MARKET WRAPS
Stocks:
European stocks were little changed on Tuesday in subdued trading as the U.S. celebrates Independence Day.
Momentum in the markets should return on Wednesday, as traders await the Federal Reserve minutes and then look to Friday's U.S. jobs data, which might give clues on further interest-rate rises.
Stocks to Watch
Adidas is only at the beginning of a multiyear turnaround story that will be helped by the Samba shoe's surging popularity and favorable margin dynamics, Berenberg said, which estimates the company could return to a 7.5% margin by the end of 2024. Read more.
H&M's better-than-expected 2Q EBIT despite flattish local currency sales highlights very good cost control and puts it on track to make significant progress towards the 10% margin target by 2024, UBS said, lifting its price target to SEK187 from SEK143. Read more.
China's export restrictions on gallium and germanium--critical minerals to the production of semiconductors--can be disruptive but manageable for the chip industry, Citi said. In Europe, Infineon and STMicroelectronics both rely on the minerals for some of their product lines which represent low single digits as a percentage of revenue. Read more.
UBS's acquisition of Credit Suisse has changed its investment case for now, but the challenges facing the bank are known and it is well placed to quickly restructure, Deutsche Bank said. Read more.
The U.K. house building sector has underperformed given inflation data and the Bank of England's response, with JPMorgan reiterating its cautious stance on the market. Read more.
Economic Insight
The Federal and the European Central Bank are likely to go into a "wait-and-see" mode from the summer, Aramea Asset Management said.
The central banks are likely to be waiting to see to what extent the tightening that they have carried out so far has cooled demand and thus inflation, Aramea added.
"If there are signs of success by the end of the year, interest rate cuts in the first half of 2024 are realistic."
Read Sustainable Return to 2% Inflation Seen as a Precondition to Rate Cuts, Says Aramea
Forex:
The dollar was steady in early European action.
While limited scope for any increase in rate expectations should support the dollar, weak jobs data could hit the currency, Swissquote said. "There is a good chance of a dovish readjustment in the case of soft jobs data."
Bonds:
Government supply in the eurozone is expected to amount to EUR97 billion in July, the lowest monthly supply year to date in 2023, Citi said.
Issuance should fall further in August as part of seasonal decline in supply over the summer, Citi added. It calculates the monthly net cash requirement to be marginally supportive at minus EUR6 billion.
"This would, however, be the first month in 2023 with a supportive NCR and second most supportive over the year [after October]," Citi said.
Energy:
Crude futures gained, with price movements recently more aligned with the macro environment than supply and demand fundamentals, according to ING.
ING said Monday's announcement that Saudi would rollover its oil production cut into August came as little surprise to the market, however Russia's move to cut 500 million barrels a day was more of a shock. Still, it said the market was largely unconcerned with prices rangebound.
"Fundamentals are not having as much influence on price direction as one would expect. Instead, the uncertain macro outlook is what the market is focused on. And it is difficult seeing this pattern changing significantly in the short term."
Metals:
Base metals were mixed, with gold a touch higher, as worries over the global economy continued to dampen demand.
Fitch unit BMI downgraded its 2023 average copper price forecast to $8,000 a ton from $9,000 a ton "on the back of weak global demand, a consequence of the slowing global economy and mainland China's service-led recovery."
Prices are likely to remain volatile on the dollar, it said, adding that "we do not expect a return to the highs seen in 2022 as mainland China's real-estate sector remains in doldrums." Read more .
DOW JONES NEWSPLUS
EMEA HEADLINES
Germany's Trade Surplus Fell in May as Exports Ticked Down
Germany's trade surplus fell unexpectedly on month in May, as exports declined marginally and imports rose, a sign that domestic demand could be improving despite a global economic slowdown, as the country's economy tries to shake off the recession it suffered in the winter.
The country's adjusted trade surplus-the balance of exports and imports of goods-dipped to 14.4 billion euros ($15.72 billion) in May, compared with a revised EUR16.5 billion in April, data from the country's statistics office Destatis showed Tuesday.
Sainsbury's Backs FY 2024 Guidance After 1Q Sales Rose
J Sainsbury on Tuesday said its like-for-like sales rose in the first quarter of fiscal 2024, driven by growth in its groceries volumes as it kept prices low on popular products.
