European Midday Briefing : Stocks Pause As Investors Await U.S. CPI

MARKET WRAPS

Stocks:

European stocks were struggling for direction on Wednesday as traders awaited U.S. inflation data later in the week.

"European markets face another empty calendar, with just weekly U.S. crude inventories on the calendar for the day, as the wait for U.S. inflation tomorrow goes on," IG said.

Shares on the Move

Sainsbury's was the worst performer on the FTSE 100, with shares down 5.1%, after it reported a mixed performance during the third quarter and Christmas period.

Stocks to Watch

Rio Tinto is unlikely to make any changes to its 2024 guidance alongside its 4Q FY 2023 result given it was last updated at an investor day on Dec. 6, Morgan Stanley said.

Instead, "we will look for realized price data and will focus on the volume ramp-up at Kennecott and Oyu Tolgoi" in the report scheduled for release before the Australian market opens on Jan. 16, it added.

Jefferies said that the biggest risk to miners this year is a potential U.S. recession . "We have heard arguments as to why commodity prices might rise even if there is a recession, but we are very skeptical about this view," it added.

U.S. Markets:

Stock futures traded mostly to the upside with Wall Street searching for direction ahead of the inflation data and the start of corporate earnings season later this week.

Stocks to Watch

Coinbase declined 1.6% in premarket trading and Marathon Digital fell 3.3% as Bitcoin traded about 2% lower. The Securities and Exchange Commission said its X account was compromised , disavowing a post from moments earlier that said the agency had approved the first Bitcoin exchange-traded funds to come to market.

Hewlett Packard Enterprise reached an agreement to acquire Juniper Networks for about $14 billion. Juniper shares rose about 1% premarket.

Forex:

The euro-dollar exchange rate looks comfortable at current levels, sticking to a narrow range around 1.0930 and showing few signs of moving too far away from this mark so far this week, DZ Bank Research said.

Until Thursday's U.S. inflation data, EUR/USD "should hardly be able to be dissuaded from its sideways range" as focus centers on the likely timing and extent of interest-rate cuts by the Federal Reserve and the European Central, it added.

Sterling could edge higher if Bank of England's Bailey steers clear of commenting on possible interest-rate cuts in the coming months when he testifies to the U.K. parliament's Treasury Select Committee at 1415 GMT, ING said.

"Any reference to the future path of monetary policy may follow the tone of the latest BOE meeting, where Bailey focused on pouring cold water on rate cut bets."

Commentary such as this could weigh on EUR/GBP in the near term, especially if backed up by solid upcoming U.K. data, ING said.

Bonds:

Italy's very large, EUR15 billion dual-tranche syndicated bond issuance Tuesday, with combined books in excess of EUR160 billion "did not weigh on market sentiment, which was on the contrary boosted," UniCredit Research said.

BlackRock said that fixed income markets face greater volatility as inflation remains persistent. Investors could demand more compensation for the risk of owning long-term bonds given rising public debt and a more uncertain inflation outlook, it added.

Markets are currently grappling with the prospect that neutral rates--the interest rate that neither stimulates nor restricts economic activity--could be settling higher following the Covid-19 pandemic.

"We think neutral rates are higher in both the U.S. and Europe, partly due to looser fiscal policy and the investment demands tied to the low-carbon transition."

Energy:

Oil prices edged higher following reports of a larger-than-expected crude inventories drawdown in the U.S.

"U.S. crude oil inventories fell by 5.2 million barrels, which is larger than the market was expecting," ING said.

"However, large builds were once again seen on the products side, with gasoline and distillate stocks increasing by 4.9 million barrels and 6.9 million barrels, respectively."

Meanwhile, the Energy Information Administration raised its 2024 U.S. crude oil production forecast to an average of 13.2 million barrels a day, and predicted a further increase to 13.4 million barrels a day in 2025.

Metals:

Base metals and gold prices rose as investors await U.S. inflation data for hints on the timing of potential interest-rate cuts and China's trade data, which could offer more clarity on demand prospects.

"Metals prices are likely to struggle to make up ground unless this week's U.S. inflation data comes in significantly lower and/or Chinese import data is much stronger than expected," Commerzbank Research said.

Still, "the downside potential for prices is likely to be limited by expectations of interest rate cuts, which are likely to be reinforced by a weakening U.S. economy," it added.

EMEA HEADLINES

Persimmon Sales Rate Fell But Saw Late Year Improvement; Forward Orders Rose

Persimmon said its 2023 sales rate fell, though demand improved in the final quarter and its forward sales position rose.

For the year ended Dec. 31, the U.K. house builder said Wednesday that its private average sales rate declined to 0.58 per outlet per week, from 0.69 in 2022, though the fourth quarter sales rate improved to 0.41 from 0.28.

Sodexo Spinoff Pluxee Sets Financial Targets Ahead of Feb. 1 Listing

Sodexo spinoff Pluxee has set short-term and midterm targets ahead of its planned listing on Feb. 1.

The employee-benefits company, which is being carved out of the French food-and-catering giant, said on Wednesday that it aims to grow revenue by a percentage in the low double digits in fiscal 2024, and has the same goal for fiscal 2026.

Global Economic Growth to Slow for Third Straight Year, World Bank Says

The World Bank expects global economic growth to decelerate for the third year in a row to a "sorry record by the end of 2024," hampered by tight monetary policy, restrictive financial conditions, and "feeble global trade and investment."

It sees the global economy expanding 2.4% in 2024, slowing from last year's growth rate of 2.6%-and nearly three-quarters of a percentage point lower than the average pace between 2010 and 2019, the World Bank said in its latest Global Economic Prospects report, released Tuesday.

GLOBAL NEWS

Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up

Western importers are reporting a steep rise in ocean-shipping rates and weekslong delays as carriers divert ships from the Red Sea to avoid Houthi rebel attacks.

Some companies shipping goods on the crucial trade lane are starting to chafe at the rising prices and extra fees that ocean carriers are imposing for the higher cost of routing containerships on longer voyages around the Horn of Africa following drone and missile attacks by Houthi rebels in Yemen.

Spending Bill Won't Be Done in Time, Senate Republicans Warn

WASHINGTON-Congress may need to pass another short-term bill to avoid a partial government shutdown in less than two weeks, potentially forcing House Speaker Mike Johnson (R., La.) to break a vow he made to GOP colleagues swearing off such measures.

Senate Minority Leader Mitch McConnell (R., Ky.) said the dwindling days left before the deadline meant Congress would have to take up a stopgap bill, known as a continuing resolution or CR, to keep the government open as work continues on full-year fiscal 2024 legislation. The current interim spending law funds some parts of the government through Jan. 19 and the rest through Feb. 2.

Israel's Far Right Calls for Palestinians to Resettle Outside Gaza

TEL AVIV, Israel-Far-right Israeli ministers are increasingly calling for Palestinians to leave Gaza and for Jews to rebuild settlements there, complicating Prime Minister Benjamin Netanyahu's efforts to maintain diplomatic support for the war against Hamas while also ensuring his own political survival.

Netanyahu faces one of the greatest threats to his 16-year leadership, with dismal approval ratings after Hamas killed more than 1,200 people, mostly civilians, and took more than 200 people hostage on Oct. 7. Careful not to alienate key members of his cabinet and risk the collapse of his government, he has been quiet on the remarks despite pressure to disavow them from the U.S., Israel's most important ally.

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

(END) Dow Jones Newswires

01-10-24 0536ET