MARKET WRAPS
Stocks:
European stocks gave up early gains on Tuesday to trade lower once again on some mixed corporate news.
Barclays was a big faller on the FTSE 100 after the bank said profit dropped 16% in the three months through September , reflecting a persistent weakness in investment banking and competitive pressures in retail banking.
Barclays said in a presentation to investors that it was "evaluating material structural cost actions to help drive future returns." Executives said they would outline those steps when it reported annual results in February.
Elsewhere, there were modest gains for miners and the oil majors as commodity prices rose.
U.S. Markets:
Earnings season heats up again on Tuesday, with results due early on from Visa and Coca-Cola among others. Microsoft and Google parent Alphabet will report after the market close.
Meantime, stock futures edged higher and Treasury yields held broadly steady, with the 10-year yield at about 4.85%, after Monday's big swings.
Forex:
The euro could extend gains against a weak dollar in the near term, Danske Bank Research said, as the dollar dropped to one-month lows due to falling Treasury yields.
"We continue to prefer the topside in EUR/USD in the near-term, as we anticipate U.S. economic data starting to disappoint," Danske Bank Research said, adding that in this regard, it is worth keeping an eye on potential weakness in the U.S. service sector.
Preliminary PMI data are due from Europe and the U.S. on Tuesday and will provide direction for both currencies.
Bonds:
Uncertainty around eurozone fiscal reform, rising yield curves and wider eurozone sovereign spreads make any major decision at the European Central Bank's upcoming meeting unlikely , Pimco said. It doesn't expect the ECB to make changes to its current bond portfolio reinvestment guidance.
J O Hambro Capital Management said bond yields are expected to decline over the next six months as high borrowing costs weigh on the economy.
"The usual economic downturns will be exacerbated by current bond yields, the highly inverted yield curve and, in particular, the rise in real yields. We need to be aware that the economy can collapse under such pressures, similar to what we saw in March with the collapse of the regional banking sector in the U.S."
J O Hambro Capital Management expects that, apart from the headwinds from issuance, bond yields will tend to fall over the next six months.
Commerzbank Research said that "if higher yields lead to higher yields, we have a problem, especially if this pattern, which we saw in the sovereign debt crisis, applies to Bunds and Treasuries."
Energy:
Oil prices were slightly firmer, as worries lingered over the current situation in Israel and Gaza.
Futures fell almost 3% on Monday, as Israel looked to hold off its ground invasion of the Palestinian territory.
"Although Israeli forces continued airstrikes and raids on Gaza on Monday, the delay of the broader invasion was read positively by the market," Deutsche Bank said.
Elsewhere, the IEA in its latest World Energy Outlook said it expected fossil-fuels demand to peak before the end of the decade , with increasing solar power helping to meet demand.
Metals:
Base metal prices inched higher on a weakening dollar, while gold traded flat.
"Macro money flows are choppy and volatile ahead of important dollar drivers later this week," Peak Trading Research said.
It added that the number-one change in macro mood has been a falling dollar, with investors looking elsewhere amid a rising U.S. deficit and gridlock over a new speaker of the house.
Peak said markets will now be looking to Thursday, with U.S. GDP data and the ECB policy decision due.
Citi said iron-ore shipments from countries other than the top three exporters --Australia, Brazil and South Africa--fell below 12% of Chinese demand in September as momentum in iron-ore prices stalled.
It highlighted supplies from so-called nontraditional sources that include India and Peru as being very sensitive to prices, given those places account for the industry's highest-cost ore.
DOW JONES NEWSPLUS
EMEA HEADLINES
Barclays Trims 2023 UK Net Interest Margin View After 3Q Income Missed Expectations
Barclays lowered its U.K. net interest margin guidance for 2023 and posted lower-than-expected third-quarter income growth, with income at its corporate and investment bank missing expectations.
The British bank on Tuesday said its now expects a net interest margin for Barclays UK of between 3.05% and 3.10% for the year. It had lowered its 2023 margin guidance to no more than 3.20% at its half-year results in July with a view of around 3.15%.
Eurozone Activity Slumped in October, PMIs Show
Economic activity unexpectedly contracted at a faster rate in the eurozone in October as output declined steeply and demand faltered, data from a purchasing managers' survey showed Tuesday.