The British grocer posted a 9.8% rise in like-for-like sales excluding fuel for the 16 weeks ended June 24, noting that its performance was helped by the bank holidays and warmer weather toward the end of the quarter.
Casino Receives Offers to Strengthen Capital Base
Casino Guichard-Perrachon said it has received two proposals to strengthen its capital base, a day after the group warned it could default on part of its debt.
The French grocer said Tuesday that one proposal came from EP Global Commerce and Fimalac, and the second from 3F Holding. Casino said it would analyze the two proposals and put them to creditors on Wednesday, when it expects to disclose details of the offers.
Volkswagen to Invest $1.09 Bln in Brazil Market Growth
Volkswagen said Tuesday that it will invest 1 billion euros ($1.09 billion) by 2026 in Brazil, where it plans to grow by 40% in the next several years.
The German car maker said its investment will include local development of ethanol-based combustion engines and the expansion of its subscription business model that lets customers lease cars for a duration of their choice. The company will also launch two fully electric models in Brazil by the end of the year, part of a plan to bring 15 new electric and hybrid vehicles to the country by 2025, it said.
GLOBAL NEWS
U.S. Looks to Restrict China's Access to Cloud Computing to Protect Advanced Technology
WASHINGTON-The Biden administration is preparing to restrict Chinese companies' access to U.S. cloud-computing services, according to people familiar with the situation, in a move that could further strain relations between the world's economic superpowers.
The new rule, if adopted, would likely require U.S. cloud-service providers such as https://urldefense.com/v3/__http://Amazon.com__;!!F0Stn7g!FtCNvogyZH6AC_T-YqEAtyL5sGB0sHQseQBAVYu8ekZQk9zAqf6P-upt2f3kxjSe_9oNRmUrOofnTC5ZgwjFeUhVaMW9YJ3wByzvFeMjnBg$ and Microsoft to seek U.S. government permission before they provide cloud-computing services that use advanced artificial-intelligence chips to Chinese customers, the people said.
China's Chip Industry Braces for Further Sanctions With Concerns and Defiance
SHANGHAI-Chinese chip makers and suppliers, gathered in Shanghai for an industry event, were in a grim but defiant mood following a report that the U.S. plans to widen export controls targeting the industry.
Among those already blacklisted, Yangtze Memory Technologies urged suppliers to show "integrity" and deliver machinery parts it had already purchased. "We can't get the components, which we have bought legally," said Nanxiang Chen, YMTC's chairman and acting CEO. The company is China's leading maker of flash memory chips. Such chips are essential in all kinds of electronic devices including computers and smartphones.
China Restricts Exports of Two Minerals Used in High-Performance Chips
SINGAPORE-China set export restrictions on two minerals the U.S. says are critical to the production of semiconductors, missile systems and solar cells, a show of force ahead of economic talks between two rivals that increasingly set trade rules to achieve technological dominance.
The minerals-gallium and germanium-and more than three dozen related metals and other materials will be subject to unspecified export controls starting Aug. 1, Beijing's Ministry of Commerce said Monday. Its statement referred to safeguarding national security and interests and said some future export applications would require review by the government's top body, the State Council.
RBA Stands Pat on Rate to Assess Economic Outlook
SYDNEY-The Reserve Bank of Australia left official interest rate on hold Tuesday saying that the decision gives it time to further assess the mixed economic outlook.
The official cash rate remained at 4.10%, with economists split ahead of the policy meeting on whether the RBA would tighten further or remain on the sidelines.
Japan Discharge of Fukushima Radioactive Water Into Pacific Gets Green Light
TOKYO-The international nuclear-safety authority Tuesday gave Japan the green light to release slightly radioactive wastewater from the crippled Fukushima nuclear plant into the sea, saying science didn't justify concerns raised by nations around the Pacific.
The International Atomic Energy Agency, a United Nations body, said Japan's plan was safe and in line with similar discharges carried out by nations around the world that operate nuclear-power plants.
Israel Launches Largest Attack on West Bank in Decades
The Israeli military launched its largest operation in the occupied West Bank in more than two decades, targeting what it said were armed Palestinian militants with a deadly aerial and ground assault stretching into a second day.
French Riots Test Macron's Loyalty to Police
(MORE TO FOLLOW) Dow Jones Newswires
07-04-23 0531ET
