EMEA Morning Briefing: Stocks Seen Lower; Investors Await Fresh Data for Rate Cut Cues

MARKET WRAPS

Watch For:

Germany consumer confidence index; trading updates from Atos, Flutter Entertainment, Smiths Group, John Wood Group, Ocado Group

Opening Call:

European stock futures were tracking lower early Tuesday; Asian stock markets were mixed; the dollar weakened; Treasury yields broadly edged lower; oil and gold futures declined.

Equities:

European stock futures declined, tracking U.S. stocks' second straight retreat on Monday after investors excited by the potential for lower interest rates pushed the indexes to record highs.

Fed Gov. Lisa Cook on Monday said the central bank needs to take a "careful approach" in deciding when to cut interest rates, but gave few clues on the timing or size of any reductions.

"I suspect that many investors over the next couple of days are going to be asking themselves the question, 'Do we need to get more bullish in our assumptions or do we need to take a couple of chips off the table?'" said Steve Chiavarone, head of the multi-asset group at money manager Federated Hermes.

"The next big catalyst will be earnings season," said John Bailer, deputy head of equity income at Newton Investment Management.

Investors are awaiting this week's economic data for more clarity on the Fed's rate cut path. The U.S. durable goods orders data for February is due later today followed by the final estimate of fourth-quarter GDP and weekly jobless claims data on Thursday and the PCE price index data--the Fed's preferred inflation measure--on Friday.

Forex:

The U.S. dollar weakened as markets stuck to bets that the Fed and other major central banks will start cutting interest rates in the next few months.

On the CME's FedWatch tool, odds of a June cut by the Fed are priced at 63%, up from 51% a week ago.

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The Japanese yen may be supported by fears of possible foreign exchange intervention.

Japan's top currency official Masato Kanda on Monday delivered a strong warning against yen shorts, Chang Wei Liang, foreign-exchange and credit strategist at DBS Group Research, said.

Kanda said that he is seeing speculative moves in forex markets that aren't reflecting fundamentals and that the government is prepared to act, the strategist noted.

Bonds:

U.S. Treasury rate volatility--as measured by the MOVE Index--is very low despite recent guidance from the U.S. Fed that interest rates could stay higher for longer than previously expected, said Morgan Stanley Wealth Management.

"More confidence in the rate outlook seems to be underpinning the calm, with equity market sentiment helping as well," it says.

Investors will be watching the personal-consumption-expenditures index on Friday for indications of whether inflation continued to reaccelerate in February, and Fed Chair Jerome Powell's remarks at an economics and monetary-policy conference to be held at the San Francisco Fed.

Energy:

Oil futures declined but may remain supported as investors monitor escalating geopolitical tensions in the Middle East and Russia's war in Ukraine. Output cuts by Moscow to meet OPEC+ targets and a decline in the U.S. rig count have also raised concerns over a potential tightening of crude supply.

Continued drone attacks by Ukraine on Russian oil refineries keep the risk premium for the oil market higher, ING strategists said.

Metals:

Gold fell but expectation of a further slowdown in inflation may support. A slew of economic reports this week could to offer more clarity on when central banks will start cutting interest rates, ANZ Research analysts said.

Investors were also parsing Fed officials' comments. The Fed's Lisa Cook said policymakers must take a cautious approach to allow more time for inflation to slow while Austan Goolsbee said he expects three rate cuts this year, the analysts noted.

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Copper gained in Asia as concerns about China's economic challenges eased slightly. Metals broadly rose after China downplayed concerns about the challenges facing its economy over the weekend, ANZ Research team said.

Copper prices got a lift from Chinese Premier Li Qiang's comments that there was still room for broader macroeconomic policies due to low consumer price growth, they said.

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Iron ore edged lower as China's property sector concerns linger.

Steel demand will likely track sideways in 2024 as China's property sector continues to look weak, said Vivek Dhar, an analyst at Commonwealth Bank of Australia.

TODAY'S TOP HEADLINES

Cook says Fed has to move carefully before cutting interest rates

Federal Reserve Gov. Lisa Cook said Monday the central bank needs to take a "careful approach" in deciding when to cut interest rates, but she gave few clues on the timing or size of any reductions.

Last week, the Fed left a key short-term U.S. interest rate unchanged while signaling it's still likely to make three rate cuts later in the year.

