MARKET WRAPS
Stocks:
European stocks traded higher on Monday on improved investor sentiment after strong CPI data from China.
"The CPI reading, which emerged over the weekend, implies an improvement in the commodities demand picture and in turn provides a boost to the resources sector," AJ Bell said.
Read Chinese Consumer Inflation Returns in Reprieve for Economy
The improved sentiment comes at the start of a busy week with the European Central Bank meeting and important U.S. data scheduled.
Stocks to Watch
Europe's luxury stocks will see demand affected by a deteriorating macroeconomic outlook in the region and weakness in China, Liberum said, adding that the sector's earnings outlook for 2024 in Europe is also deteriorating as consumer sentiment appears to be stalling and risks possibly breaking down. Read more .
Sentiment around HSBC seems intertwined with recent share price moves despite convictions of above consensus earnings and returns, Jefferies said following investor meetings with the bank's Asia CFO who conveyed a message of consistency around delivery on the "greater than $35bn" of net interest income for 2023. Read more .
Legrand's end markets have an increased likelihood of shrinking in 2024, especially its residential and non-residential markets in Europe and its light commercial sector in the U.S., Citi said, downgrading its rating to sell and cutting their target price to EUR82. Read more .
U.S. Markets:
Stock futures and Treasury bond yields rose as investors were looking ahead to the next release of the consumer-price index on Wednesday, which could help them gauge the Fed's next steps in its campaign to tame inflation.
Coming up, Oracle is due to post earnings after markets close.
Stocks to Watch
Alphabet rose 0.5% as the DOJ finally will bring its three-year-old antitrust case against Google to trial beginning Tuesday.
Apple was up 0.8% in premarket trading, a day before its annual fall launch event, dubbed "Wonderlust" this year.
Tesla rose 5.7% after shares were upgraded to Buy from Hold by Morgan Stanley, who also boosted the stock's price target to $400 a share, up from $250.
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Forex:
This week could be make or break for the euro, UBS Global Wealth Management said.
"We don't think the euro should slip lower from here, but that view requires a clear message from the European Central Bank that fighting inflation remains the top priority."
UBS GWM doesn't see any sign of financial stress either that would prevent the ECB from tightening policy further. "A hike in September or October would support the euro."
The current focus for EUR/USD has returned to the relative difference between the U.S and European economies, thus ruling out a near- and medium-term scenario of a decline in the dollar index, https://urldefense.com/v3/__http://XS.com__;!!F0Stn7g!HEyYPrZ9m5BUNDDuejsOcVzXBhACZs3WQmLEmQdHdlZsRpr5RW10Rj1Lr1MMdmGp_klx4o1WsMLD2AKw-SW_dVhqTUU1-_iBkgfal8sMfC8$ said.
Recent data on the services sector and jobless claims suggest that while "the U.S. economy continues to demonstrate its strength, the European economy appears to be in a relatively stable state," it said.
Central banks' assessment of the economy will be key ahead of rate decisions by the ECB and the Fed.
Read Neither an ECB Rate Raise, Nor a Pause Should Surprise
Read ECB to Pause and Leave Door Open for Another Rate Raise, Jefferies Says
Bonds:
Eurozone government bond yields rose with the knock-on effect from Japan which is clearly visible this morning, Commerzbank Research said, referring to a hint at the end of negative interest rates policy in the country.
The Bank of Japan's governer said in a local daily Yomiuri that ending negative interest rates would be an option if wage and consumer price gains look sustainable.
"Near-term, prospects of higher Japanese government bond yields have the potential to revive the bearish Eurozone government bond steepening from last week," Commerzbank said.
Read Eurozone Government Bond Redemptions to Outpace Supply This Week
Energy:
Oil prices edged at the start of the week, but support from shrinking supply from Saudi Arabia and Russia has helped to contain losses.
Prices gained for the second week in a row last week on the back of supply cuts, ANZ said.
"Tightness in the physical market is also providing some support," it said, adding that U.S. inventories have fallen to their lowest level since December.
"Chinese demand is also strong, with imports rebounding strongly in August."
Metals:
Base metals and gold prices rose on a falling dollar and uncertain macroeconomic outlook, as investors looked to this week's key inflation data points, with US consumer and producer price indexes due.
"Wednesday's CPI Inflation data is September's #1 non-fundamental data point and will move our commodity markets via Fed policy expectations and the dollar," Peak Trading Research said.
