MARKET WRAPS
Stocks:
European stock markets were mostly lower on Wednesday, as more disappointing Chinese data coupled with ongoing talks in Washington to avoid a U.S. default, continued to keep a lid on risk assets.
“There isn’t really any real direction to proceedings currently with markets seemingly stuck in a range,” CMC Markets UK said.
Stocks to Watch
Rio Tinto’s ambition to play a bigger role in supplying metals essential to the energy transition has UBS pondering whether the miner could turn to M&A.
It said Rio Tinto’s two lithium projects in its pipeline–Rincon in Argentina and Jadar in Serbia–are relatively high risk.
“As a result, we see potential for Rio Tinto to grow in lithium through M&A [albeit M&A is not without risk either],” UBS said.
“This has become more likely over the last six months with lithium prices falling more than 60% from all-time highs [from $80/kg in December 2022 to $30/kg] and with the lithium industry consolidation accelerating.”
U.S. Markets: Markets:
Stock futures ticked higher, suggesting major indexes could recover slightly after falling on Tuesday on worries about a potential debt-ceiling default.
Meanwhile, regional bank shares gained and were on track to extend a recent stretch of high volatility.
Target and Cisco Systems will report earnings later on Wednesday, while data on housing starts and building permits will provide insight into the health of the U.S. housing market.
Yields on U.S. government bonds mostly slipped, with the 10-year Treasury yield at 3.536%, while the WSJ Dollar Index gained 0.3%, on pace to finish higher for the sixth session in the last eight trading days. The index has risen to a roughly two-month high.
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Forex:
The dollar hit a five-week high against a basket of currencies due to concerns about a slowing Chinese economy, which is weighing heavily on Asian and Latin American currencies, MUFG said.
“The softening outlook for growth outside of the U.S. is helping to provide more support for the U.S. dollar in the near-term,” it said.
Meanwhile, improvement in U.S. retail sales, industrial production and NAHB housing market data on Tuesday helped to dampen concerns over a sharper slowdown or recession in the country.
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Sterling could extend its current decline against the euro on the back of monetary policy divergence between the European Central Bank and Bank of England, ING said.
The BOE is likely to pause its interest rate rise cycle in June but 20 basis points of increases are priced into the Sonia curve so there is “ample room” for sterling to be hit by a scaling back of rate expectations, ING said.
“We still target 0.8900 in EUR/GBP by the summer.”
Energy:
Oil futures were around 1% lower following mixed Chinese economic data and after the latest API figures showed a surprise build in U.S. crude stocks.
API data pointed to a 3.7 million barrel build in U.S. crude stockpiles when analysts had been forecasting an 800,000 barrels drop. Chinese data also suggested a slowing of fixed-asset investments while industrial output contracted.
Metals:
Base metals were higher with gold flat, as worries over the U.S. debt ceiling and Chinese demand continued to drag on markets.
“The overarching bearish influence on the markets has mainly centered on the speed and depth of China’s recovery,” Commodity Research Group said.
Recent data has shown property investment slipped in April 16.2% year-on-year, while coal, aluminum and steel production fell, too, it said.
DOW JONES NEWSPLUS
EMEA HEADLINES
UBS Prepares for $4 Billion Legal Hit From Credit Suisse Deal
Swiss bank UBS said that it has set aside $4 billion to cover potential legal and regulatory costs from its acquisition of Credit Suisse, and that it is expecting to record other asset write-downs.
UBS on Tuesday released an updated version of a merger prospectus that was first published three weeks ago. The new document showed that UBS expects to book a $34.8 billion gain on negative goodwill, which is when a company acquires assets for less than their worth-typically in a distressed situation.
Siemens Raises Fiscal 2023 Guidance After 2Q Profit Soared
Siemens reported higher fiscal second-quarter net profit, exceeding analyst expectations, and raised its fiscal 2023 guidance after record profitability for its industrial businesses.
The German industrial company on Wednesday reported 3.48 billion euros ($3.78 billion) in quarterly net profit attributable to shareholders, compared with EUR1.03 billion in the prior-year period, on revenue that grew 14% to EUR19.42 billion.
Commerzbank Backs Guidance After 1Q Profit Nearly Doubled
Commerzbank confirmed its guidance for the year after booking higher-than-expected profit and core revenues for the first quarter, buoyed by higher interest rates.
The German bank on Wednesday posted a net profit of 580 million euros ($630.2 million) for the three months to the end of March, up 95% on year.
