EMEA Morning Briefing: Shares May Rise as Investors Brace for Earnings

MARKET WRAPS

Watch For:

Germany Ifo business climate index; trading updates from Koninklijke (Royal), SSAB, SEB, Assa Abloy, Reckitt Benckiser Group, Heineken, Koninklijke Vopak, Iberdrola, Orange, Eni SpA, Carrefour, Roche Holding, Air Liquide

Opening Call:

Stock futures were tracking higher early Wednesday as investors focus on corporate earnings amid easing geopolitical tensions. In Asia, stock benchmarks gained; Treasury yields mostly rose; the dollar weakened slightly; while oil was mixed and gold declined.

Equities:

European shares were poised to open higher as the earnings season picks up pace. Technology shares led U.S. stock indexes higher Tuesday ahead of a spate of major earnings reports.

"The commotion around Iran and Israel is dissipating and investors have been able to focus on earnings and fundamentals," said Art Hogan, chief market strategist at B Riley Wealth Management.

Ecohing a similar sentiment, Louis Navellier, chief investment officer at Navellier said, "the market's recovery this week now looks more driven by an easing of geopolitical risks than any major changes in economic expectations, and should support the motivation to buy the dip by the trillions still sitting in money-market accounts."

Forex:

The U.S. dollar edged lower in Asia but retains upside potential.

The dollar could remain strong, Deutsche Bank's George Saravelos said. The U.S. domestic private sector "is fully funding public sector spending," while policymakers keep approving budgets with a fiscal deficit above 5%. Moreover, the dollar remains the preferred safe-haven currency, Saravelos said.

"With Fed terminal rate expectations having now materially re-priced, is it time to change dollar view? We don't think so," he said.

Bonds:

U.S. Treasury yields reserved course to broadly edge higher after dipping on Tuesday following data showing weaker demand weighed on the pace of expansion in business activity this month.

The S&P Global Flash U.S. Composite PMI declined to 50.9 in April from 52.1 in March. The survey "reinforces the case for thinking markets will be caught out by how quickly the economic data swing to supporting the case for reducing interest rates soon," Pantheon's Ian Shepherdson said.

Separately, Treasury's $69 billion auction of 2-year notes produced solid results, with non-dealer bidders taking an above-average 84.9%, according to BMO Capital Markets strategist Vail Hartman.

Energy:

Oil futures were mixed early Wednesday. Weak U.S. economic data released overnight have spurred hopes of looser monetary policy from the Fed, ANZ Research analysts said.

The S&P Global Flash U.S. Composite PMI, which gauges activity in the manufacturing and services sectors, slipped to a four-month low in April, the analysts noted.

This might help convince policy makers that rate cuts are needed to support the economy, the analysts added.

Metals:

Gold continued to fall after its most-active futures contract posted lowest finish since April 4 on Tuesday.

The precious metal has formed a bullish hammer at a 50% Fibonacci retracement level on the charts to suggest bullish "mean reversion" may kick in, said Matt Simpson, market analyst at forex.com and City Index.

As for now, however, gold's bias isn't for a break to new highs, Simpson added.

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Copper edged higher early Wednesday after settling slightly lower overnight. The metal has been on a strong rally recently, and Daria Efanova, head of research at Sucden Financial, sees little downside near term.

Copper could stay "supported by tightening supply fundamentals, which should strengthen support at current levels," she said. The metal is currently trading above the trend support level of $9,700 a ton, Efanova added.

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Iron ore rose in Asia. The current price rally is driven by better macroeconomic sentiment, not only seasonal improvements on the demand side, Guoxin Futures analysts said.

Iron ore is also undervalued, making it more likely for investors to buy it at a bargain price, they added.

TODAY'S TOP HEADLINES

World Primed for More Balanced Growth as U.S. Cools, Peers Pick Up Pace

Activity in the U.S. private sector slowed in April amid signs of a pickup in other leading economies, a sign that global growth is set to be more broadly balanced this year.

Surveys of purchasing managers released Tuesday pointed to a surprise cooling of activity in the U.S. as the second quarter began, while eurozone activity gained for the second straight month, helped by Germany's return to growth for the first time in nearly a year.

