EMEA Morning Briefing: Stocks Could Edge Back Ahead of Fed Decision

MARKET WRAPS

Watch For:

GDP data for EU, Germany France, Italy; CPI data for EU, Italy, France; Germany unemployment; France consumer spending; UK money and credit; trading updates from HSBC; Banco Santander; Mercedes-Benz Group; Deutsche Lufthansa; Volkswagen; adidas; Galp; Clariant; Caixabank; Whitbread

Opening Call:

Shares could waver in Europe on Tuesday, with focus on the FOMC's two-day meeting that starts later today. In Asia, stock benchmarks rose; Treasury yields weakened; the dollar consolidated; while oil and gold slipped.

Equities:

European stocks may falter in opening trade on Tuesday, as investors await the Federal Reserve policy meeting.

The Fed meeting set to conclude Wednesday could give investors additional hints on whether the central bank might lower rates by year's end.

That update will be followed Friday by the April jobs report, which will provide the latest snapshot of a U.S. economy that continued expanding in the first quarter.

Earnings season will pick up speed Tuesday, when results from Amazon.com, McDonald's and Coca-Cola are due.

Forex:

The dollar consolidated in Asia. The greenback could gain ground against the yen if Japan denies it has intervened in foreign exchange markets, Bannockburn said.

People familiar with the matter confirmed the intervention to The Wall Street Journal.

Bannockburn said it is possible, but argued that thin trade because of a Japanese holiday may have contributed to the USD/JPY sudden move.

The Japanese currency had been weakened by fading expectations for near-term interest rate increases by the Bank of Japan, while the U.S. Fed remains hawkish.

Bonds:

Treasury yields fell as markets priced in another Fed hold.

The U.S. Treasury said it expected to borrow $243 billion this quarter, $41 billion more than previously estimated, due in part to lower projected cash receipts. Investors expect the Fed to keep a hawkish tone after the Wednesday meeting.

U.S. data are expected to show the economy is still running hot.

Energy:

Oil edged lower in Asia, weighed by cease-fire hopes in the Middle East that could reduce potential oil supply disruptions in the region.

The move lower in oil prices comes amid renewed hopes of a cease-fire between Israel and Hamas, said NAB, noting U.S. Secretary of State Antony Blinken's trip to the region.

This could help bring an end to fighting in Gaza, NAB added.

Metals:

Gold prices inched down ahead of the key two-day U.S. Fed meeting, which begins later in the day.

Investors are bracing for the FOMC meeting's outcome and Chairman Powell's remarks on interest rates after inflation has stayed more stubborn than expected, ANZ Research said.

While a weaker U.S. dollar supports investor demand for the precious metal, safe haven buying has been subdued as tensions in the Middle East have eased, it added.

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Copper was higher, building on Monday's gains.

Ongoing struggles at copper mines continue to trouble the market, ANZ Research said.

Codelco, Chile's state-owned copper producer, reported a decline in quarterly output at its aging mines. The producer's output in the first quarter fell 9.6% on year, ANZ Research noted.

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Iron ore was lower in Asian trade.

Prices may be choppy in the short term as current valuations are high, Huatai Futures said.

The demand and supply dynamics for iron ore are relatively balanced, and investors expect slightly higher demand in the short term, it added.

TODAY'S TOP HEADLINES

China's Factory Activity Expands, But at Slower Pace

China's factory activity expanded for a second consecutive month in April but at a slower pace, an official gauge showed, suggesting that the vast manufacturing sector might have lost some steam amid economic headwinds.

China's official manufacturing purchasing managers index fell to 50.4 in April from 50.8 in March, the National Bureau of Statistics said Tuesday. A reading above 50 indicates an expansion in activity while a reading below it indicates contraction.

Japan Govt to Respond Firmly to Excessive FX Movements, Top Currency Official Says

TOKYO-Japan's top currency official said the weak yen was hurting vulnerable people by raising the price of imported goods such as food, adding that the government would respond firmly to excessive movements in the currency market.

