EMEA Morning Briefing : Shares Set to Gain Ahead of ECB Decision

MARKET WRAPS

Watch For:

Services PMI data for eurozone, Germany, France, Italy, UK; EU PPI; France industrial production index; trading updates from Inditex, B&M European Value Retail

Opening Call:

Shares are off to a strong start in Europe on Wednesday. In Asia, stock benchmarks were mixed; Treasury yields were little changed; the dollar consolidated; while oil was in the red and gold was flat.

Equities:

European shares seem set to head for higher ground on Wednesday ahead of the European Central Bank's interest rate decision on Thursday, where a rate cut is widely expected.

Signs of U.S. economic weakness are also on traders' minds. Earnings from big retailers indicate that some Americans are getting more choosy about where they spend their money.

All eyes will be on the U.S. jobs report this Friday.

Meanwhile, a private gauge of China's services sector signaled the fastest pace of growth in 10 months in May, echoing official data, thanks to strong business activity and market demand.

Forex:

The dollar consolidated in Asia ahead of major U.S. economic data due out this week.

Tonight's ISM services PMI is crucial in giving markets more clues about the U.S. economy's health, given the services sector has been a big driver of it, Maybank said.

There could be a limit to the dollar's downside until the Fed clearly begins to again tilt more dovish, it added.

Bonds:

Treasury yields were little changed in Asia, as an influx of new data raised concerns about the U.S. economy's outlook.

The U.S. Labor Department said job openings changed little in April. The data is "further evidence of normalization" in labor markets, Capital Economics said.

Forecasters expect an increase in payrolls due Friday. CME data shows odds of a September interest rate cut at 56%, up from 42% a week ago. Odds of two cuts this year rise to 41% from 29%

Energy:

Oil fell, extending recent declines, amid concerns about the prospects for a supply surplus on OPEC+'s plans to gradually phase out voluntary output cuts.

This deepened the market's bearish sentiment, ANZ's research team said.

U.S. factory activity shrank in May, while China's official PMI also fell back into contractionary territory, causing uncertainty over the outlook for oil demand, it added.

Metals:

Gold was flat, but could be supported by growing Fed rate-cut bets.

Those expectations are being driven by data released overnight, which showed the number of U.S. job openings sank in April to a more-than three-year low.

The precious metal's bias leans toward upward movement amid strong expectations of the Fed cutting rate later this year, said XS.com.

Traders may prefer to wait for key U.S. data releases this week, such as nonfarm payrolls report due out Friday, it added.

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Copper prices were flat amid mixed cues.

While investors cheer on the prospect of easing monetary policy, support is offset by the concerns over weak demand, ANZ Research said.

Stockpiles at the Shanghai Futures Exchange have climbed to their highest level since 2020, it said, adding that there has also been a steady stream of smaller inflows in London Metal Exchange warehouses located in Asia.

"While this is likely the result of an attractive arbitrage trade with international prices, it didn't help sentiment," it added.

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Iron ore prices were lower, dragged by concerns over weak demand from China.

The country's demand for steel and iron ore may remain sluggish given the lack of a significant increase in property demand, Huatai Futures said.

It added that current inventory levels of iron ore are high, which may further pressure prices.

TODAY'S TOP HEADLINES

China Caixin PMI Signals Fastest Services Activity Growth in 10 Months

A private gauge of China's services sector signaled the fastest pace of growth in 10 months in May, echoing official data thanks to strong business activity and market demand.

The Caixin services purchasing managers index increased to 54.0 in May from 52.5 in April, Caixin Media Co. and S&P Global said Wednesday.

Intel and Apollo in $11 Billion Joint Venture for Chip Manufacturing Plant in Ireland

Intel and Apollo Global Management have entered into a joint venture in connection with the chip maker's Fab 34 manufacturing facility in Ireland.

Apollo will lead an $11 billion investment for a 49% equity interest stake in the facility.

Former Brexit Champion and Trump Supporter Shakes Up U.K. Election Race

LONDON-A staid British election campaign has been suddenly energized by the arrival of a now familiar troublemaker: Nigel Farage, a Trump ally who pushed Britain to leave the EU and is now on a mission to destroy the ruling Conservative Party and rebuild it in his own populist image.

On Tuesday, Farage was in the Moon and Starfish pub in Clacton-on-Sea, in East England, taking big sips from a pint of beer, while being mobbed by supporters and the British press. The day before, the 60-year-old announced he would become the leader of a small anti-immigration party called Reform UK and stand for this July's election with a pitch to, once again, shake things up.

Israel and Hezbollah Move Closer to Full-Scale War

Israel and Hezbollah are moving closer to a full-scale war after months of escalating hostilities with the Lebanese militant group, adding pressure on Israel's government to secure its northern border.

Hezbollah, a U.S.-designated terrorist organization closely aligned with Iran, opened a battle front with Israel on Oct. 8, a day after the deadly Hamas-led raid inside Israel sparked the current war in Gaza.

X CEO Linda Yaccarino Loses Top Lieutenant

X Corp. Chief Executive Linda Yaccarino's right-hand man and head of business operations, Joe Benarroch, is leaving the company, according to people familiar with the matter.

Benarroch has been one of Yaccarino's most trusted advisers for years. The two previously worked together at Comcast's NBCUniversal, where Yaccarino oversaw the media giant's ad business. Soon after Yaccarino joined the social-media platform-then known as Twitter-in 2023, she tapped Benarroch to be part of her team.

Elon Musk confirms reallocating thousands of Nvidia AI chips from Tesla

Tesla Inc. Chief Executive Elon Musk confirmed Tuesday that he diverted thousands of Nvidia Corp. AI chips away from the EV maker.

Citing emails and memos from Nvidia NVDA, CNBC had reported earlier in the day that Musk had redirected about 12,000 Nvidia H100 graphics processing units originally shipped to Tesla TSLA to two of his other companies, X and xAI.

Asia's Chip Giants Hustle to Maintain Their Edge Over the U.S.

In a series of articles this week, Wall Street Journal reporters from around the world go inside the escalating global chip battle. At stake: leadership of an industry expected to double in size by the end of the decade to $1 trillion. Other installments are here and here, and a visualization of the global chips battle can be found here.

In early April, South Korean President Yoon Suk Yeol didn't mince his words when describing why chips are paramount to the country's economic survival.

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Expected Major Events for Wednesday

06:00/SWE: 1Q Balance of Payments

06:00/NOR: 1Q Balance of payments

06:30/HUN: Apr Preliminary External Trade

06:45/FRA: Apr Industrial production index

07:00/CZE: Apr Retail trade

07:15/SPN: May Spain Services PMI

07:45/ITA: May Italy Services PMI

07:50/FRA: May France Services PMI

07:55/GER: May Germany Services PMI

08:00/EU: May Eurozone Services PMI

08:00/UK: May UK monthly car registrations figures

08:30/UK: May UK Official Reserves

08:30/UK: May S&P Global UK Services PMI

08:30/UK: May Narrow money (Notes & Coin) and reserve balances

09:00/EU: Apr PPI

09:00/CYP: May Registered Unemployed

09:00/LUX: May CPI

10:00/FRA: Apr OECD CPI

16:59/POL: Polish interest rate decision

All times in GMT. Powered by Onclusive and Dow Jones.

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

(END) Dow Jones Newswires

06-05-24 0015ET