European Midday Briefing: Stocks Trade Higher, Focus on U.S. Tech Earnings

MARKET WRAPS

Stocks:

European stocks traded higher again on Wednesday as investors shifted focus to upcoming earnings from major U.S. tech companies.

The main focus outside of earnings is on Thursday's U.S. GDP and Friday's PCE inflation data, IG said, which could provide more clarity on the Federal Reserve's plans for monetary easing.

Meanwhile, better eurozone economic data and expectations of interest-rate cuts by the European Central Bank remain conducive for risk sentiment, Commerzbank Research said.

"Spill-over risks from the U.S. have also receded given the ECB's commitment to a June cut and hence much lower sensitivity to the Fed."

U.S. Markets:

Stock futures rose, with contracts tied to the Nasdaq leading gains on the back of Tesla, which surged after its earnings report.

Results are due from AT&T, Boeing, IBM and Meta, among others.

Stocks to Watch

Tesla's quarterly profit plunged, but Elon Musk sought to assuage some concerns by underscoring Tesla's commitment to bringing out less-expensive cars. The stock was up over 10% premarket.

Visa's fiscal second-quarter adjusted earnings, which strip out one-time items, were $2.51 a share, better than analysts' forecasts of $2.44. Shares rose 2.4%.

Forex:

The euro held on to Tuesday's gains against the dollar, triggered in part by improving eurozone economic data, Brown Brothers Harriman said.

"The recovery in eurozone leading economic indicators will likely temper expectations that the European Central Bank is about to embark on an aggressive easing cycle and offer the euro near-term support."

Deutsche Bank Research said strong U.S. growth and inflation have been the drivers of a dollar rally so far this year and should continue to support the currency.

Uncertainty surrounding U.S. elections this year could also benefit the dollar via safe-haven flows, it said.

Deutsche doesn't think the dollar is vulnerable to high fiscal deficits. "America's external accounts are not deteriorating because the domestic private sector is fully funding public sector spending."

The Fed remains committed to its inflation target so the greater the deficit the higher the equilibrium level of real rates, it said.

Sterling stabilized following Tuesday's strong gains, fuelled by above-forecast U.K. purchasing-manager surveys, Bank of England signals that it isn't in a rush to cut rates and a weaker dollar, ING said.

At least four out of nine BOE policymakers are now dissenting against comments from others suggesting rate cuts could come reasonably soon, ING said.

"We could see some stabilisation in the short term as both the U.K. calendar and BOE-speak go quiet."

Bonds:

An above-forecast print in Germany's Ifo business climate index yielded little reaction in bonds or the euro, even as the data gave fresh evidence of the German economy's slow recovery.

Energy:

Oil prices edged higher on reports of bullish U.S. inventories and signs of a tightening market, despite a reduced geopolitical risk premium.

"Oil timespreads continue to tighten with Brent prompt spread backwardation expanding to $1.04 a barrel as of today, compared to a backwardation of $0.69 a barrel a week ago," ING said.

Metals:

Gold futures slipped, trading in a narrow band as investors shift attention to Thursday's U.S. GDP and Friday's personal consumption expenditure index data releases.

EMEA HEADLINES

Gucci Owner Kering Expects Sharp Drop in Operating Profit After China Weighs on Sales

Kering expects sharply lower operating profit in the first half after sales slumped in the first three months as the company grapples with sluggish demand, particularly in China.

The French luxury-goods giant said Tuesday that it anticipates a decline between 40% and 45% in first-half recurring operating income compared with the year-earlier period, while it continues to invest in its fashion houses.

Roche Sales Decline on Currency Hit

Roche first-quarter sales declined amid weak demand for Covid-19 products and currency headwinds but slightly beat analysts expectations.

The Swiss pharmaceutical giant said Wednesday that sales dropped to 14.39 billion Swiss francs ($15.79 billion) for the first quarter, from CHF15.32 billion in the same quarter a year prior. Analysts had estimated sales at CHF14.35 billion, according to a Visible Alpha compiled consensus.

