European Midday Briefing: Nvidia Lifts Tech But Mood Cautious After Fed Minutes

MARKET WRAPS

Stocks:

Most major European benchmarks struggled higher on Thursday, with tech helped by strong earnings and a bullish forecast from Nvidia, although gains were capped after the latest Federal Reserve minutes revealed some officials were open to raising rates if inflation reaccelerated.

Stocks to Watch

Jefferies said a deal between BHP and Anglo American has become more likely, saying talks could lead to a recommended offer.

"We think it is possible that BHP either raises its offer again [albeit modestly] or agrees to changes in structure, or does both to satisfy the Anglo board."

Ultimately, a separation of Kumba and Amplats would be necessary--the question is whether it would happen before or after any takeover, Jefferies said, adding the chance of a rival suitor emerging remains.

"We have long believed that Glencore and Anglo make a compelling strategic combination, and it would be a surprise to us if BHP acquires Anglo without Glencore at least attempting to get involved in some way, shape, or form."

U.S. Markets:

The Nvidia bandwagon rolls on. Shares climbed in off-hours trading after the AI chip maker unveiled another quarter of blockbuster sales and earnings.

In recent trading:

Index futures advanced, with contracts tied to the Nasdaq-100 leading gains; benchmark bond yields edged lower, having settled at 4.433% on Wednesday; Nvida was up 7%.

Forex:

Prime Minister Rishi Sunak's surprise announcement on Wednesday that U.K. general elections would take place on July 4 could limit any gains for sterling, Swissquote Bank said. Polls suggest the elections will result in victory for the opposition Labour Party.

"The uncertainty surrounding the U.K. general election will most probably tame appetite for sterling in the next six weeks."

Still, sterling continues to hover close to the previous day's two-month highs against the dollar and the euro after higher-than-expected inflation data meant an interest-rate cut in June was all but ruled out.

Metals:

Metals were weaker, with gold futures at their lowest in a week.

The precious metal had set a new record high on Monday, and MUFG said its year-end forecast of $2,350 an ounce now looks modest. But, a modest correction downwards is expected with the metal now in overbought territory, MUFG added.

The metals complex has been caught up in the broader risk-off move following Wednesday's Federal Reserve meeting minutes, and recent price strength--particularly in copper--was becoming increasingly detached from short-term fundamentals, ING said,

"Therefore, we would have likely seen some profit-taking from speculators," ING said.

EMEA HEADLINES

Eurozone Rebound Continues Apace as Germany Leads Recovery, Surveys Show

Germany led a continued recovery in eurozone economic activity in May, according to business surveys, adding to signs that global growth is becoming less reliant on the U.S.

The eurozone economy contracted in the second half of 2023 in response to a surge in energy and food prices following Russia's invasion of Ukraine, and the subsequent rise in interest rates intended to tame that inflation.

Rio Tinto Faces Class Action Over Bougainville Mine Impact

A class action against Rio Tinto has been filed in a Papua New Guinea court in relation to a long-shuttered copper mine that it offloaded in 2016 and was at the center of a decadelong civil war.

Mining at the Panguna copper pit on the South Pacific island of Bougainville ended in 1989 when militants forced the operation to shut down. Nearly three decades later, Rio Tinto handed over its almost 54% holding in operator Bougainville Copper to be distributed between Papua New Guinea and Bougainville.

Rolls-Royce Confirms 2024 Targets After Strong Start to Year

Rolls-Royce said it was sticking to its guidance for 2024 after a strong start to the year.

The British aerospace and defense company said it continues to expect operating profit for the year in the 1.7 billion to 2.0 billion-pound ($2.16 billion-$2.54 billion) range and free cash flow from continuing operations in the range of GBP1.7 billion to GBP1.9 billion.

Aviva Backs Guidance After Rise in Premiums

Aviva reported a rise in its gross written premiums over the first quarter and confirmed its recently issued guidance.

The British insurer and asset manager's general insurance gross written premiums reached 2.7 billion pounds ($3.43 billion) for the three months to March 31, up from GBP2.38 billion a year earlier, as its new business sales in its capital-light businesses accelerated.