The HCOB Flash Eurozone Composite Output Index-a gauge of activity in the manufacturing and services sectors-fell to 46.5 from 47.2 in September, hitting its lowest level in just under three years.
Novartis Raises Earnings Guidance After Key Drugs Boost Profit, Sales
Novartis raised its full-year earnings guidance for the third time this year after it reported higher net profit and sales for the third quarter, boosted by strong sales of key drugs.
The Swiss pharmaceutical giant said Tuesday that it now expects core operating profit to grow this year by a percentage in the mid to high teens range. It had previously anticipated a growth rate from low double percentage digits to mid teens excluding Sandoz, the generic-drugs unit that was spun off earlier this month.
UniCredit Raises 2023 Guidance as Net Interest Income Drives 3Q Earnings
UniCredit reported a rise in earnings, exceeding analyst expectations, as its third-quarter was again driven by net interest income leading it to raise its 2023 guidance.
The Italian bank said on Tuesday that it made 2.32 billion euros ($2.48 billion) in net profit for the period, compared with EUR1.71 billion a year prior, on revenue that grew 24% on year to EUR5.97 billion.
German Consumer Confidence for November Sinks on Weaker Income Prospects
Consumer confidence in Germany weakened for a third consecutive month in data for November, with respondents turning more to saving than spending as income expectations took a hit.
Germany's forward-looking consumer-sentiment index forecasts confidence to fall to minus 28.1 in November, from minus 26.7 in October, according to data published Tuesday by market-research group GfK and the Nuremberg Institute for Market Decisions.
UK Jobless Rate Held Steady in Three Months to August
The U.K.'s jobless rate was unchanged in the three months to August, a further signal that the country's robust labor market could continue to cause problems for the Bank of England, despite some indications of loosening, according to data published Tuesday.
The unemployment rate, measured with a new methodology, stood at 4.2% in the period, according to data from the Office for National Statistics, equal to the figure in the May-to-July period. A poll of economists conducted by The Wall Street Journal under the previous method of data collection forecast 4.3%.
Hermès records industry-beating growth as sales rise 16%
Luxury goods seller Hermès International on Tuesday said its sales continued to grow in the third quarter, on the back of "sustained momentum in Asia and in the Americas," despite fears around a slowdown in the wider luxury sector.
The French fashion house reported a 16% uptick in third quarter sales to EUR3.36 billion ($3.58 billion). A selection of five analysts polled by FactSet had predicted the company would generate sales worth EUR3.31 billion.
Puma Confirms 2023 Guidance; Currency Effects Hit 3Q Earnings
Puma confirmed its 2023 guidance despite a fall in third-quarter earnings, which were dampened by currency effects.
The German sporting-goods company said on Tuesday that it made 131.7 million euros ($140.5 million) in net profit for the period, compared with EUR146.4 million a year ago, on sales that fell 1.8% to EUR2.31 billion.
Orange Backs Guidance After Revenue, Earnings Match Views
Orange confirmed its 2023 outlook after it reported revenue and earnings for the third quarter that rose slightly and were broadly in line with consensus expectations.
The French telecommunications group said Tuesday that revenue for the quarter was 11.00 billion euros ($11.74 billion), up 1.6% on year. Growth in the company's retail operations offset a decline in wholesale revenue, Orange said.
Fossil-Fuel Demand Likely to Peak Before 2030 as Renewable Uptake Rises, IEA Says
Global demand for fossil fuels is likely to peak before the end of the decade, with mounting shocks to the global energy system caused by geopolitical uncertainty hastening the move to renewable energy, according to the International Energy Agency.
The IEA, a Paris-based group of some of the world's biggest energy users, said demand for coal, oil and natural gas should all peak this decade, with increasing use of electric vehicles and renewable energy offsetting demand for carbon-based fuel sources.
Green Steel Is Coming. Europe Is Leading the Charge Thanks to New Carbon Taxes.
Steel is one the world's most polluting industries, but Europe is leaping forward in making the metal green.
By 2030, the continent is expected to be home to nearly 50 green and low-carbon steel projects, according to the Leadership Group for Industry Transition's compilation of projects. In comparison, the U.S. only has two such projects.
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10-24-23 0534ET