Why gold's 3% dip may help fuel a run to fresh record highs

Gold futures on Tuesday tallied a two-session decline of about 3%, the largest such loss in over a year. The big question is whether the pullback has been sharp enough to provide a fresh opportunity for investors who missed out on the metal's climb to record highs.

Weakness in gold is partly due to "diminished risk of an outright war between Israel and Iran, which therefore reduced the haven appeal of gold somewhat," said Fawad Razaqzada, market analyst at City Index and FOREX.com, in emailed commentary.

Gucci Owner Kering Expects Sharp Drop in Operating Profit After China Weighs on Sales

Kering expects sharply lower operating profit in the first half after sales slumped in the first three months as the company grapples with sluggish demand, particularly in China.

The French luxury-goods giant said Tuesday that it anticipates a decline between 40% and 45% in first-half recurring operating income compared with the year-earlier period, while it continues to invest in its fashion houses.

Senate Passes Ukraine, Israel Aid Package After Monthslong Fight

WASHINGTON-The Senate passed a long-delayed $95.3 billion foreign-aid package sending much-needed ammunition and military equipment to beleaguered Ukrainian soldiers and fortifying Israel's missile defense systems, while also forcing the sale of Chinese-controlled TikTok in the U.S.

The 79-to-18 vote brought to a close months of wrenching debate over Ukraine that sharply split the Republican Party, with rank-and-file members openly rebelling against their leaders. The fight also called into question both how far the U.S. would go to defend the country, now in the third year of trying to repel Russia's invasion, as well as America's leadership role in the world.

Oracle Is Moving to Nashville, Founder Larry Ellison Says

Oracle plans to move its corporate headquarters to Nashville, founder and Executive Chairman Larry Ellison said Tuesday at a company healthcare event in Tennessee.

In an onstage conversation with Bill Frist, a physician and former Senate majority leader, Ellison said the enterprise software company is "moving this huge campus, which will ultimately be our world headquarters," to Nashville.

Tesla Accelerates Rollout of More-Affordable EVs as Profit Drops Sharply

Tesla Chief Executive Elon Musk sought to assuage Wall Street's concerns about the company's strategic direction by underscoring the automaker's commitment to making less-expensive electric cars.

On the company's Tuesday earnings call, Musk said Tesla was accelerating the launch of new models, including vehicles that would sell at more-affordable prices.

Google Delays Cookie Phase-Out Following Regulatory Pushback

Google will miss its end-of-year target for changing the way advertising is delivered in its dominant Chrome web browser, a setback in its yearslong effort to improve consumer privacy on the internet.

Google said Tuesday it would no longer be able to eliminate third-party cookies on its original timeline, citing "ongoing challenges related to reconciling divergent feedback from the industry, regulators and developers." The changes have been eagerly anticipated by advertisers because almost two-thirds of internet traffic flows through Chrome, making it an important gateway for reaching consumers.

TikTok Isn't Going Away-at Least Not Yet. Here's What to Know.

Here we go again: another potential TikTok ban is in the works, for the 647th time. Except now it looks a lot more serious for the Chinese-controlled social-video app and its 170 million U.S. users.

The Senate on Tuesday approved a bill that would force a sale or ban of TikTok. It now heads to President Biden's desk, where he will likely sign it into law.

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Expected Major Events for Wednesday

05:00/FIN: Mar PPI

05:00/FIN: Mar Labour force survey, incl unemployment

06:00/SWE: Mar Labour Force Survey

07:00/CZE: Apr Business cycle survey (consumer/business confidence)

08:00/GER: Apr Ifo Business Climate Index

08:00/ICE: Mar PPI

08:00/POL: Mar Unemployment

08:00/ITA: Apr Consumer Confidence Survey

08:00/ITA: Apr Business Confidence Survey

08:00/ICE: Apr CPI

13:00/BEL: Apr Business Confidence Survey

15:59/UKR: Mar PPI

23:01/UK: Mar UK monthly automotive manufacturing figures

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(END) Dow Jones Newswires

April 24, 2024 00:17 ET (04:17 GMT)

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