Julius Baer Flags Recovery in Client Activity

Julius Baer Gruppe said client activity has recovered from the multiyear lows seen in last-year's second half as it posted a 10% year-to-date rise in its assets under management.

The Swiss private-banking group's assets under management stood at 471 billion Swiss francs ($514.25 billion) at April 30, boosted by a positive currency impact and strong stock markets which was partly offset by lower bond market valuations. Total net inflows were CHF1 billion, it said Thursday. The result also included CHF4.8 billion from Kairos, whose sale was completed after the end of the period.

Telenor Names Benedicte Schilbred Fasmer New CEO

Telenor named Benedicte Schilbred Fasmer as the company's new chief executive officer from Dec. 1.

Fasmer is currently CEO of SpareBank 1 SR-Bank, and has previously been a group executive vice president at insurance company Fremtind Forsikring and head of corporate banking at DNB Bank. In addition, she has significant capital markets experience including private equity, corporate finance at several banks including Citibank, while her board experience includes serving as chair of the Oslo Stock Exchange, a member of the supervisory board of the Central Bank of Norway, and being a board member of payment app Vipps, Telenor said.

GLOBAL NEWS

Fed Officials Saw Longer Wait for Rate Cuts After Inflation Setbacks

Federal Reserve officials concluded at their most recent meeting they would need to hold interest rates at their current level for longer than they previously anticipated after a third straight disappointing inflation reading last month.

While officials continued to think interest rates were high enough to slow the economy and inflation, they signaled they were less certain over the degree to which rates would restrain activity and price pressures, according to minutes of the April 30-May 1 meeting, which were released Wednesday with a customary three-week delay.

Some Fed Officials Disagreed With Balance-Sheet Plans, Minutes Show

Federal Reserve officials weren't entirely in lockstep at their latest policy meeting on plans to start reducing the central bank's balance-sheet runoff, and at least a couple said they'd be willing to consider interest-rate hikes in the face of stronger inflation readings.

The publication of the minutes from the Federal Open Market Committee's April 30-May 1 meeting on Wednesday struck a more hawkish tone that dwelled heavily on the lack of progress seen in tamping down inflation during the first quarter.

China's 30-Year Bond Sees Volatile Trade as Investors Flock to Safe Haven

China's new 30-year sovereign bonds have seen volatile trade since their debut, suggesting massive appetite for safe-haven assets in the world's second-largest economy amid a crisis in the property sector.

The price of the bonds pulled back sharply Thursday after surging a day earlier, when they started trading on the Shanghai and Shenzhen stock exchanges. These bonds, sold by China's Ministry of Finance, had been released to institutional investors Friday.

Chinese Military Launches Drills Encircling Taiwan in Test of New President

BEIJING-The new leader of Taiwan barely had time to unpack his presidential office before China's military surrounded the island on Thursday, in a large-scale show of force that risks locking the two sides in a fresh cycle of escalation.

Growing mistrust of Beijing helped propel Lai Ching-te to the presidency, which he assumed earlier this week. The latest maneuvers only reinforce Beijing's commitment to using its military might to intimidate the island, even as doing so risks undermining its especially delicate ties to the U.S.

Ukraine, U.S. Say Russia Is Deploying Banned Toxic Gas in Battle

KYIV, Ukraine-The Ukrainian soldiers were hunkered down last month in a front-line dugout and under siege from Russian drones dropping grenades. They were relieved at first when bomblets landed that didn't explode. Then a strong smell of chlorine filled the air: The grenades were seeping poisonous gas.

The Ukrainians felt their skin sting, eyes water and lungs fill with smoke, provoking a hard cough. They rushed to wet rags with water and place them over their faces as the heavy gas filled the air around them. One of the fighters left the protection of the dugout to distract the enemy drones, allowing his compatriots to escape.

Write to paul.larkins@dowjones.com

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

May 23, 2024 05:34 ET (09:34 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.