European Midday Briefing : Investors Eye More U.S. Jobs Data

MARKET WRAPS

Stocks:

European stocks struggled for direction on Thursday as risk appetite somewhat improved after the previous session's softer-than-expected U.S. jobs data, easing concerns about interest rates staying higher for long.

U.S. weekly jobless claims are due later, and investors will eye them with a view to Friday's jobs report for September, which is expected to be weaker.

U.S. Markets:

Stock futures and Treasury bonds edged lower, as investors awaited more insight on the labor market.

Stocks to Watch

BlackBerry rose 4.2% after announcing it would split into two separate businesses, and planned to spin off its Internet-of-Things business in an initial public offering. The IPO would be targeted for the first half of the next fiscal year, BlackBerry said.

Exxon Mobil declined 0.6% after it said its third-quarter earnings would get a lift from rising crude oil prices. In a regulatory filing, Exxon said it expects a change in liquids prices to boost profit in the period by between $900 million and $1.3 billion.

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Forex:

The dollar edged lower after Wednesday's weaker-than-expected ADP employment survey but these falls are unlikely to last and gains for the euro and sterling against the U.S. currency should be temporary, UniCredit Research said.

"Soft U.S. data, such as the ADP employment survey yesterday, do not seem to be enough to challenge the dollar strength."

The most weaker U.S. data can offer is to temporarily reduce the weakness of other FX majors against the dollar, but they are not enough to spark a long-lasting recovery, at least for EUR/USD and GBP/USD, it added.

Read Swedish Krona Recovery Unlikely Before 2024, SEB Says

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Bonds:

It is encouraging that Bunds are finding support around crucial yield levels, but signs of lasting relief aren't in sight, Commerzbank Research said.

"Bunds found support with 10y yields at the crucial 3% mark, but without downbeat macro data on the agenda today and European Central Bank speak unlikely to support, markets could soon test the yield highs again."

Read European Credit Spreads Could Widen Moderately Ahead of US Labor Data

Energy:

Oil prices inched higher, having fallen sharply on Wednesday as data from the U.S. showed rising gasoline inventories.

This was despite crude oil inventories falling and Saudi reaffirming its commitment to cut supply by 1 million barrels a day until the end of the year.

Metals:

Base metals were lower while gold was flat in early trading, with weak demand from China and the prospects of rate hikes from the Fed keeping prices capped.

"The markets await unemployment rate data on Friday, which will paint a better picture of the current state of the U.S. labor market," Sucden Financial said.

"While the U.S. economy has remained robust in the face of tight monetary policy, we expect further softening in the labor market in the coming months."

Volatility should remain after Chinese investors return from seasonal holidays next week, with downside likely to persist, Sucden added.

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DOW JONES NEWSPLUS

EMEA HEADLINES

Germany's Trade Surplus Fell Less Than Expected in August

Germany's trade surplus fell in August, but by less than expected, as both exports and imports declined.

The country's adjusted trade surplus-representing the difference between exports and imports of goods-decreased to 16.6 billion euros ($17.44 billion) in August, compared with EUR17.7 billion in July, data from the country's statistics office Destatis showed Thursday.

French Industry Slips, Denting Previous Trends

French industrial output slid backward in August from the previous month, suggesting some emerging weakness in what has to-date been a relatively robust economy.

Total output was 0.3% less than in July, data from national statistics body Insee showed Thursday. Economists polled by The Wall Street Journal had expected a slightly steeper fall on month at 0.5%.

Amazon, Microsoft Face UK Competition Probe Over Cloud Dominance

Amazon and Microsoft face an antitrust probe in the U.K. over their cloud dominance after the country's communications regulator alleged that certain market features could limit competition.

The U.K.'s Office of Communications on Thursday said it is concerned about the position of Amazon and Microsoft as leading providers of cloud services, and asked the competition watchdog to further investigate the market. The Competition and Markets Authority launched a probe that is expected to be concluded by April 2025, it said.

Pandora to Scale Investments; Sets New Guidance

Pandora said Thursday it is scaling up investments to accelerate revenue growth and set new financial targets.

The Danish jeweler said the strategy it launched in 2021 is yielding positive results, with investments in the brand, store network, organisation and people all paying off, so it is now initiating the next chapter.

Casino Seals Agreement with Creditors on Financial Restructuring

Casino Guichard-Perrachon said it had entered into a special agreement with a consortium led by Czech billionaire Daniel Kretinsky, banks and other creditors to shore up its capital base, paving the way for an equity injection and a reduction of its debt to the tune of 6.1 billion euros ($6.41 billion).

The embattled French supermarkets owner said Thursday that the lock-up agreement-a financial arrangement that prevents insiders of a company from selling their shares for a specified period of time-marked the next step of a deal in principle that Casino had struck with the Kretinsky-led consortium in July.

GLOBAL NEWS

Rising Interest Rates Mean Deficits Finally Matter

The U.S. has long been the lender of last resort to the world. During the emerging-market panics of the 1990s, the global financial crisis of 2007-09 and the pandemic shutdown of 2020, it was the Treasury's unmatched capacity to borrow that came to the rescue.

Now, the Treasury itself is a source of risk. No, the U.S. isn't about to default or fail to sell enough bonds at its next auction. But the scale and upward trajectory of U.S. borrowing and absence of any political corrective now threaten markets and the economy in ways they haven't for at least a generation.

Where Have the Traders Gone? A $4 Trillion Market Is Stuck in a Rut

Hong Kong's $4 trillion stock market is having liquidity issues.

Trading volumes in the financial hub have slumped over the past three years, reflecting fading investor interest in buying and selling stocks on the city's exchange. Lower trading activity has also contributed to bigger swings in share prices and has become a sticking point for some Hong Kong-listed companies whose stocks barely trade on some days. That has also made it harder for the exchange to attract listings from global companies.

Top Republicans Jump Into Speaker Race After McCarthy Ouster

WASHINGTON-Several prominent Republicans jumped into the race for House speaker and pledged to unite their splintered party, a day after Kevin McCarthy was ousted in a vote orchestrated by hard-line conservatives, setting up a crowded race for the gavel.

House Majority Leader Steve Scalise, the No. 2 House Republican, announced his candidacy, as did Ohio Rep. Jim Jordan, chairman of the House Judiciary Committee and a founding member of the conservative House Freedom Caucus. A third member, Oklahoma Rep. Kevin Hern, told the Texas delegation that he planned to run as well as he laid the groundwork for a campaign.

Russia Withdraws Black Sea Fleet Vessels From Crimea Base After Ukrainian Attacks

Russia has withdrawn the bulk of its Black Sea Fleet from its main base in occupied Crimea, a potent acknowledgment of how Ukrainian missile and drone strikes are challenging Moscow's hold on the peninsula.

Russia has moved powerful vessels including three attack submarines and two frigates from Sevastopol to other ports in Russia and Crimea that offer better protection, according to Western officials and satellite images verified by naval experts. The Russian Defense Ministry didn't respond to a request for comment.

U.S. Sends Seized Iranian Ammunition to Ukraine

The U.S. sent Ukraine more than a million rounds of seized small-arms ammunition that Iran had sought to ship to fighters it supports in Yemen, the U.S. Central Command said on Wednesday.

The shipment of the 1.1 million 7.62mm rounds took place on Monday and comes as doubts have grown about the U.S.'s ability to continue long-term security assistance for Kyiv.

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

(END) Dow Jones Newswires

10-05-23 0628ET