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EMEA Morning Briefing: Stocks Could Lose Ground; Key Fed Inflation Measure in Focus


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EU business & consumer surveys; France consumer confidence survey; trading updates from H&M, Old Mutual, Vanquis Banking

Opening Call:

Shares could be off to a shaky start in Europe on Wednesday. In Asia, stock benchmarks were mostly lower; Treasury yields were flat; the dollar ticked up; while oil weakened and gold was little changed.


European stocks seem poised to retreat in opening trade on Wednesday, as investors continue to wait for U.S. data to shed some clarity on the Federal Reserve's policy outlook.

The U.S. final estimate for fourth-quarter GDP and weekly jobless claims data are due on Thursday, followed by the personal-consumption expenditures price index data--the Fed's preferred inflation measure--on Friday.

Meanwhile, fresh data signaled the U.S. economy remains on solid footing, at least for companies and households with cash to spare. Orders for long-lasting goods jumped in February, showing strong demand for aircraft and other transportation equipment. Home prices rose 6% in January from a year earlier, the fastest clip since 2022.


The dollar gained some ground in Asia amid risk-off sentiment spurred by Wall Street's losses overnight.

Risk appetite is receding ahead of the U.S. PCE data due out later this week, said Mizuho Bank.

The notion of 'competitive pivot' is also propping up the dollar, whereby the global rate-cut cycle isn't dominated by the Fed, but instead, the European Central Bank and the Bank of England feature prominently, it said.


Treasury yields were little changed in Asia, as investors looked ahead to February U.S. PCE data.

The bond market will be closed that day for the Good Friday holiday. However, the PCE report has the potential to shift the market's thinking on when the Fed may feel it is able to start reducing interest rates.

Fed-funds futures traders are pricing in a 64% chance of a 25-basis-point rate cut by June, according to the CME FedWatch Tool. The central bank is mostly expected to cut its main target rate in three quarter-point increments by December.


Oil futures fell in Asia as the market scrutinized ongoing geopolitical tensions and OPEC cutbacks.

Ceasefire talks between Israel and Hamas have broken down again and the Houthi rebels claim they have targeted six U.S. and U.K. ships over the past 72 hours, ANZ said.

Traders were also watching OPEC members for any sign that they may alter their stance on production quotas, ANZ said, adding that the group is due to meet next week.


Gold was flat, with the precious metal appearing to be taking a breather, settling in a narrow band.

The wider picture remains constructive for gold and silver despite concerns the U.S. Federal Reserve's monetary easing will be delayed, Scope Markets said.

"Nonetheless, the view that we will inevitably see rates cut in the end does continue to provide support for precious metals," it said.

Gold prices, in particular, are closely linked to rates, with higher rates diminishing the precious metal's appeal.


Zinc edged lower on rising worries over steel demand in China, ANZ said.

The lack of strong policy signals out of China has caused greater uncertainty over construction activity, driving zinc lower, as it is the base metal most affected by weak steel demand, it added.

Zinc is commonly used in a protective coating for steel to prevent rusting.

Most base metals were also lower due to a lack of risk-on appetite, coupled with a stronger U.S. dollar, Sucden Financial said.


Iron ore futures were lower, as concerns over China's steel demand continued to weigh.

Softer steel production and rising steel inventory data are weighing on prices, Westpac said.

Prices are lower even though the People's Bank of China on Monday suggested that the country's property market has a "solid foundation for stable growth", ANZ said.



China Industrial Profits Return to Growth

China industrial profits returned to growth at the start of the year, adding to signs that the world's second-largest economy is on stronger footing.

Industrial profits jumped 10.2% in the first two months of 2024, compared with a 2.3% decline for all of 2023, the National Bureau of Statistics said Wednesday. The result was partially thanks to a low base last year.


Yen Hits 34-Year Low as Hopes for BOJ Rate Increases Fade

The Japanese yen hit its weakest level against the dollar in 34 years on waning expectations that the Bank of Japan would raise interest rates further, after it dropped its negative interest rate policy last week.

The dollar briefly rose to as high as 151.97 yen, which had not been touched since July 1990, compared with Y151.55 as of Tuesday 5 p.m. Eastern Time. The U.S. currency was recently at Y151.77.


