European Midday Briefing: Stocks Edge Higher Despite Some Weak Economic Data

MARKET WRAPS

Stocks:

European shares made modest gains on Thursday, with the FTSE 100 leading the way, despite data confirming the U.K. economy sank into a recession in the final six months of 2023.

Elsewhere, the German economy continued to struggle, with figures showing retail sales slumped in February.

"Disappointing retail sales and still weak consumer confidence suggest that the consumption-driven recovery remains more of a dream than reality for Germany," ING said.

U.S. Markets:

Stock futures declined modestly after the S&P 500 closed at a record high on Wednesday, while bond yields nudged higher but remained within the week's tight range.

U.S. economic data due on Thursday include weekly initial jobless claims, the revision of fourth quarter GDP, the Chicago Business Barometer for March, February pending home sales and consumer confidence for March.

Earnings reports are expected from Walgreens Boots Alliance, Oxford Industries, Torrid Holdings, and MSC Industrial Direct.

Forex:

The dollar rose, reaching its strongest in six weeks against a basket of currencies, after Christopher Waller's speech.

"It sounds like he may well have recently shifted his own view on the Fed easing cycle to two cuts this year, and his message was one of shallower and later rate cuts," ING said.

"It feels like the greater risks are DXY popping through 104.50 towards 105.00."

Bonds:

Higher-than-expected Italian and French budget deficits in 2023 and a heavy ratings calendar ahead will shift the focus to fundamentals of eurozone government bond issuers, potentially causing some yield spread widening later this year, Societe Generale Research said.

The 10-year Italian BTP-German Bund yield spread has narrowed by nearly 40 basis points year-to-date and a little less than 10bps of this move can be explained by the global risk-on and the narrowing of credit spreads, while the remaining 30bps or so represents an idiosyncratic "feel good factor," Societe Generale Research said.

"This can be seen as a potential widening risk if market focus shifts on challenging fiscal prospects again."

The 10-year Treasury yield is expected to trade in the 3.75%-4.25% range until mid-year, with a potential to drift lower, Societe Generale Research said.

"With no clear catalysts for a sustained sell-off and the Fed biased toward easing, the risk to yields are skewed to the downside."

That said, with relatively strong data it is also hard to justify a sustained rally, it added.

Without a strong conviction on directional moves, Societe Generale Research looks at carry-efficient ways to position for the coming weeks.

Energy:

Oil prices rose despite a surprise build in U.S. crude inventories last week.

"WTI's trend still appears constructive, with the commodity carving out a bullish continuation pattern," Capital.com said.

Metals:

Base metals were mixed with gold making small gains as the market remained nervous ahead of key U.S. inflation data.

A stable dollar and lower Treasury yields have further helped the yellow metal to trade higher, ING said.

There are mixed views in the market regarding the U.S. interest rate cuts planned for the year--Chicago Mercantile Exchange data shows that swap markets have now trimmed the probability of a rate cut in June to 60%, from 69% late last week, ING added.

EMEA HEADLINES

UBS CEO Ermotti to Stay to See Through Credit Suisse Integration

UBS Group said Sergio Ermotti is set to stay as chief executive officer to see through the integration of Credit Suisse, and sought to address concerns about its size and potential needs for tighter regulation.

The Swiss banking group said regulations and capital requirements weren't the problem that led to the downfall of Credit Suisse as it lowered an accounting gain on the acquisition of its former rival, triggering a restatement of its net profit for last year.

Schlumberger to Invest Nearly $400 Million in Carbon-Capture Venture

Schlumberger will pay almost $400 million to acquire 80% of carbon-capture company Aker Carbon Capture, creating a combined carbon-capture-focused venture.

Oil-field-services company Schlumberger said late Wednesday that it would pay 4.12 billion Norwegian krone ($381.5 million) for the stake in the company and would contribute its own carbon-capture business to the combined venture. Schlumberger may also make 1.36 billion Norwegian krone in performance-based added payments in the next three years.

GLOBAL NEWS

The S&P 500 Is Poised for Best Start to Year Since 2019

Many investors had high hopes going into 2024. The market's robust first-quarter rally still managed to surprise them.

Everything from stocks to bitcoin to gold marched to new records. With one trading session to go, the S&P 500 is up 10% in the first quarter, set for its best start to the year since 2019. Any weakness in the stock market hasn't lasted more than a few sessions, with investors buying the dip and sending the index to 21 all-time closing highs.

Why the Fed Is Delaying Interest-Rate Cuts: Waller

A stretch of stronger-than-expected economic and inflation data so far this year argues for delaying cutting the federal-funds rate, according to Federal Reserve Gov. Christopher Waller.

"I see economic output and the labor market showing continued strength, while progress in reducing inflation has slowed," Waller said at a Wednesday evening event in New York organized by the Economic Club of New York. "Because of these signs, I see no rush in taking the step of beginning to ease monetary policy."

Three Presidents With a Complex Past Team Up to Defeat Trump

WASHINGTON-When President Biden takes the stage in New York City Thursday for a major campaign fundraiser with two former Democratic presidents, Bill Clinton and Barack Obama, there will be plenty of shared history and unity about the stakes of the 2024 election-and a few long-simmering resentments.

Biden has deep ties to Obama, with whom he served as vice president for eight years, and a lengthy past with Clinton, who presided over a legislative agenda in the 1990s that was helped by Biden's senior role in the Senate. The incumbent has talked with both the 42nd and 44th presidents about the best strategies for beating the 45th, Donald Trump, again in November.

Israel Set Out to Destroy Hamas and Free Hostages-but Worries It Can't Do Both

TEL AVIV-Zvika Mor's 22-year-old son Eitan was taken hostage by militants on Oct. 7, but he says he can't support a cease-fire deal that would allow Hamas to survive, even if it would free his oldest child.

"I really care about my son," said Mor, a father of eight and life coach for teens with ADHD. "But I really understand this is a national issue. We are talking not only about my son's life, but millions of people here, including my other kids, and grandchildren."

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

(END) Dow Jones Newswires

March 28, 2024 06:44 ET (10:44 GMT)

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