Munich Re Backs 2023 After 1Q Net Profit Decline on High Major Losses
Munich Re said Wednesday that first-quarter net profit declined but beat expectations after it was hit by major losses, and confirmed its guidance for the full year.
The German reinsurer said net profit for the first three months of the year was 1.275 billion euros ($1.39 billion) compared with EUR1.475 billion in the year-earlier period. In preliminary figures released late last month, the company said net profit of EUR1.3 billion would beat consensus expectations of EUR1.01 billion.
Aegon 1Q Operating Capital Generation Beat Views; Backs 2023 Guidance
Aegon on Wednesday reported a rise in operating capital generation for the first quarter of 2023 on business growth and improvement in claims experience, and said it is confident it will meet its guidance for the year.
The Dutch insurance and asset-management company posted a operating capital generation before holding funding and operating expenses of 292 million euros ($317.3 million) for the three months to March 31, a 5% increase on year. A company-compiled consensus from 13 analysts’ estimates had expected EUR240 million on average.
April New Car Registrations Rose in EU, EV Sales Soar
Registrations for new cars in the European Union rose in April, with fully electric vehicles gaining more ground on gas-burning automobiles, the European Automobile Manufacturers’ Association said Wednesday.
Car registrations, which reflect sales, jumped 17% from the same month last year to reach 803,188 vehicles, according to the group, known as ACEA. Registrations in every country rose with Italy and France topping the field, rising 29% and 22%, respectively.
Russian Officials Unnerved by Ukraine Bloodshed Are Contacting CIA, Agency Says
WASHINGTON-The Central Intelligence Agency’s semipublic campaign to convince Russians disaffected by the war in Ukraine to spy for Washington has borne fruit, CIA officials said this week, as the spy agency released a new video aimed directly at Russian government officials.
Since last fall, the CIA and Federal Bureau of Investigation have used social-media platforms and public appearances to encourage Russians angered by President Vladimir Putin’s invasion of Ukraine to contact them-and have provided what they say are secure Internet channels to do so.
Ukraine Detains Chief Justice in High-Profile Bribery Case
Ukraine detained its top judge over an alleged $2.7 million bribe as it seeks to show its citizens and Western backers that have poured billions into its war effort that it can clamp down on high-level corruption.
The detention of Chief Justice Vsevolod Knyazev is one of the most significant cases in the history of Ukraine’s patchy efforts to root out widespread graft that for years has corroded its economy and trust in Western capitals. Mr. Knyazev didn’t immediately comment.
Influential Middle East Leader Woos Russia and China, Testing U.S. Ties
ABU DHABI-Last year, the United Arab Emirates became a hub for Russian money and cut oil production, boosting Moscow’s war chest and drawing protests from Washington. The country’s leader skipped a call from President Biden as the U.S. rallied support for Ukraine.
Now, Emirati President Sheikh Mohamed bin Zayed Al Nahyan has been invited for a state visit to Washington, and the U.S. and U.A.E. are hammering out a formal agreement on defense and commerce after jointly committing $100 billion for clean-energy projects-a Biden administration goal. All the while, the Emiratis have expanded ties with Russia and another U.S. rival, China.
GLOBAL NEWS
Democrats to Launch Discharge Petition, Aiming to Force Debt-Ceiling Vote
WASHINGTON-House Democrats plan to begin collecting signatures Wednesday for a discharge petition to raise the debt ceiling, a long-shot parliamentary maneuver designed to circumvent House Republican leadership and force a vote.
Rep. Brendan Boyle (D., Pa.), the top-ranking Democrat on the House Budget Committee, said he plans to initiate the petition in the well of the House when the chamber gavels into session at 10 a.m. and be the first to sign.
Fed Officials Debate Whether to Pause Rate Rises
Federal Reserve officials squared off Tuesday over whether the central bank would need to raise interest rates at its meeting next month to combat inflation.
The central bank has lifted its benchmark federal-funds rate at its last 10 policy meetings by a cumulative 5 percentage points, most recently by a quarter percentage point on May 3 to a range between 5% and 5.25%, a 16-year high.
Biden to Trim Planned Overseas Trip to Focus on Debt Ceiling
WASHINGTON-President Biden will cut short a planned overseas trip to focus on striking a deal to raise the debt ceiling to avoid the country’s first-ever default, as party leaders remained at odds following a meeting at the White House over potential spending cuts.
(MORE TO FOLLOW) Dow Jones Newswires
May 17, 2023 05:55 ET (09:55 GMT)
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