More Chinese Companies to Be Added to U.S. Import Ban List

The Biden administration will enlarge a list of companies under an import ban because of their alleged ties to forced labor in China, an official said, a move that would intensify pressure on some corporate supply chains.

Many more companies will be added to what is known as the Uyghur Forced Labor Prevention Act Entity List, Laura Murphy, a Department of Homeland Security policy adviser, said on Tuesday. The list catalogs companies and state enterprises the U.S. alleges are involved in the exploitation of forced labor from China's Xinjiang region.


Irish Economy Forecast to Return to Growth, Easing Drag on Eurozone

The eurozone economy may be freed of a headwind that enfeebled growth in 2023, with new forecasts pointing to a return to expansion for Ireland, one of the currency area's smallest but most changeable members.

The eurozone economy barely grew last year, in contrast to a booming U.S. Much of that weakness was down to high prices for food and energy, and rising borrowing costs. But it was exacerbated by Ireland's comedown from its pandemic-driven boom.


Merck's $11.5 Billion Bet on Its Next Big Drug Finally Arrives

Merck is making a big bet that its new drug, approved Tuesday in the U.S. for a potentially fatal lung disease, will take the company a long way toward heading off a massive revenue decline later this decade.

The drug, which will sell under the name Winrevair, treats a condition called pulmonary arterial hypertension that affects nearly 40,000 people in the U.S. In 2021, Merck paid $11.5 billion for the company developing the medicine. Some analysts estimate sales as high as $7.5 billion a year.


DS Smith in Takeover Talks With International Paper

DS Smith is in talks with International Paper regarding an all-share takeover proposal valuing London-listed DS Smith at 5.72 billion pounds ($7.22 billion), potentially sparking a bidding war as the offer price is higher than that of its recently-agreed deal with peer Mondi.

Packaging company DS Smith said Tuesday that International Paper's proposal represents a value of 415 pence for each DS Smith share. Shareholders would get 0.1285 shares of International Paper for each DS Smith share, it said. This is a 48% premium to its closing price of 281 pence on Feb. 7-the day before Mondi disclosed its interest in a deal-based on International Paper's share price of $40.85 on Monday at market close, DS Smith added.


In a Secret Game of Prisoner Swaps, Putin Has Held Most of the Cards

There were no aides and no note-takers in the Oval Office-just President Biden and his German guest.

Chancellor Olaf Scholz came on such short notice that the only plane he could book, a small Airbus 321, had to refuel in Iceland. Russia's war in Ukraine and the fighting in Gaza dominated the 90-minute meeting.


Elon Musk Pushes to Increase Use of 'Full Self-Driving' Software as Tesla Sales Cool

Tesla is stepping up promotion of the driver-assistance technology it calls "Full Self-Driving Capability," seeking to expand use of the controversial software feature as it confronts the prospect of lower sales growth this year.

Elon Musk, Tesla's chief executive, told employees this week that they are required to take customers on a test drive using the technology before they hand over the keys.


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Expected Major Events for Wednesday

00:01/UK: Mar CBI Growth Indicator and Service Sector Survey

05:30/NED: Mar Producer confidence survey

07:00/SWE: Feb Foreign trade

07:00/NOR: Feb Retail Sales

07:00/DEN: Feb Unemployment

07:00/DEN: 4Q Revised GDP

07:30/HUN: Feb Employment & unemployment

07:45/FRA: Mar Consumer confidence survey

08:00/SPN: Feb Retail Sales

08:00/SPN: Mar Flash Estimate CPI

08:00/SVK: Mar Economic sentiment indicator

08:00/SVK: Mar Business tendency survey

08:30/SWE: Swedish repo rate announcement

09:00/ICE: Feb Labour Force Survey

09:00/AUT: Mar Austria Manufacturing PMI

09:00/GER: Ifo Joint Economic Forecast of German economic research institutes

09:30/UK: Feb Capital issuance statistics

10:00/LUX: Jan Trade

10:00/EU: Mar Business & Consumer Surveys - Business Climate Indicator & Economic Sentiment Indicator

16:59/HUN: 4Q Balance of Payments

16:59/SPN: Feb Budget deficit

16:59/SPN: Jan Monthly Balance of Payments

16:59/SPN: Jan Budget deficit

16:59/SPN: Dec Budget deficit

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


(END) Dow Jones Newswires

March 27, 2024 01:15 ET (05:15 GMT)

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