Lloyds Banking Backs Guidance After Slower-Than-Expected Decline in Net Interest Margin

Lloyds Banking maintained its full-year guidance as it reported a slightly better-than-expected net interest margin for the first quarter of the year.

The U.K. lender posted a net interest margin-the difference between what banks earn on loans and pay out on deposits-of 2.95% for the three months ended March 31. This beat expectations of a 2.93% margin, taken from a company-compiled consensus, and compares with the 2.98% margin it reported for the fourth quarter of last year.

Eni Raises Share Buyback Plan, Despite Earnings Decline

Eni reported a decline in net profit, missing analysts' expectations for the first three months of the year, but raised its share buyback plans.

The Italian oil-and-gas major said it achieved 1.21 billion euros ($1.30 billion) in net profit for the period, compared with EUR2.39 billion a year prior. On an adjusted basis, net profit was EUR1.58 billion.

Heineken Sales Volume Beats Expectations as Premium Beers Shine

Heineken said its beer sales volume increased by more than expected in the first three months of the year, when its premium beers including its namesake brand outperformed the rest of its portfolio.

The Dutch brewer said Wednesday that its volume of beer sold in the first quarter grew 4.7% organically on year, ahead of the company-provided market expectations of 2.5%, while prices rose by 6.0%.

GLOBAL NEWS

China Central Bank Remarks Suggest Bond-Trading Liquidity Boost Not Imminent

China's central bank has again reiterated its cautious approach to monetary easing, reinforcing views that it's unlikely to deliver a big liquidity boost via bond trading.

Officials from the People's Bank of China told the state-run Financial News that the central bank will stick to normal monetary policy tools, but broke weeks of silence about treasury bond trading, a policy tool it has used sparingly in the past two decades. A months-old speech from President Xi Jinping had stoked speculation that the PBOC could resume trading treasury bonds in secondary markets.

The Folly of China's Real-Estate Boom Was Easy to See, but No One Wanted to Stop It

When New York hedge-fund manager Parker Quillen visited a glitzy new development in northern China called Tianjin Goldin Metropolitan, he wondered how on earth the developer would fill all that space.

It had apartments starting at $1 million and plans for an office tower bigger than the Empire State Building, an opera hall, shopping malls and hotels. Its total square footage was to exceed the land area of Monaco.

Trump Shaped the Supreme Court. Now He Wants His Victory.

WASHINGTON-Creating a conservative supermajority on the Supreme Court was perhaps the crowning achievement of Donald Trump's presidency, with three appointees who delivered generational victories, including the elimination of abortion rights and the abolition of affirmative action.

But the court has been no balm when it comes to Trump's personal interests, leaving the former president fuming in several past cases after his appointees rejected his expansive claims of executive power or unfounded allegations of election irregularities.

Senate Passes Ukraine, Israel Aid Package After Monthslong Fight

WASHINGTON-The Senate passed a long-delayed $95.3 billion foreign-aid package sending much-needed ammunition and military equipment to beleaguered Ukrainian soldiers and fortifying Israel's missile defense systems, while also forcing the sale of Chinese-controlled TikTok in the U.S.

The 79-to-18 vote brought to a close months of wrenching debate over Ukraine that sharply split the Republican Party, with rank-and-file members openly rebelling against their leaders. The fight also called into question both how far the U.S. would go to defend the country, now in the third year of trying to repel Russia's invasion, as well as America's leadership role in the world.

Israel Wants Hamas Out of Gaza, but Even Uprooting It From the North Hasn't Worked

Fighting between Israel and Hamas intensified in northern Gaza, the first battleground in the war, where 200 days into the conflict territory is still heavily contested and Israel says thousands of militants remain.

The renewed violence, in areas Israeli forces had previously largely cleared of Hamas, serves as a sobering example of the difficulty of consolidating gains as they prepare an offensive in the southern city of Rafah, the militant group's last major bastion. It comes as a top State Department envoy warned Tuesday that delivery of humanitarian aid to northern Gaza was particularly critical, despite progress in recent weeks in rendering such assistance throughout the conflict zone.

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

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April 24, 2024 05:48 ET (09:48 GMT)

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