EMEA Morning Briefing : Investors Parse Fed Comments Ahead of Economic Data -November 29, 2023 at 12:16 am EST
MARKET WRAPS
Watch For:
EU Business & Consumer Surveys, ECB Governing Council non-monetary policy meeting; U.K. Chancellor Jeremy Hunt appears before the Treasury Committee, Bank of England Governor Andrew Bailey speaks at FXJSC, Money and credit, CBI Service Sector Survey; CPI data for Germany, Saxony, Brandenburg, Hesse, Baden-Wuerttemberg, North Rhine Westphalia; Italy Industrial turnover, PPI; trading updates from Pepkor Holdings, Prosus, Harbour Energy, Ferguson, Deliveroo, Renishaw
Opening Call:
Stock futures were broadly higher. Asian stock benchmarks and Treasury yields were mixed; the dollar weakened; while oil futures were mixed and gold gained.
Equities:
Stock futures were broadly higher early Wednesday as investors parsed Fed officials’ comments and await more economic data.
On Tuesday, Fed Gov. Christopher Waller, one of the more “hawkish” members of the central bank’s committee setting interest rates, said that recent signs of improvement should allow the central bank to hold rates steady into early next year.
However, another hawk, Fed Gov. Michelle Bowman, said she expects “we will need to increase the federal-funds rate further” in the fight to tamp down inflation.
Fed Chair Jerome Powell is scheduled to speak on Friday.
“The key thing on people’s minds right now is are we going to see the next leg of the equity market be led by the laggards, if you will, for the year-to-date period,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management.
The EU business and consumer surveys and the U.S. 3Q GDP data are due later today along with the Fed’s beige book.
Forex:
The dollar likely weakened on falling Treasury yields, which undermined the appeal of U.S. fixed-income assets and demand for the greenback.
Technical analysis of both U.S. bond yields and the USD Index suggest further downside risks for the greenback in the near term, RBC Capital Markets said.
The dollar is expected to weaken gradually next year, with EUR/USD ending 2024 at 1.15 and USD/JPY at 142, Bank of America Global Research said.
“The bottom line is a soft landing in the U.S. that allows the Fed [Federal Reserve] to cut rates and helps bring the dollar down from a still overvalued level,” it said.
Bonds:
Treasury yields were mixed after falling Tuesday on Fed Gov. Chris Waller’s comment that a slowing U.S. economy could help return inflation to the central bank’s 2% target.
“We are more optimistic on the inflation front than we are on the growth outlook,” said David Donabedian, chief investment officer of CIBC Private Wealth U.S.
“At a minimum, we expect growth to be weaker in 2024 than any of the three previous years with recession still a distinct possibility,” he said.
Energy:
Oil futures were mixed early Wednesday.
A decline in Treasury yields and a weaker USD in the wake of less hawkish remarks from some Fed officials overnight has given a boost to commodities, ING said.
However, OPEC+ is slated to meet Thursday, and if the group fails to reach a preliminary deal, the risk that the meeting will be delayed further can’t be ruled out, it said.
That would probably put some downward pressure on oil prices, it added.
Metals:
Gold edged higher in Asia.
The continued decline in U.S. bond yields is supporting gold prices, said Fawad Razaqzada, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!GgAEyzOWzeGpdx7P1–mj_BQnKRNjLGhv6rXFteVYIv_ZjIsgTK0ryQ5OBEOLUDyh9AArdP4kQSyTL0NrrSWNoB_NTbJIqqPqe3rJT_IXRk$ .
The more prominent the narrative of ‘peak interest rates’ gets, the stronger the support will probably be for gold prices, the analyst added.
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Copper edged lower after gaining overnight amid supply-side issues.
Panama’s top court ruled that the law enabling First Quantum’s operations there is unconstitutional, throwing the future of the stalled mine into doubt, ANZ said.
Meanwhile, workers at MMG’s Las Bambas copper mine began a strike to demand greater profit sharing, it said, adding that the two mines account for about 3% of global copper supply.
Nanhua Futures analysts reckon copper prices will likely be strong in the near term, as the supply tightness can’t be solved immediately.
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Iron ore prices fell for a second consecutive day.
Chinese authorities said they were conducting research on commodity price indexes, a signal that they are ramping up efforts to rein in the recent rallies in iron ore prices, ANZ said.
Meanwhile, current iron ore consumption levels are weaker than in the same period last year, Dayue Futures said, adding that the real-estate and infrastructure sectors still face downward pressure, and were weighing on iron ore prices.
TODAY’S TOP HEADLINES
Fed’s Waller says economy may be slowing enough to tame inflation. Fed’s Bowman not convinced.
A pair of Federal Reserve governors said recent signs of a slowdown in the economy could help return inflation to the central bank’s 2% target, but they appeared split on whether interest rates are high enough to do the job.
