European Midday Briefing : Stocks Struggle as Oil Gains Add to Inflation Fears

MARKET WRAPS

Stocks:

Most European stock markets edged higher on Tuesday, although gains were tentative, as investors awaited several central bank policy decisions this week.

The Federal Reserve starts its two-day meeting later on Tuesday. It's expected to keep interest rates steady on Wednesday, but an uptick in inflation has investors worried about raises later this year.

Although rates are expected to be close to their peak, a further rise in oil prices has sparked worries about renewed inflationary pressures while economies remain weak.

"Everyone is worried about oil prices, and what they will mean for inflation figures heading into the end of the year," IG said.

Economic Insight

Italy may need a tighter fiscal policy to keep its deficit under control this year, Barclays said, adding that the deficit is likely to be higher than previously expected this, and the same trend could continue in 2024.

Barclays said any reductions in the debt-to-GDP ratio would need a tighter tax-and-spend policy on the part of the Italian government, unless growth is stronger than expected.

U.S. Markets:

Stock futures wavered as investors awaited September's next big public offering: Instacart.

Instacart has set a price of $30 a share, which would value it at $9.9 billion on a fully diluted basis.

Should Instacart's shares trade well, that could set the stage for more startups to list their stocks.

Follow WSJ markets coverage here .

Forex:

U.S. economic resilience and the prospect of high interest rates for an extended period could help the dollar rise further, CPT Markets said.

"The week is packed with central bank meetings as decisions on interest rates and monetary policy direction are eagerly anticipated by forex traders."

The Federal Reserve's interest-rate decision on Wednesday, with a focus on its stance on inflation, will impact the dollar's direction, CPT said.

Read EUR/USD's Bias Remains Bearish Below 1.0770, Charts Show

Bonds:

The bond market looks technically vulnerable, with 10-year Bunds having room to test this year's high at 2.77%, Commerzbank Research said.

"After the key level of 2.8% in 30-year Bund yields have been taken out, 10s [10-year Bund yields] have room to test their highs of 2.77%."

While most investors seem to agree that interest rates are at their top, there is no urgency to lock in lower rates further out on the curve, Commerzbank said.

Read BOE Likely to Raise Gilt Sales in The 12 Months Starting From October

Energy:

Brent futures briefly rose above $95 a barrel after comments on demand from the Saudis.

Saudi Arabia's energy minister said the "jury is still out" on Chinese oil demand. While seemingly a bearish comment, it has been interpreted as an indication that the Gulf kingdom anticipates leaving its 1 million barrel-a-day supply cut in place into next year, ANZ said.

Read EIA Sees US Oil, Natural Gas Output Declining in Shale

Metals:

Gold prices were steady as investors awaited the Fed decision.

While few are expecting an interest rate rise, the post-meeting policy statement, dot plots and Jerome Powell's press conference will be scrutinized for any forward-looking clues.

"The Fed may indicate that one more hike is likely before the year is out," City Index said.

"This would further discourage bearish bets on the dollar, keeping the pressure on...gold in the short-term outlook."

DOW JONES NEWSPLUS

EMEA HEADLINES

Kingfisher Cuts FY 2024 View After 1H Pretax Profit Fell; Launches GBP300 Mln Share Buyback

Kingfisher cut its fiscal 2024 guidance after pretax profit fell in the first half of the fiscal year ending Jan. 31, and launched a 300-million pound ($371.6 million) share buyback.

The home-improvement retailer said Tuesday that pretax profit fell to GBP317 million in the half-year to the end of July from GBP447 million in the same period a year earlier, missing market views of GBP355.8 million, according to a Visible Alpha consensus.

TUI Backs Guidance After Strong Summer Season

TUI backed its full-year and fourth-quarter guidance after reporting a strong summer season and saying that the positive momentum has continued into the winter season.

The London-listed German travel operator said that summer 2023 bookings were 5% higher than the prior year and close to prepandemic levels at 96%. Winter 2023-24 bookings are up 15%, supported by higher prices, it added.

Ocado Backs Full-Year Views After 3Q Revenue, Customers Rose

Ocado Group said that retail revenue rose 7.2%, together with customer numbers and basket values, and retained its full-year guidance.

