MARKET WRAPS
Watch For:
Euro area balance of payments; France monthly business survey; Italy balance of payments; UK OBR Forecast evaluation report, consumer confidence survey; trading updates from Roche, Nestle, Merck, Renault, Pernod Ricard, L’Oreal, Salvatore Ferragamo, Bollore, Vivendi, EssilorLuxottica, Nokia, Telia, RS Group, Hargreaves Lansdown, Mondi, Schroders, RELX, St. James’s Place, London Stock Exchange Group, Rentokil Initial, Investor AB, Deliveroo, Dechra Pharmaceuticals
Opening Call:
European shares look poised to fall at Thursday’s open amid continued worries over unrest in the Middle East and the Fed’s rate trajectory. In Asia, stock benchmarks fell; the dollar was steady; Treasury yields pushed higher; while oil and gold futures fell.
Equities:
European stock futures fell, tracking equity losses in Asia and in the U.S. overnight. U.S. bond yields extended gains, and the swift climb in bond yields has dented enthusiasm for stocks in recent weeks.
Investors are also monitoring the intensifying Israel-Hamas war that threatens to disrupt the global energy market. A mixed bag of corporate earnings results further complicates the outlook for stocks.
A string of hotter-than-expected economic reports in the past several weeks has prompted investors to weigh whether the Federal Reserve may lift interest rates again this year in its campaign to cool inflation.
“The market is walking this tightrope,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management. “There’s a lot of risk in front of it.”
Forex:
The dollar steadied in Asia. Focus will probably shift to Fed Chair Powell’s speech later today, CBA said. A reiteration of the “higher for longer” message on rates could allow U.S. bond yields to stay at or above their current levels and support USD, CBA added.
Bonds:
Treasury yields extended gains after establishing more 16- and 17-year highs overnight as investors focused on the U.S. economy’s resiliency.
“Economic news out of the U.S. continues to dumbfound expectations,” said Matthew Ryan, head of market strategy at Ebury.
“Most economists, and indeed the Federal Reserve itself, had warned that a slowdown in consumer spending, and even a recession, was likely on the way towards the end of this year,” he said.
Energy:
Oil futures fell in Asia, pulling back after prices settled at their highest level in more than two weeks overnight. However, rising Middle East tensions will probably continue to drive an oil-price rally.
Traders worry that the Hamas-Israel conflict could spread regionally, Citi said. While oil prices have come off their year-to-date highs, they have undergone choppy movements and stay supported “well-north” of $80/bbl, Citi added.
Metals:
Gold pulled back in Asia after surging overnight. Rising geopolitical risks has spurred safe-haven demand for the precious metal.
Looking at the way that gold has rallied recently, investors appear to be pricing in a sharp escalation in the crisis in the Middle East region, said Fawad Razaqzada, market analyst at City Index and https://urldefense.com/v3/__http://FOREX.com__;!!F0Stn7g!EG7XLRWZ9VL95mIlPdlO7U_8pGrkNCGeIGdYW5V7FX70YOuptNn21x8mBF-KYkTBIMQORg3_vhZllbZXTnyB9rHensCGHL45AoqD81hsFKI$ .
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Copper prices were flat amid mixed global cues. As demand for infrastructure gradually recovers in China, copper prices could enter a new upward cycle, Kaiyuan Securities said.
However, rising geopolitical tensions in the Middle East could weigh, ANZ said. Copper inventories in LME warehouses, which jumped to the highest level since October 2021, also weigh, ANZ said.
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Continued declines in Chinese property prices could exacerbate headwinds facing the iron ore and steel markets, ANZ said. New home prices in 70 major Chinese cities fell at a slightly faster pace in September than August, according to data released Thursday.
Investors should keep an eye on Chinese macroeconomic policy, the exports trend for Chinese steel and a potential increase in steel inventories with the coming winter, Huatai Futures said.
TODAY’S TOP HEADLINES
Why One Fed Official Is Ready to Stop Raising Rates
The Federal Reserve should extend its pause on interest-rate increases because of growing evidence that higher borrowing costs will slow the economy despite recent signs of hiring and spending strength, a top central bank official said.
Philadelphia Fed President Patrick Harker in a Tuesday interview said he thinks the central bank can likely wait until early next year to decide whether rapid rate increases over the past 20 months have done enough to keep inflation heading lower.
U.S., Experts Say Evidence Suggests Palestinian Rocket Hit Gaza Hospital
Israel, the U.S. government and independent security experts said Wednesday the preliminary evidence for a deadly explosion at a Gaza hospital compound pointed to a local militant group, casting doubt on Palestinian claims that an Israeli airstrike was responsible.
Independent analysts poring over publicly available images of Tuesday’s explosion at Al-Ahli Arab Hospital in Gaza and its aftermath say the blast site doesn’t bear the hallmarks of a strike with a bomb or missile of the types usually used by Israel.
Gaza Hospital Blast Reverberates Across Muslim World
The explosion at a Gaza hospital Tuesday night set off a wave of protests across much of the Middle East and the broader Muslim world, some of them calling for death to Israel.
Hamas immediately blamed Israeli air strikes for the blast at the Al-Ahli Arab hospital and said 500 people had been killed. Israel, the U.S. and independent security experts on Wednesday cast doubt on Hamas claims, saying the preliminary evidence pointed to a Palestinian militant group. The amount of damage also appears inconsistent with the Hamas-controlled Gaza Health Ministry’s assertion on Wednesday that 471 people were killed, experts said.
Visa, Mastercard Want a Slice of Africa’s Mobile Money
JOHANNESBURG-African fintech companies have found creative ways to help the continent’s consumers spend their money. Traditional payments companies want in.
Global payment giants, including Mastercard and Visa, are pouring billions of dollars into African companies that have powered a sharp expansion in e-commerce on the continent. Recent deals have focused on mobile-money operators, which allow users to send funds using simple cellphones, and platforms that facilitate such payments for merchants such as Uber Technologies, Netflix or Estée Lauder without relying on credit cards or bank accounts.
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Expected Major Events for Thursday
04:30/NED: Sep Unemployment
06:00/SWI: Sep Trade Balance
06:00/NOR: 3Q Business tendency survey
06:45/FRA: Oct Monthly business survey (goods-producing industries)
07:00/SPN: Aug Trade Balance
08:00/POL: Sep Average gross wages
08:00/POL: Sep PPI
08:00/POL: Sep Industrial Production Index
08:00/EU: Aug Euro area balance of payments
09:00/ITA: Aug Balance of Payments
10:00/POR: Sep PPI
17:59/POR: Aug Balance of Payments
23:01/UK: Oct UK Consumer Confidence Survey
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
10-19-23 0016ET