Masato Kanda, vice minister of finance, spoke Tuesday after the yen weakened to a multidecade low of around 160 to the dollar on Monday. Japan intervened Monday to prop up the yen, people familiar with the matter said.

Treasury Department raises its second-quarter borrowing estimate

The Treasury Department said Monday it expects to borrow $243 billion in the second quarter, which is $41 billion higher than previously estimated.

The increase was driven in part by lower projected cash receipts for the second quarter. The updated forecast includes an end-of-quarter cash balance of $750 billion.

L'Occitane Owner Offers Buyout That Values Company at EUR6 Billion

L'Occitane International received an offer from the controlling shareholder group, led by Australian billionaire Reinold Geiger, to buy the company and take it private in a bid that values the company at 6 billion euros ($6.42 billion).

The Luxembourg-based and Hong Kong-listed cosmetics company said Monday that the offer from L'Occitane Groupe, Geiger's holding company, to buy the remaining shares would cost EUR1.7 billion. Geiger's group and its partners own 72.64% of the shares.

Israel Raises Concerns About Possible ICC Arrest Warrants

Israel is concerned that the International Criminal Court is preparing to issue arrest warrants against its senior-most officials on charges related to Israel's war against Hamas in Gaza, according to Israeli officials.

Western officials have reached out to the court to express unease with any imminent decisions because of the potential to undercut U.S.-led diplomacy to achieve a cease-fire and free some of the 129 hostages taken Oct. 7 and held in Gaza.

Goldman in Talks to Unload GM Credit-Card Partnership to Barclays

Goldman Sachs is in talks to transfer its General Motors credit-card program to Barclays, in what would be a big step in the Wall Street bank's retreat from consumer lending.

Barclays is the leading candidate to take over issuance of the credit cards, which have about $2 billion of balances outstanding, and could strike a deal with GM by this summer, according to people familiar with the matter.

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Expected Major Events for Tuesday

04:30/NED: Mar PPI

04:30/NED: Mar Retail turnover

04:30/NED: Apr Flash Estimate CPI

05:00/FIN: Mar Retail sales

05:30/FRA: Mar Household consumption expenditure in manufactured goods

05:30/FRA: 1Q GDP - first estimate

06:00/EU: 1Q New Commercial Vehicle Registrations in Europe statistics (EU27 + EFTA3)

06:00/NOR: Mar Credit Indicator C2

06:00/DEN: Mar Retail Sales Index

06:00/GER: Mar Foreign trade price indices

06:00/DEN: Mar Unemployment

06:30/HUN: Mar PPI

06:30/GER: Mar Retail Trade

06:30/HUN: 1Q Preliminary GDP

06:45/FRA: Mar Housing starts

06:45/FRA: Mar PPI

06:45/FRA: Apr Provisional CPI

07:00/SPN: 1Q Preliminary GDP

07:00/AUT: 1Q Flash Estimate GDP

07:00/SWI: Apr KOF economic barometer

07:00/TUR: Mar Foreign Trade

07:00/CZE: 1Q GDP preliminary estimate

07:55/GER: Apr Labour market statistics (incl unemployment)

08:00/BUL: Mar PPI

08:00/ITA: 1Q GDP preliminary estimate

08:00/GER: 1Q GDP - 1st release

08:30/POR: 1Q Flash Estimate GDP

08:30/UK: Mar Bank of England effective interest rates

08:30/UK: Mar Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit

08:30/UK: Mar Monetary & Financial Statistics

09:00/GRE: Mar PPI

09:00/GRE: Feb Turnover Index in Retail Trade

09:00/MLT: Mar PPI

09:00/CYP: Mar PPI

09:00/CRO: Mar Industrial Production Volume Index

09:00/LUX: Mar PPI

09:00/EU: 1Q Preliminary Flash Estimate GDP

09:00/CRO: Mar Retail trade

09:00/ITA: Apr Cities CPI

09:00/ITA: Apr Provisional CPI

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April 30, 2024 00:16 ET (04:16 GMT)

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