EMEA Morning Briefing: Shares Seen Lower; Earnings, U.S. GDP Data in Focus

MARKET WRAPS

Watch For:

Germany GfK consumer climate survey; France business sentiment index, unemployment; trading updates from AstraZeneca, Barclays, Cellnex Telecom, BASF, Deutsche Bank, Sanofi, Airbus, BNP Paribas, Holcim, Hermes, Lagardere, Vinci, Atos, Schneider Electric, Pernod Ricard, Saint-Gobain, Nestle, Sainsbury, STMicroelectronics, Telia, Swedbank, Norwegian Air Shuttle, Unilever, Schroders, London Stock Exchange Group, WPP

Opening Call:

Stock futures were tracking lower early Thursday as economic data and corporate earnings remain in focus. Asian stock benchmarks were mixed; Treasury yields were little changed; the dollar weakened; oil and gold declined.

Equities:

European shares were poised to open lower on mixed cues from Asian equities and ahead of more corporate earnings.

U.S. stocks have rebounded in recent sessions on company earnings and investors this week are sifting through earnings from some members of the Magnificent Seven group of technology behemoths.

"The earnings backdrop has been very consistent with that broader story of growth remaining reasonably strong," said Bill Merz, head of capital markets research at U.S. Bank Wealth Management.

Some investors said the volatility in bond yields has been driving turbulence in stocks.

"As long as rates stay high, the equity market will face some pressure," said Zhiwei Ren, a portfolio manager at Penn Mutual Asset Management.

Investor focus today is also on the U.S. first-quarter GDP data. Economists polled by the Wall Street estimate the economy expanded at 2.2%.

Forex:

The Sterling looks oversold and should rebound, though this process may be slow, said Kamal Sharma, FX strategist at Bank of America.

BofA has held a positive view on the U.K. currency this year in the expectation that the Bank of England should be among the last of the major central banks to cut interest rates against a backdrop of elevated inflation, he said.

"Our baseline view for an August rate cut should support sterling though we concede that this may take time to play out," he added.

Bonds:

U.S. Treasury yields were little changed as traders remained concerned that inflation may continue to look sticky on Friday, with the release of March data on the personal-consumption-expenditure prices index.

If the PCE report - which is the Fed's favored inflation measure - comes in hotter than forecast, that may further diminish the chances of any interest-rate cut by the central bank this year.

"Market pricing has largely followed recent upside surprises in economic data, which have moved higher across the board," TD Securities said.

"This leaves markets vulnerable to a correction lower in rates if data begins to miss these heightened expectations."

Energy:

Oil prices edged lower with pressure from U.S. data showing a drop in weekly demand for gasoline outweighing support from the first drop in commercial crude supplies in five weeks.

Crude prices also declined on ebbing risks of supply disruption in the Middle East.

"Geopolitical tensions are still simmering in the Middle East," said Tyler Richey, co-editor at Sevens Report Research.

Another bounce in prices into the weekend "would not be supirsing as oil bears will be hesitant to go home with short positions with the threat of escalating tensions between Israel and Iran (or Iran's proxy groups) being very real."

Metals:

Gold declined as traders await the U.S. PCE data due out Friday to monitor for further clues on the Fed's monetary-policy trajectory.

For Thursday's session, the precious metal is likely to move sideways for consolidation, said Joseph Chai, technical analyst at RHB Retail Research.

Following this consolidation, however, gold should resume its uptrend, based on charts, the analyst said, adding that the initial resistance is at April 12 high of $2,448.80/oz, while initial support is at $2,300/oz.

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Copper prices were higher in Asia. The AI boom benefits copper as it's used in a multitude of applications like chips, Huaan Futures said.

There has also been an increase in sales of home appliances in China that has buoyed copper demand, the brokerage added.

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Iron ore futures rose in Asia.

Prices have stabilized after rebounding, but may be volatile in the short term, as steel production bottomed out recently and the current valuation of iron ore reflects market pessimism toward demand, analysts at Guotai Junan Futures said.

TODAY'S TOP HEADLINES

GDP set to top 2% again, extending hot streak for U.S. economy

The U.S. economy appears to have grown by 2% or more for the seventh quarter in a row in the first three months of 2024 - but a wider trade deficit could throw up a roadblock.

Here's what to watch for in the first-quarter report on U.S. gross domestic product, which will be released Thursday at 8:30 a.m. Eastern time.

America's Economy Is No. 1. That Means Trouble.