The online grocer and retail-technology specialist said revenue for the 13 weeks ended Aug. 27 increased to 569.6 million pounds ($705.4 million) from GBP531.5 million a year earlier, boosted by a 1.9% rise in average orders per week.

Santander Reorganizes Retail-and-Commercial, Consumer Operations

Banco Santander said it is consolidating its retail-and-commercial and consumer activities in all its markets under two new global businesses, a move aimed at aligning these operations with the model of the rest of the group.

The Spanish bank said late Monday that its retail-and-commercial and consumer operations will be housed under two new global businesses-retail and commercial and digital consumer bank. These new business segments add to the group's payments, corporate-and-investment banking, and wealth management-and-insurance businesses.

Talking Markets: Europe's Wind Industry Calls for Support Amid Mounting Struggles, China Competition

Europe's wind-power industry hopes that new policy support from the European Union will help it cope with a long list of challenges that include high costs, long permitting processes and rising competition on their home turf from Chinese manufacturers.

In recent months, developers across the region have had to postpone projects and take financial charges in the face of increasing raw material costs and logistic challenges, damaging investors' confidence despite the industry's key role in the energy transition.

The Unexpected New Winners in the Global Energy War

BIR REBAA, Algeria-Once-obscure corners of the energy world, from offshore Congo to Azerbaijan, are booming as Europe finds new sources of natural gas to replace the Russian supplies that once powered the continent. The shift is redrawing the world's energy map at a rapid clip.

In Bir Rebaa, deep in the Sahara, the Italian energy company Eni and Algeria's state-owned energy company are drilling dozens of wells, producing gas from previously untapped fields in a matter of months.

GLOBAL NEWS

American Business Confidence in China Slumps to Lowest in Decades

HONG KONG-U.S. companies are painting the bleakest picture in decades over doing business in China as tensions between Beijing and the West are compounded by a deteriorating environment for their operations.

Just over half of 325 members surveyed by the American Chamber of Commerce in Shanghai were optimistic about their five-year business outlooks, the lowest since the survey began in 1999, the group said Tuesday. As recently as 2021, the figure stood at 78%.

RBA Considered Further Interest-Rate Hike at September Meeting

SYDNEY-The Reserve Bank of Australia continues to warn that further interest-rate increases might be needed if inflation remains stickier than expected, adding that it considered tightening policy settings further at a meeting earlier this month.

Still, in minutes of its Sept. 5 board meeting published Tuesday, the RBA said it is confident that the Australian economy remains on a "narrow path" by which inflation returns to the desired 2% to 3% inflation target over time, while employment growth continues.

Why the Fed's next decisions on rates could lead to a wave of commercial-debt defaults

Getting staff back to the office is only part of the battle.

Regional banks that went big lending on office properties also face a ticking time bomb of maturing debt that they helped create, particularly if the Federal Reserve holds its policy rate near the current 22-year high well into next year.

Janet Yellen says she expects soaring oil prices to stabilize

Treasury Secretary Janet Yellen on Monday said she thinks oil prices will stop rising but that the Biden administration is watching carefully.

"My expectation is that they will stabilize, but we will just have to keep an eye on it," Yellen said in a CNBC interview.

UAW Strike Collides With Biden's Manufacturing Agenda

The United Auto Workers strike at U.S. carmakers exposes a conflict at the heart of the Biden administration's economic policy that could be difficult to resolve.

On the one hand, President Biden promotes new investment in clean technology and electric vehicles to bring manufacturing back to U.S. shores. On the other, he celebrates labor unions and supports their demands for higher wages.

China Sends Top Diplomat to Russia After Surprise U.S. Talks

SINGAPORE-China's top diplomat began a four-day visit to Russia after a surprise stopover in Malta for weekend talks with White House officials, as Beijing lays the groundwork for separate meetings between Chinese leader Xi Jinping and his U.S. and Russian counterparts.

Russia's Vladimir Putin is expected to visit China in October-his first trip abroad since the International Criminal Court in March issued an arrest warrant over his role in the forced deportation of children from Russian-occupied areas of Ukraine. Anticipation is growing that Xi and President Biden could meet at the Asia-Pacific Economic Cooperation summit in San Francisco the following month.

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09-19-23 0536ET