European Midday Briefing : Stocks Trade Higher As Eurozone Inflation Cools

MARKET WRAPS

Stocks:

European stocks made solid gains on Friday after the eurozone's inflation data came in lower than expected, signalling the European Central Bank might have reached the peak of its current tightening cycle.

Read Eurozone Inflation Cools More Than Expected in September

Investors will focus on U.S. data next, as slowing inflation should ease the risk of interest rates rising any further.

"This [U.S. PCE data] should be supportive for the Federal Reserve being on hold," Danske Bank said, even as rates are expected to stay higher for longer.

Stocks to Watch

Shares in Adidas and Puma rose sharply after Nike reported quarterly results that beat Wall Street expectations. Nike's update for the quarter ended August should benefit its European peers given concerns about the demand backdrop in the U.S. going into the results, Jefferies said. Read more .

Novo Nordisk's management priorities remain focused on scaling supply-chain capacities and growing the pipeline to sustain growth through the 2030s/40s, Citi said. Read more .

U.S. Markets:

Stock futures and Treasury bonds recovered some ground ahead of consumer-spending data and the Fed's preferred inflation gauge.

Stocks to Watch

Nike rose 8% premarket after the company on Thursday reported better-than-expected profits.

Tesla was accused in a federal lawsuit Thursday of subjecting Black employees at its California auto-assembly plant to racial harassment and a hostile work environment. Read more . Shares rose 1.7% premarket.

Follow WSJ markets coverage here

Forex:

The dollar fell on month-end profit taking and as Treasury yields retreated from high levels.

However, the currency's "underlying strength" has not been reversed, with the DXY dollar index still trading around 106, UniCredit Research said.

Friday's eurozone inflation plus U.S. core PCE and personal income data could test whether investor sentiment has become less bullish on the dollar, it said.

Very low eurozone inflation could send EUR/USD lower, especially if U.S. data show price pressures aren't easing sufficiently, the analysts say.

Energy:

Crude oil prices inched higher in early trade, with the recent rally tempered on Thursday over worries that oil had become overbought, according to ING.

"There is likely reluctance amongst participants to push too much higher right now with the market clearly in overbought territory," ING said.

"There is also possible nervousness that OPEC+ and specifically Saudi Arabia could start to ease cuts earlier than scheduled if prices move much higher."

Metals:

Base metals and gold prices rose in early trading as the dollar eased back, but with the greenback remaining strong, BMI said it saw little scope for a strong rise in metal prices in the coming months.

Competition for labor, equipment and raw materials will likely continue lifting construction and operating costs for lithium producers, especially while demand growth for the battery ingredient remain high, Wood Mackenzie said.

"Development and operational risk will also likely increase over time, as lithium is sourced from more complex deposits in higher risk jurisdictions," while "more expensive debt and equity, and higher disruption rates are to be expected." Read more .

Read Rising Mine Costs Seen Contributing to More Inflation-Prone World

DOW JONES NEWSPLUS

EMEA HEADLINES

Commerzbank Shares Rose After Payout Policy Revamp

Shares in Commerzbank rose on Friday after the German lender revamped its payout policy, saying it aims for a return of at least 70% of profit for next year.

At 0741 GMT, the stock traded 8.25% higher at EUR10.52.

Lufthansa, Air France-KLM Express Interest in TAP Air Portugal

Deutsche Lufthansa and Air France-KLM have expressed interest in TAP Air Portugal, after the Portuguese government said it plans to sell a majority stake in its flag carrier.

The government said in a statement on Thursday that the Council of Ministers had approved a decree to sell at least 51% of the company, reserving up to 5% for its employees. Finance Minister Fernando Medina said he was seeking large-scale investors, either alone or in consortia, that would leverage TAP to grow its national hub in Lisbon and bolster capacity at other national airports, including Porto.

UK Economy Growth in 2Q Matches Previous Estimate But 1Q Figures Revised Upward

The U.K. economy grew in the second quarter at the same rate as previously estimated, but upward revisions to the prior quarter's figures indicate the economy could be withstanding some of the pressures from high inflation and a cost-of-living crisis.

Gross domestic product expanded 0.2% from April to June compared with the previous three-month period, the same as in preliminary estimates, but growth in the first quarter was revised up to 0.3% from a previously reported 0.1%, according to data from the Office for National Statistics released Friday.

GLOBAL NEWS

Kevin McCarthy Wins Three, Loses One in Late-Night Spending Votes

WASHINGTON-House Republicans largely succeeded in passing a series of annual spending bills late Thursday night, trying to show that the often fractured conference can stay united on legislation headed into any last-gasp negotiations with Democrats to avert a government shutdown this weekend.

As the clock ticked toward midnight, the House passed the GOP's annual State Department and foreign aid appropriations bill, then the yearlong Defense Department and Homeland Security measures, with only a handful of defections in the three votes. But the final bill of the evening-funding the Agriculture Department-failed, with more than two dozen Republicans joining Democrats in opposition.

Reserve Bank of Australia Set to Extend Rate Pause But Retain Hawkish Hue

SYDNEY-The Reserve Bank of Australia is widely expected to leave its official cash rate on hold for a fourth month at its policy meeting on Tuesday, the first to be presided over by its recently appointed governor, Michele Bullock.

But even as the OCR is again held at 4.10%, the RBA is unlikely to telegraph to financial markets that it is becoming relaxed about the medium-term inflation outlook, according to economists.

Trump Says He Won't Seek to Move Georgia Case to Federal Court

Former President Donald Trump said in a legal filing Thursday he wouldn't seek to move the state racketeering case against him to a federal jurisdiction, a surprise move that would mean his Georgia trial would likely be televised.

Trump and 18 co-defendants were charged last month by Fulton County District Attorney Fani Willis, a Democrat, with operating a "criminal enterprise" to overturn Trump's narrow loss in Georgia during the 2020 presidential election. She charged the 19 defendants with being in violation of the state's racketeering, or RICO, law; some face various other counts.

House Republicans Open Impeachment Inquiry Into Biden

WASHINGTON-With a government shutdown looming, House Republicans held their first hearing in an impeachment inquiry into President Biden, accusing him of lying about family members' business dealings and condoning their trading on the Biden name.

Rep. James Comer (R., Ky.), chairman of the House Oversight Committee, said Biden misled the American people when he said he separated his official duties and his family's business dealings. Comer said the president's family members, particularly his son Hunter Biden, were selling "Joe Biden himself" as they made millions of dollars.

Write to [e-mail]

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

09-29-23 0537ET