Israel Cancels Visit to Washington After U.S. Abstains on U.N. Cease-Fire Resolution

The United Nations Security Council approved a resolution calling for an immediate cease-fire in Gaza after the U.S. allowed it to pass by abstaining, prompting Israel to withdraw from coming high-level meetings with the Biden administration.

The unusual U.S. move signaled the administration's growing frustration with Israeli Prime Minister Benjamin Netanyahu, whose relations with the White House have deteriorated over their clashing political agendas and conflicting views of military tactics.

China reportedly seeks to block Intel, AMD and Microsoft tech from being used in government computers

The Chinese government has reportedly introduced new guidelines to stop Intel and AMD microprocessors from being used in state-owned PCs and servers, according to the Financial Times.

Beijing's new procurement guidelines also seek to push out Microsoft's Windows, and other foreign-made operating systems, in line with plans to replace U.S. technology with homemade Chinese alternatives, the report said.

Qantas Investigating Airbus Plane After Engine Issue

SYDNEY-Qantas engineers will inspect an Airbus A330 after pilots shut down one of its engines on a flight between Melbourne and Perth on Monday night.

Local media reported passengers saying there was a loud bang on Qantas Flight 781. The airline, Australia's largest, said the aircraft landed safely and without further incident in Perth.

Australia's Canva Targets Professional Designers With U.K. Acquisition

SYDNEY-Design-software developer Canva acquired U.K.-based design platform Affinity, targeting professional users, as the fast-growing Australian company builds toward a U.S. stock-market listing.

Sydney-based Canva agreed to pay privately owned developer Serif a combination of cash and stock for Affinity, which produces photo-editing, illustration and graphic-design software for a professional audience also serviced by the likes of Adobe. Canva didn't give financial details of the acquisition, but co-founder Cliff Obrecht said it was the largest in Canva's 11-year history.

EV maker Lucid rallies after $1 billion investment by majority stockholder as it burns cash

Lucid Group Inc.'s stock was up 6% on Monday after the cash-burning electric-vehicle maker said its majority stockholder will buy $1 billion worth of its stock, even as other EV companies continue to face headwinds.

Lucid Group LCID said Saudi Arabia-based Ayar Third Investment Co. - an affiliate of the Public Investment Fund, the Saudi sovereign wealth fund - has agreed to purchase $1 billion worth of a new series of convertible preferred stock via private placement, subject to customary closing conditions.

Boeing's Next CEO Will Have 'Massive Job' at Company in Crisis

Federal probes, sloppy factories, angry airlines, tense union negotiations and supply-chain snarls. Boeing's crisis won't end when David Calhoun exits as chief executive.

The next leader of the American manufacturing icon will have to address some of the same issues that Calhoun, a longtime Boeing director, was brought on to clean up four years ago when the board he led ousted his predecessor.

Adam Neumann Bids to Buy Back WeWork for More Than $500 Million

Adam Neumann, the former chief executive and co-founder of WeWork, recently submitted an offer to buy the bankrupt co-working company for more than $500 million, according to people familiar with the matter.

It wasn't immediately clear how Neumann would finance the acquisition, the people familiar with the matter said.

Judge Rejects X Lawsuit Against Research Group That Accused It of Allowing Hate Speech

A federal judge dismissed X Corp.'s lawsuit against a research group that accused the platform of allowing the proliferation of hate speech.

In July, X sued the Center for Countering Digital Hate, alleging that the group prepares its research using flawed methodologies to censor viewpoints it disagrees with. X accused the group of improperly accessing data from X's platform by scraping and improperly obtaining login credentials to a database operated by a vendor.

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Expected Major Events for Tuesday

06:00/FIN: Feb Labour force survey, incl unemployment

07:00/SWE: Feb PPI

07:00/DEN: Feb Retail Sales Index

07:00/GER: Apr GfK consumer climate survey

08:00/SPN: 4Q Final GDP

08:00/SWE: Mar Consumer Tendency Survey

08:00/SWE: Mar Monthly Business Tendency Survey

09:00/ICE: Feb PPI

09:00/ICE: Mar CPI

13:00/HUN: Mar Hungarian interest rate decision

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(END) Dow Jones Newswires

March 26, 2024 01:15 ET (05:15 GMT)

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