Bond markets are pricing a 50% probability of another rate hike from the Federal Reserve in 2023, with this week's data likely to shift those odds, Peak added.
Read Miners Might Get a Seasonal Boost Heading Into Year-End
DOW JONES NEWSPLUS
EMEA HEADLINES
Eurozone Braced for Weaker Growth in 2023, 2024, EU Forecasts Say
The eurozone is likely to grow at a slower pace than previously expected this year and next amid weak domestic consumption and flagging global demand, with the powerhouse German economy notably set to shrink, according to fresh figures published by the European Union executive Monday.
The 20-member bloc should book growth of 0.8% this year and 1.3% in 2024, revised down from previous estimates in May of 1.1% and 1.6%, respectively, according to the European Commission.
Covestro Confirms Takeover Talks With Abu Dhabi National Oil Co. - Update
German chemicals manufacturer Covestro said it had opted to enter into talks over a potential takeover by Abu Dhabi National Oil Co., coming on the record after weeks of speculation that the two companies were negotiating a deal.
Covestro made the announcement late Friday, hours after Bloomberg reported that its supervisory board was meeting to discuss the possibility of entering into formal talks with the state-owned Emirati oil giant.
Brookfield, Societe Generale Join Forces to Launch $10.70 Billion Private-Debt Fund
Brookfield Asset Management is partnering with France's Societe Generale to set up a private-debt fund worth 10 billion euros ($10.70 billion) over the next four years, a move the companies say will significantly increase their financing footprint while addressing growing demand for private debt.
The French bank said Monday that the fund would initially launch with EUR2.5 billion targeting the power, renewables, data, midstream and transportation sectors. The fund is also expected to help Brookfield and Societe Generale meet the needs of insurance companies with investment-grade products based on their ratings and duration requirements.
GLOBAL NEWS
Earnings Estimates Are Rising, a Welcome Sign for 2023 Market Rally
Wall Street expects corporate earnings to rebound after three quarters of year-over-year declines, a development that could put the stock market's faltering rally on firmer footing.
When the next reporting season kicks off in earnest in October, analysts estimate that companies in the S&P 500 will show that profits inched up 0.5%, helping deliver a 1.2% increase for 2023, according to FactSet.
Japan Financial Stocks Jump as 10-Year Govt Bond Yield Hits 9-Year High
Japanese financial stocks rose sharply Monday morning as the 10-year government bond yield hit a nine-year high after the Bank of Japan's governor said in an interview with local daily Yomiuri that ending negative interest rates would be an option if wage and consumer price gains look sustainable.
Sumitomo Mitsui Financial Group shares were recently 4.2% higher, Dai-ichi Life Holdings shares were up 4.3% and Resona Holdings shares were 5.3% higher. The benchmark Nikkei Stock Average was recently down 0.3% at 32514.55.
Chinese Banks' August Loan Issuance Beat Expectations
Chinese banks issued a higher-than-expected amount of new loans in August, as Beijing tapped the nation's financial institutions to step up support for the cooling economy.
New yuan loans extended by banks in China reached 1.36 trillion yuan ($185.20 billion) in August, up from CNY345.9 billion in July, the People's Bank of China said Monday.
Hard-Line Conservatives Talk Tough, and Government Shutdown Looms
WASHINGTON-House dissidents say they're serious this time.
After putting Kevin McCarthy through 15 ballots to win the House speakership, a group of hard-line Republicans has wrestled with how aggressively to respond to what they call his failure to keep the promises he made. The dissidents shut down the floor in June to protest a debt-ceiling deal with President Biden. In July, the faction blocked a floor vote on one of 12 annual spending bills, complaining that GOP leaders had relied on gimmicks to reach McCarthy's commitment to cut spending to fiscal 2022 levels.
Trump's Truth Social Challenge Now Is to Get a Deal Done
Donald Trump's media company is pushing to complete a lucrative deal to go public, but it faces pressure from a slowdown in growth and the former president's return to mainstream social media.
Truth Social's parent company is trying to go public through a merger with a special-purpose acquisition company. The transaction could value Trump Media & Technology Group at more than $1 billion and generate a windfall of hundreds of millions of dollars. Trump would own about half the public company as its chairman.
Xi's Tight Control Hampers Stronger Response to China's Slowdown
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