If you want a single number to capture America's economic stature, here it is: This year, the U.S. will account for 26.3% of the global gross domestic product, the highest in almost two decades.

That's based on the latest projections from the International Monetary Fund. According to the IMF, Europe's share of world GDP has dropped 1.4 percentage points since 2018, and Japan's by 2.1 points. The U.S. share, by contrast, is up 2.3 points.

Days Ahead of Xi's Visit, EU Investigations Add to Pressure on Strained China Relations

BRUSSELS-The European Union is ramping up economic pressure on Beijing with two new investigations into allegations of unfair Chinese business practices, days ahead of Chinese President Xi Jinping's planned visits to Paris and Budapest.

The European Commission, the bloc's executive body, is voicing growing concern over Chinese subsidies and other economic policies that it says harm European businesses. The bloc in recent months has used a new legal tool to probe Chinese companies' bids for public tenders in Europe, and last year launched an antisubsidy investigation into electric-vehicle imports from China.

Moncler Sales Beat Forecasts Amid Solid Demand in China

Moncler posted sales above analysts' expectations for the first quarter, driven by solid demand in China where some competitors are struggling to attract and retain customers.

The Italian luxury-fashion company, best known for its puffer jackets, reported sales of EUR818 million ($875.5 million) for the three months to the end of March, up 16% at constant exchange rates. Analysts had forecast quarterly sales of EUR789.5 million, according to consensus estimates by Visible Alpha.

Michelin Backs Targets After Weaker Demand Hurts Sales

Michelin backed its full-year outlook despite lower sales revenue in the first quarter on softer demand.

Sales for the French tire manufacturer fell to EUR6.64 billion ($7.11 billion) from EUR6.96 billion in the first quarter of last year. The drop was expected by analysts, who forecast sales of EUR6.68 billion, according to a company-compiled consensus.

BHP Makes Offer for Rival Anglo American in Potential Mega Mining Deal

Mining giant BHP offered to buy Anglo American, a longtime rival with a market capitalization of about $35 billion, in a potential megadeal that could reshape the global mining industry.

Anglo American said Thursday it had received a proposal from BHP made up of an all-share offer for the company, contingent upon Anglo American's demerger of shareholdings in two South Africa-listed units, Anglo American Platinum and Kumba Iron Ore.

Meta's Costs Rise Rapidly as Zuckerberg Vows to Keep Spending on AI Arms Race

Meta Platforms on Wednesday reported record first-quarter revenue as the company's advertising business grew at a rapid clip even as investors soured on forecasts of rising costs related to artificial intelligence.

Shares initially fell by more than 15% after Meta said it would increase its spending levels for the year by up to $10 billion to support infrastructure investments to support its AI investments.

IBM to Buy HashiCorp in $6.4 Billion Deal

International Business Machines agreed to buy cloud-software company HashiCorp in a deal with an enterprise value of $6.4 billion, extending the tech company's push into cloud and artificial intelligence as those offerings drive growth.

IBM would pay $35 a share for HashiCorp in cash, giving the company access to HashiCorp's roster of some 4,400 clients, IBM said.

Goldman Sachs and Bank of America shareholders reject proposals to separate chair and CEO roles

Shareholders at annual meetings on Wednesday rejected separate proposals at Goldman Sachs Group Inc. and Bank of America Corp. to separate the roles of chair and chief executive at the banks.

The votes at the annual meetings marked victories for David Solomon at Goldman Sachs GS and Bank of America's BAC Brian Moynihan, who both hold the titles of chair and chief executive.

Write to singaporeeditors@dowjones.com

Expected Major Events for Thursday

06:00/SWE: Mar PPI

06:00/GER: May GfK consumer climate survey

06:00/NOR: Mar Labour force survey SA, incl unemployment

06:45/FRA: Apr Monthly business survey (goods-producing industries)

07:00/SPN: Mar PPI

07:00/SWE: Apr Consumer Tendency Survey

07:00/SWE: Apr Quarterly Business Tendency Survey

09:00/MLT: Mar Registered Unemployed

09:00/LUX: Feb Trade

10:00/UK: Apr CBI Distributive Trades Survey

10:00/FRA: 1Q Claimant count and job advertisements collected by Pole emploi

11:00/TUR: Turkish interest rate decision

23:01/UK: Apr UK Consumer Confidence Survey

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April 25, 2024 00:15 ET (04:15 GMT)

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