European Midday Briefing: Shares Steady as Rate Hopes Continue to Buoy Mood

MARKET WRAPS

Stocks

Stocks in Europe were steady on Friday as the recent upbeat sentiment continued, on the growing conviction among investors that the post-Covid surge in borrowing costs will soon end.

Earlier in the session.the European Central Bank's Joachim Nagel said it was increasingly likely the ECB would lower its key interest rate over the coming months.

In addition, Bank of England chief, Andrew Bailey, said the central bank would consider cutting interest rates at all of its coming meetings as price rises continue to cool encouragingly.

Stocks to Watch

Anglo American shares are trading cheaply versus its own history as well as its peers, leaving room for re-rating if prices for its key commodities rise, Citi said.

In addition, three things are likely working in favor of the stock.

Citi highlights Anglo American's split exposure between base metal, bulks and precious metals, the potential upside to earnings from operational turnaround in its coking coal and platinum-metals businesses, and cost efficiencies from full annualized ramp-up of its Peruvian copper operations.

U.S. Markets:

Stock futures were little changed after all three major U.S. indexes hit new records Thursday.

Stocks to Watch

Nike reported flat quarterly sales and warned it expects sales to decline in first half of the fiscal year. Shares fell around 6.5% premarket.

FedEx reported that recent restructuring efforts helped drive higher quarterly profits, even as demand for parcel deliveries remained soft. Shares rallied 12% in premarket trading.

Forex:

The dollar hit a one-month high against a basket of currencies, buoyed by strong U.S. economic data, but its gains look overdone given the Fed's focus on slowing inflation, ING said.

"We don't see the dollar rally having legs. The Federal Reserve sent a rather clear message earlier this week: some resilience in activity data won't be a barrier to cutting as long as inflation shows downward momentum."

After a busy week for central-bank announcements, markets could scale back long dollar positions following the Fed's "relatively dovish message."

Bonds:

The 10-year German Bund yield is back in attractive buy-the-dip territory again, Societe Generale Research said.

"Rate cuts are on their way: continue buying Bunds on dips. Steepeners perform into rate cuts if they are held for a sufficiently long time... we stick with this long-term view."

Commerzbank Research sees continued momentum in Italian BTP-German Bund spreads to tighten further, even as valuations are getting stretched. "BTPs continue to defy gravity."

The latest accelerated tightening has taken short-dated spreads within striking distance of the levels observable before Lehman's demise in 2008 and 10-year spreads to the lows during the European Central Bank's quantitative easing, "which might well trigger toasts in Brussels that the debt crisis from 2010/12 is now solved for good," Commerzbank Research said.

"And all this without ECB bond buying!"

Energy:

Crude futures edged lower on a stronger dollar and as international leaders ratchet up pressure on Israel for an immediate ceasefire in Gaza.

Metals:

Metals prices were lower, with Commerzbank saying the gold rally was likely over for now.

It added that in the absence of new impetus, the growth in base metals prices should abate in the short term, especially as Chinese copper smelters are unlikely to agree on a minimum treatment charge or production cuts.

EMEA HEADLINES

German Business Sentiment Improves

Business sentiment in Germany turned brighter in March, boosted by a better outlook for the economy, according to a closely watched survey.

The Ifo business-climate index rose to 87.8 in March from 85.7 in February, data from the Ifo Institute showed Friday, beating expectations of 86.0 from a consensus forecast of economists polled by The Wall Street Journal.

Vodafone UK JV With Three to Get Further Review by U.K. Regulator

The U.K. Competition and Markets Authority plans a further investigation into Vodafone Group's planned joint venture of its U.K. operations with Three U.K. as it believes the deal could leave consumers and businesses worse off.

The regulator said Friday that the deal-which seeks to combine two of the four U.K. mobile network operators-could lead to higher prices for customers and impact investment in U.K. mobile networks.

Santander Expects to Pay Out More Than $6.5 Billion to Shareholders For 2024

Santander said it expects to pay out more than 6 billion euros ($6.52 billion) in dividends and share buybacks for this year.

The Spanish lender is on track to meet its 2024 targets and expects to reach a 16% return on tangible equity in the first quarter, it said Friday ahead of its annual general meeting.

Hannon's Take: The Swiss Aside, Central Bankers Have Yet to Declare Victory

It is increasingly clear that central banks in rich countries expect to lower their key interest rates over coming months. But only one has declared victory in the battle to tame inflation.

Switzerland's central bank surprised investors when it lowered its key rate by a quarter of a percentage point Thursday.

U.K.'s Flat Retail Sales Boost Hopes of Economic Recovery Ahead

Retail sales were flat in the U.K. in February as better online sales offset weak in-store traffic, keeping the country on track for a consumer-led rebound in the first half of the year.

Total volumes were the same as in January, figures from the Office for National Statistics showed Friday. This was a better reading than the slight downtick expected by economists surveyed by The Wall Street Journal.

U.K. Consumers Prove Cautious Amid Economic Clouds, Survey Suggests

Consumer confidence remains weak in the U.K. amid continued concerns over the economy, according to a survey published Friday.

Research group GfK's consumer confidence barometer was unchanged in March at minus 21, thwarting economists' hopes of a slight uptick, as set out in a poll conducted by The Wall Street Journal.

GLOBAL NEWS

Beijing Concerned Funds From Liquidity Boosts Aren't Finding Borrowers

China's policymakers are growing concerned that intensified monetary policy support has led to excessive liquidity in the banking system that isn't being funneled into the real economy.

Chinese lenders have been flush with cash since early last year when Beijing started to cut banks' reserve requirements and guide down lending rates to aid the country's faltering economy. But weak demand for loans from businesses and consumers means vast cash deposits sit idle in banks, eroding the effectiveness of policies meant to stimulate growth, economists say.

Immigration Is Helping the U.S. Edge Out Asia

As the world's postpandemic economic order takes shape, the U.S. has emerged as an unexpected winner. Asian economies that fared relatively well during the pandemic-especially China, but also advanced economies such as Japan and Taiwan-have struggled to maintain steam.

The end of the pandemic-era export boom and Washington's aggressive stimulus are two reasons. But the U.S. has another ace up its sleeve: big postpandemic immigration inflows.

Trump Is in a Race Against Time to Protect His Fortune

In the span of just a few days, Donald Trump's financial position has moved from seemingly dire-facing the seizure of prized real estate if he doesn't obtain a large bond-to potentially dazzling, with revelations that his social-media company could bring him more than $3 billion.

It is nothing new for a man who has long ridden a roller coaster of luck, acquiring and losing valuable assets repeatedly. When his financial position appears to be the most at risk, again and again, he finds a way to squirm out of it and emerge strong.

U.S. Ratchets Up Pressure on Israel With a Vote Friday on Cease-Fire Resolution at U.N.

The U.S. is set to bring a draft United Nations resolution calling for an immediate and sustained cease-fire in Gaza to a vote in the Security Council on Friday, a U.S. official said, raising the pressure on Israel to pause its five-month-old war with Hamas.

The draft resolution is coming up while Secretary of State Antony Blinken is in the region pressing for a cease-fire deal in hopes it will result in a surge in humanitarian aid into Gaza and a release of hostages held by Hamas, the U.S.-designated terrorist group whose bloody Oct. 7 attack on Israel sparked the war.

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

(END) Dow Jones Newswires

March 22, 2024 06:25 ET (10:25 GMT)

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