlook from Micron Technology.

Investors awaited data on jobless claims, durable-goods orders, pending home sales and a third estimate of first-quarter GDP.

The 10-year Treasury yield ticked up.

Walgreens Boots Alliance and Nike are among the companies due to post earnings.

Stocks to Watch

While Micron Technology 's forecast met analyst expectations, investors had hoped for a bigger benefit from the AI boom. Shares fell 6% premarket.

Nvidia, Advanced Micro Devices followed Micron lower, posting modest premarket declines.

Forex:

The dollar edged lower after hitting its highest level in two months against a basket of currencies, and UniCredit Research said upcoming economic data, including durable goods orders, could help temper its gains.

"A possible drop in durable goods orders, which are scheduled to be released in the U.S. this afternoon, might put a lid on an additional appreciation of the greenback [dollar]."

The Japanese yen edged higher after dropping to its weakest against the dollar since 1986 on Wednesday, buoyed by strong Japanese retail sales data, month-end dollar sales by Japanese exporters and prospects of Japanese authorities intervening to prop up the currency, UniCredit Research said.

Bonds:

Eurozone government bond yields traded indecisively as investors awaited critical economic indicators, notably inflation data from Italy, France and Spain on Friday, alongside the impending French elections, XTB MENA said.

"The results of the first round of the French election could strongly impact French treasury yields and the spreads with German equivalents during next week as markets will update their expectations and turn to the second round."

The French election might not have an immediate market impact but it could store up greater issues over time for French government bonds, TwentyFour Asset Management said.

If the far-right National Rally wins a relative majority, French government bond spreads are likely to tighten, it said.

"While the market would have preferred the status quo-that ship has sailed and this isn't an unexpected result given their poll lead."

TwentyFour AM said the market won't price in a fiscal crisis immediately if the National Rally wins a relative majority, but warned that investors are increasingly uncomfortable with unsustainable budget policies and deficits.

Treasurys are facing headwinds from supply, while investors remain nervous ahead of the release of PCE data on Friday, Commerzbank Research said.

"Most recently, UST headwind[s] were at play, with significant Treasury supply yesterday and today and investors likely becoming nervous about tomorrow's PCE print after Canadian and Australian inflation surprised to the upside earlier this week."

Energy:

Oil prices ticked lower on concerns over global demand following a build in U.S. inventories and lingering uncertainties around the path of interest-rate cuts in the world's top consumer.

The latest EIA data was bearish for prices, pointing to weak gasoline demand despite the summer travel season. Plus, "volatility in equity markets contributed to a rollercoaster ride in crude oil markets while a stronger USD added to the bearish picture," ANZ said.

European natural-gas prices traded higher as concerns over supply disruptions and strong demand for liquefied natural gas in Asia weighed on sentiment despite high storage levels across the bloc.

Metals:

Gold prices edged lower as U.S. inflation data looms, while copper remained under pressure as a stronger dollar and concerns over demand in China weighed on sentiment.

China's industrial profit rose at a much slower pace in May, pointing to persisting economic headwinds at a time when the country is also in the midst of a dispute with the European Union over the bloc's tariffs on imports of Chinese-made electric vehicles.

EMEA HEADLINES

Riksbank Holds Rate Steady But Sees Two or Three Cuts Later This Year

Sweden's central bank held its key policy rate at 3.75% and said it could cut the policy rate two or three times during the second half as long as the outlook for inflation holds.

The decision was in line with a poll of economists by The Wall Street Journal ahead of the decision.

GSK stock falls more at London open following RSV vaccination news

GSK's London-listed shares fell even more swiftly than their ADRs to news that advisers to the Centers for Disease Control and Prevention shifted their recommendations for who should be vaccinated against respiratory syncytial virus.

GSK's London-listed shares UK:GSK were trading at GBP14.91 in early action Thursday, a decline of 7%, and worse than the GBP15.44 implied by the U.S. close.

Biden Administration Scrambles to Head Off Wider War Between Israel and Hezbollah

WASHINGTON-A Biden administration push to curtail worsening border clashes between Israel and Hezbollah in southern Lebanon is running into major headwinds because of the difficulty the U.S. faces in arranging a cease-fire in Gaza, U.S. officials say.

The connections between the two fronts underscore the diplomatic conundrum facing the White House as it seeks to prevent a full-scale war that could draw in Iran and broaden the fighting well beyond Gaza.

GLOBAL NEWS

Bill Gates Has Billions in Green Startups. He Shares the Early Winners and Long Shots.

It is the blessing that can help determine a climate startup's fate: backing from Bill Gates, one of the biggest investors in efforts to transform the world's energy use.

Since 2015, Breakthrough Energy, the climate-investment firm founded by Gates, has lavished $2.2 billion on more than 160 startups and other initiatives, seeking both returns for investors and emissions reductions. He has also made investments separately outside the firm.

Fed Officials Are Talking About 3 Scenarios. Here's What They Mean for Rates.

The Federal Reserve is as data-dependent as ever these days. Instead of offering firm forecasts-or even best guesses-officials are acknowledging that there's a range of potential outcomes ahead, and they aren't sure which way the chips will fall.

Several Fed governors and regional bank presidents have recently described a handful of options for the U.S. labor market and inflation in the second half of 2024, and what the appropriate monetary policy response would be in each case.

The Fed's Higher for Longer Policy Is Breaking the Yen

The Japanese yen is at a nearly four-decade low versus the U.S. dollar, and there's no sign of relief for the East Asian currency. It's a product of divergent monetary policy between the Bank of Japan and its developed-market peers-particularly the Federal Reserve.

The yen weakened to nearly 161 versus the dollar on Wednesday, a level last seen in 1986 after a 14% depreciation in 2024 alone. It was holding at 160.47 early Thursday. That's a level at which the BOJ has intervened to support the currency in the past, by selling foreign-currency reserves, but there was no sign of an intervention at the moment.

Biden-Trump Debate Takes Shape as Clash With 'No Love Lost'

President Biden and former President Donald Trump prepared for a high-stakes clash in the first presidential debate of the 2024 campaign on Thursday, seeking to persuade a skeptical nation about their abilities to serve a second term and looking to shake up a tightly contested race that has grown increasingly bitter.

The debate at a CNN studio in Atlanta was expected to put a spotlight on their advanced ages. Biden is the oldest U.S. president at 81, and Trump, 78, was among the oldest to serve. Their competing visions on the economy and democracy will also be in focus.

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

(END) Dow Jones Newswires

06-27-24 0605ET