European Midday Briefing : Investors Await Fed Minutes

MARKET WRAPS

Stocks:

European stocks struggled for direction on Wednesday as investors turned cautious ahead of the Federal Reserve minutes due after the close, and U.S. inflation data due on Thursday.

"The [Federal Open Market Committee] minutes will remind investors that 'rates will stay higher for longer' if inflation remains above target," Swissquote said.

The risks are that bond yields push higher, despite recent comments from Fed officials suggesting that rates are unlikely to rise further and safe-haven flows due to tensions in the Middle East, it added.

Stocks to Watch

BP's raised earnings guidance widens the gap to consensus once again, but the jury is still out on its medium-term trajectory, RBC said, keeping an outperform rating on the stock with a 550-pence price target.

Read BP's Guidance Raise Keeps it Well Ahead of Consensus Forecast

LVMH's third-quarter revenue miss will likely disappoint the market and add further pressure on the luxury sector in the near term, RBC Capital Markets said.

Read LVMH's 3Q Revenue Miss Could Weigh on the Industry

U.S. Markets:

Stock futures edged up and Treasury yields fell as hopes build that the Fed's campaign to raise interest rates is winding down.

Yields on benchmark 10-year Treasury notes fell more than 0.1 percentage point early on Wednesday, extending their decline below 4.6%.

Stocks to Watch

Birkenstock's initial public offering was priced at $46 a share, the midpoint of the expected range. At $46 a share, the company raises $1.5 billion and has a market value of $8.6 billion. Shares will begin trading on the NYSE on Wednesday under the ticker symbol "BIRK."

HP said it was increasing its annual dividend by 5% and forecast fiscal 2024 free cash flow of between $3.1 billion and $3.6 billion. The stock was up 1.4%.

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Forex:

The dollar has sagged after recent comments from Fed officials suggesting that rates are unlikely to rise further, but it might get a lift when Fed minutes are released, as well as inflation data on Thursday, https://urldefense.com/v3/__http://XS.com__;!!F0Stn7g!FkMdKLL6Q8UqjyVu1GAdz371qFXEcS8JvyVLwWH64IudBF1Q8ARc8Adxoxs2He0ZbcB9p0x4FpOvOk3hUj3l5BwyzpDy-yiB93MazBvxeTY$ said.

The minutes will likely provide a logical basis for keeping interest rates high for longer than expected, it said.

This "strengthens the dollar and negatively impacts the pound and dollar-denominated assets and currencies."

Higher-than-expected inflation data would also lift the dollar, https://urldefense.com/v3/__http://XS.com__;!!F0Stn7g!FkMdKLL6Q8UqjyVu1GAdz371qFXEcS8JvyVLwWH64IudBF1Q8ARc8Adxoxs2He0ZbcB9p0x4FpOvOk3hUj3l5BwyzpDy-yiB93MazBvxeTY$ added.

Energy:

Oil prices ticked higher, putting prices broadly where they were from the rally at the start of the week, as worries that the situation in Israel could spill over into other countries supported markets.

"If the conflict is contained to Israel and Hamas we would expect the current risk premium to slowly erode," ING said.

"However, there is still a risk that this escalates, particularly if there is any Iranian involvement. Under this scenario, stronger enforcement of U.S. sanctions on Iranian oil would tighten up the oil market through 2024."

Metals:

Base metals and gold prices were higher in early trading, with a falling dollar helping support commodities backed by the greenback.

Talk at this week's London Metals Week has been mixed, with the acknowledgement that weak demand in China has kept prices capped, but also that underlying data shows metal consumption to actually be quite strong.

"China with the exception of real estate is doing fine, and that includes metals demand," BMO said.

BMO pointed to strong demand from wind and solar, as well as high property completion rates in China this year.

DOW JONES NEWSPLUS

EMEA HEADLINES

German Inflation in September Confirmed at Lowest Rate Since Start of Ukraine War

German inflation fell sharply in September, confirming prior estimates and hitting its lowest rate since the outbreak of the war in Ukraine, a level that the European Central Bank could consider enough to end its current hiking cycle.

