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EMEA Morning Briefing: Shares Set to Rise as Fed Path Remains in Focus

MARKET WRAPS

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EU trade; trading update from Tesco

Opening Call:

European stock futures point to gains at the open. Asian stock benchmarks declined; the dollar steadied; Treasury yields rebounded slightly; oil futures fell while gold rose.

Equities:

Stock futures advanced early Friday after major European indexes extended a string of declines Thursday following last week's European Parliament elections and amid worries over mounting deficits in France.

Though Wall Street has dialed back expectations for the number and timing of rate cuts by the Federal Reserve, traders have been bidding up riskier assets in anticipation of lower borrowing costs.

Taking on more risk in anticipation of benchmark borrowing costs being cut by one quarter of a percentage point could prove to be a mistake if rates are reduced because of deteriorating economic conditions, said Adam Hetts, global head of multi-asset investing at money manager Janus Henderson.

"That's not putting the punch bowl back on the table," Hetts said. "Investors are playing with fire."

Sébastien Page, chief investment officer at T. Rowe Price Group, said corporate earnings, the artificial intelligence boom and market liquidity are all factors more important to his investment decisions than the timing of a rate cut. "We're all too obsessed with 25 basis points," he said.

Forex:

The dollar continues to track Federal Reserve policy expectations with "remarkable enthusiasm," said Societe Generale.

"The key to rate cuts is now tilting more towards the growth data than CPI," SocGen said, adding that slower growth would open the door to earlier rate cuts now that inflation is decelerating. SocGen expects the DXY dollar index to stay rangebound until U.S. growth slows.

Bonds:

Rates on U.S. government debt finished lower for a third straight session overnight following a solid 30-year government-bond auction and data that added to evidence of easing U.S. inflation.

"Inflation took two steps in the right direction last month after surprising to the upside in early 2024," said Bill Adams, chief economist for Comerica Bank. Thursday's PPI for May "reinforces expectations for a soft print of the Fed's preferred measure of inflation, the personal-consumption expenditures price deflator, when it is released later this month."

Energy:

Oil futures fell in Asia amid likely risk-off sentiment In the market. The outcome of the FOMC meeting showed the Fed remains cautious and recent data isn't enough to build the central bank's confidence that inflation is coming under control, StoneX Market Intelligence said.

However, the crude oil market should remain well supported over the next 18 months by possible stricter adherence to quotas by Russia's Energy Ministry, along with geopolitical risks, ANZ said.

Metals:

Gold edged higher early Friday after prices fell overnight on cooler-than-expected U.S. producer price data, UOB said.

The Fed's outlook for fewer rate cuts this year appears to be weighing on gold prices, which continue to face bearish headwinds, Phillip Nova said. Reports of China's PBOC halting gold purchases and the Fed's hawkish stance may prove worrisome for the precious metal in the short term, it added.

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Citi continues to highlight copper as its top pick, raising its 2025 forecast for copper to $12,000 a ton from $10,000 a ton, citing increased confidence in traditional non-energy transition demand.

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Iron ore gained in Asia amid China's continued efforts to ease its property crisis. The PBOC held a meeting this week to promote its relending policies for affordable housing and encourage state-owned companies to buy unsold homes. The efforts bode well for iron ore prices, ANZ said.

Meanwhile, Brazilian iron ore miner Vale has said the demand outlook remains positive over the short, medium and long term, ANZ added.

   
 
 

TODAY'S TOP HEADLINES

How the Fed Can Cut Rates This Summer Without Cutting Rates

The Federal Reserve has more than one way to work its will on the economy. It could soon start using its more subtle tools to start nudging rates down. That still would have a real impact on businesses and households.

The central bank most directly controls short-term rates by setting a target range for the federal-funds rate, the rate at which banks lend money to one another overnight. On Wednesday it left this target unchanged while saying that Fed policymakers on average expect to cut this rate range just once this year, down from an expectation of three times in March.

   
 
 

Macron's Gamble on Stopping Le Pen Now Risks Ushering Her to Power

PARIS-President Emmanuel Macron has always aspired to become one of the great men of history, saving Europe from the fires of populism and setting its economy on course to compete with the U.S. and China.