The economy appears to have softened toward the end of the year in a manner that could push the rate of inflation lower, Fed Gov. Chris Waller said Tuesday in a speech in Washington, D.C.
Washington warily eyes the death of the Chinese economic ‘juggernaut’
The Chinese economy faces stiff headwinds including a slumping housing sector, heavy government debt loads and rising unemployment, and U.S. policymakers are taking notice.
“Over the past few months sentiment in China’s economy has grown increasingly negative,” said Republican Rep. French Hill of Arkansas at an event on China’s economic outlook at the Center for Strategic and International Studies on Tuesday.
U.S. Urges Israel to Change Tactics in Gaza
WASHINGTON-The U.S. is pressing Israel to modify its plans for the next phase of its campaign in Gaza to better protect civilians and rebut criticism that the White House has given Israeli forces carte blanche to wage its war with Hamas.
The U.S. push to have Israel fight a more targeted war signals a shift away from President Biden’s full-throated support at the outset for the campaign to oust Hamas, and is the focus of intensive consultations between Biden and Prime Minister Benjamin Netanyahu on how to handle the conflict-one that Washington has worked with Arab allies to prevent from broadening beyond Gaza.
Renault Charges Ahead With Ampere’s Electric-Car IPO Amid Doubts
Renault is moving ahead with publicly listing Ampere, its electric-car unit, but some analysts think an IPO could be the wrong road forward.
The French automaker is setting Ampere up to become Europe’s top electric-vehicle producer by making cheaper cars than its rivals to attract more consumers than just the early EV adopters, according to Chief Executive Luca de Meo, who is also the head of Renault.
Pope Francis Cancels Plans to Attend COP28 Due to Flu
ROME-Pope Francis has canceled plans to attend the COP28 United Nations Climate Change Conference in Dubai this weekend on account of persistent “influenza and inflammation of the respiratory tract,” the Vatican said.
The announcement adds to concerns about the health of the pope, who will be 87 next month, and who has had a number of ailments in recent years.
Apple Pulls Plug on Goldman Credit-Card Partnership
Apple is pulling the plug on its credit-card partnership with Goldman Sachs, the final nail in the coffin of the Wall Street bank’s bid to expand into consumer lending.
The tech giant recently sent a proposal to Goldman to exit from the contract in the next roughly 12-to-15 months, according to people briefed on the matter. The exit would cover their entire consumer partnership, including the credit card the companies launched in 2019 and the savings account rolled out this year.
HP Enterprise’s Earnings Edge Past Estimates, Driven by AI
Hewlett Packard Enterprise posted October-quarter financial results that were largely in line with Street estimates, driven by growing strength in its high-performance-computing and AI segment, where it is finding traction in particular with customers training large language models.
In late trading, HP Enterprise shares were 0.8% higher at $15.65.
Charlie Munger, Warren Buffett’s Partner and ‘Abominable No-Man,’ Dies at 99
No equal business partner has ever played second fiddle better than Charlie Munger.
Warren Buffett’s closest friend and consigliere for six decades, the billionaire vice chairman of Berkshire Hathaway died Tuesday at age 99 in a California hospital. A news release from Berkshire confirmed his death.
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Expected Major Events for Wednesday
00:01/UK: CBI Service Sector Survey
05:30/NED: Nov Producer confidence survey
06:30/GER: Nov North Rhine Westphalia CPI
06:30/FRA: 3Q Job creation
07:00/SWE: Oct Retail sales
07:00/SWE: Oct Foreign trade
07:00/SWE: 3Q GDP
07:00/TUR: Oct Foreign Trade
07:00/NOR: 3Q Credit Indicator C3
07:00/GER: Oct Foreign trade price indices
08:00/SWE: Nov Consumer Tendency Survey
08:00/SWE: Nov Monthly Business Tendency Survey
08:00/SVK: Nov Business tendency survey
08:00/SVK: Nov Economic sentiment indicator
08:00/SPN: Nov Flash Estimate CPI
08:00/SPN: Oct Retail Sales
09:00/ITA: Nov Consumer Confidence Survey
09:00/ITA: Nov Business Confidence Survey
09:00/ICE: Nov CPI
09:00/GER: Nov Saxony CPI
09:00/GER: Nov Hesse CPI
09:00/GER: Nov Baden-Wuerttemberg CPI
09:00/GER: Nov Brandenburg CPI
09:30/UK: Oct Money and Credit – Lending to Individuals, Lending to Businesses, Broad Money and Credit
09:30/UK: Oct Monetary & Financial Statistics
09:30/UK: Oct Bank of England effective interest rates
10:00/ITA: Oct PPI
10:00/CYP: Sep Industrial Production Index
10:00/EU: Nov Business & Consumer Surveys – Business Climate Indicator & Economic Sentiment Indicator
10:30/BEL: Nov CPI
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11-29-23 0015ET