Consumer prices were 4.5% higher in September than the same month a year earlier compared with 6.1% in August, measured by national standards, data from the German statistics office Destatis showed Wednesday.

Sales Slow at Louis Vuitton's Owner as China Sputters

LVMH Moët Hennessy Louis Vuitton reported a sharp slowdown in sales growth as the world's biggest luxury-goods company struggled to lure big-spending Chinese consumers back to its boutiques after the end of China's pandemic restrictions.

The owner of Louis Vuitton and Dior said sales in its Asia market-which is dominated by China and excludes Japan-rose 11% over a three-month period ending on Sept. 30, stripping out the effects of currency fluctuations. That is down from a 23% rise in the first half of the year.

Novo Nordisk's Ozempic Drug Shows Success in Kidney Trial, Boosting Shares

Shares in Ozempic maker Novo Nordisk topped the Stoxx Europe 600 index after the company said its weight-loss drug also showed success in a trial for kidney failure in diabetes patients.

The Danish pharmaceutical giant said it will stop the trial called FLOW, which was started in 2019 to study the progression of kidney impairment and risk of renal and cardiovascular mortality in people with type 2 diabetes and chronic kidney disease, thanks to the interim results. It has seen over 3,500 people enrolled across 28 countries, it said late Tuesday.

Bang & Olufsen Backs Guidance After 1Q Earnings Beat Hopes

Bang & Olufsen on Wednesday backed guidance after posting better-than-expected fiscal first-quarter earnings as profits benefited from price increases and the sale of more higher-margin products, while supply-chain and logistic costs normalized.

The Danish consumer-electronics company said it had robust consumer demand in most markets, while its performance in Asia Pacific was hurt by a slow recovery in Chinese consumer spending.

GLOBAL NEWS

Higher Bond Yields Likely to Extend Fed Rate Pause

A sustained rise in long-term Treasury yields could be bringing the Federal Reserve's historic rate hiking cycle to an anticlimactic end.

Top central bank officials have signaled in recent days that they could be done raising short-term interest rates if long-term rates remain near their recent highs and inflation continues to cool.

China Auto Sales Rose in September on Promotions, Holiday Travel

China's vehicle sales rose in September, helped by sales promotions and holiday buying.

Retail sales of passenger cars in the world's biggest auto market rose 5.0% on year and 5.0% on month to 2.02 million vehicles in September, the China Passenger Car Association said Wednesday. It cited higher demand ahead of October holidays and more sales promotions as automakers tried to hit quarterly sales goals.

Biden Walks Fine Line in Israel Conflict

WASHINGTON-President Biden, whose support for Israel dates back a half-century, faces a foreign-policy conundrum following Hamas's devastating attacks: how to support the closest U.S. ally in the Middle East without pulling America into a dangerous regional conflict.

The Israeli war presents Biden with a series of thorny foreign-policy challenges as U.S. officials work to deter regional powers such as Lebanon-based Hezbollah from opening up a northern front in the war while weighing what to do regarding more than 100 hostages taken by the Hamas militant group.

China Releases Australian Journalist Detained on Suspicion of Disclosing State Secrets

SYDNEY-China released an Australian journalist whom it had detained for more than three years on suspicion of disclosing state secrets, removing a key irritant in a tense relationship between a close U.S. ally and Beijing.

Cheng Lei, who was an anchor for the Chinese government's English-language television news channel, arrived in Melbourne by plane where she was reunited with her two children, Australian Prime Minister Anthony Albanese said Wednesday. Her release comes as Albanese prepares to visit China in a landmark trip later this year.

Former Trump Finance Chief in Testimony Says Penthouse, Assets Were Overvalued

The Trump Organization's longtime finance chief Allen Weisselberg took the witness stand Tuesday and said under questioning that the real-estate empire's financial statements inflated the value and size of some assets, including Donald Trump's penthouse in Trump Tower.

Weisselberg was called as a witness in the civil case brought by the New York attorney general's office alleging Trump and his business engaged in a decadelong fraud that falsified asset values for financial gain. Weisselberg, who has left the company and served time this year in the Rikers Island jail complex on a tax-fraud conviction, is also a defendant in the case.

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

(END) Dow Jones Newswires

10-11-23 0545ET