The question now looming over Macron is whether he will go down in history as the man who ushered Marine Le Pen and her far-right party to the threshold of power in France.

   
 
 

Russia's Devastating Attacks on Ukraine's Grid Spark Fears of Brutal Winter

KYIV, Ukraine-Ukraine is imposing blackouts, launching hasty repairs and hunting for spare parts after a Russian bombing campaign targeting power infrastructure in recent months slashed the country's electricity production by half.

The Russian attacks, using waves of missiles and explosive drones, have sparked fears of a painful winter should the power outages severely hamper the economy and lead to an exodus from cities. Ukraine has long pleaded with the West for more air-defense systems, and Ukrainian officials say deliveries have been insufficient to protect both cities and the front lines.

   
 
 

At G-7, Biden and European Leaders Agree to Finance Ukraine Using Russian Assets

FASANO, Italy-President Biden and key European leaders reached an agreement to finance Ukraine with a loan of up to $50 billion, backed by the profits on frozen Russian assets.

Key details of the financing arrangement still need to be agreed on, but the leaders, meeting at a summit of the Group of Seven major advanced economies, hope it will shore up Ukraine's finances as it fights against the two-year-old Russian invasion.

   
 
 

Tesla Shareholders Vote to Uphold Musk's Pay Plan

Tesla shareholders voted to reapprove Elon Musk's multibillion-dollar pay package, signaling support for the EV maker's longtime leader and giving the board ammunition in its fight to preserve the court-rejected compensation plan.

Approval of the company's proposal was announced at Tesla's annual shareholder meeting in Austin, Texas.

   
 
 

Microsoft Grilled on Capitol Hill Over Security Failures

Microsoft President Brad Smith said the company bears responsibility for a raft of security failures that led to a hack of U.S. government systems last year, and vowed to address them in testimony before Congress on Thursday.

Smith, in an appearance before the House Committee on Homeland Security, said the company accepts the findings of an investigation into its security practices "without equivocation or hesitation."

   
 
 

Proposed Visa and Mastercard Swipe-Fees Settlement Is Likely to Be Thrown Out

A federal judge said she was unlikely to approve a proposed settlement in a long-running lawsuit that alleges Visa, Mastercard and large U.S. credit-card issuers restrict competition over the fees merchants pay when they accept credit cards.

"The Court will issue a written decision, but informed the parties that it will likely not approve the Settlement," a filing Thursday in federal court in Brooklyn said. The judge said the settlement's proposed changes seemed inadequate, according to a person inside the courtroom.

   
 
 

GameStop Shareholder Meeting Is Adjourned After Glitch Disrupts Call

GameStop's annual shareholder meeting was cut short after high interest from shareholders led to a technical issue.

The company's annual meeting was scheduled to start at 11 a.m. EDT on Thursday. It will be reconvened at 12:30 p.m. EDT Monday.

   
 
 

Apple Sued by Employees Alleging Unequal Pay for Women

Two female Apple employees filed a proposed class-action lawsuit Thursday alleging the company pays women lower salaries than men for similar work.

The suit, filed in a San Francisco state court, targets Apple's hiring practices used to set compensation, as well as the company's performance-review policies. It is the latest in a series of pay equity lawsuits against major corporations, including large tech giants, that allege they underpay women and minorities.

   
 
 

Write to singaporeeditors@dowjones.com

   
 
 

Expected Major Events for Friday

04:30/NED: Apr International trade

05:00/FIN: May CPI

06:00/SWE: May CPI

06:00/ROM: 1Q Employment and unemployment

06:30/HUN: Apr Construction

06:45/FRA: May CPI

07:00/SVK: May Core & net inflation development

07:00/SVK: May CPI

08:00/BUL: May CPI

08:00/POL: May CPI

08:00/POL: Apr Merchandise trade

08:00/ITA: Apr Foreign Trade EU

08:30/UK: May Bank of England/Ipsos Inflation Attitudes Survey

09:00/EU: Apr Foreign trade

10:00/POR: May CPI

15:59/UKR: Apr Trade

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(END) Dow Jones Newswires

June 14, 2024 00:21 ET (04:21 GMT)

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