European Midday Briefing : Weak German Data Drags on Stocks

MARKET WRAPS

Stocks:

European stocks were lower again on Thursday following another set of disappointing data from Germany.

Germany's industrial production fell more than expected in July, further damping hopes of a manufacturing rebound in the country as global demand for its goods cools. Output declined 0.8% compared with the previous month, missing forecasts of a 0.2% fall.

Read Feeble German Economy Faces Fresh Contraction as Factories Falter

The data will do little to change the mood that the risk of recession is high again, ING said.

Retail sales, exports and now also industrial production all dropped in July, giving the German economy a weak start to the third quarter, it added.

Also dragging on sentiment was softer-than-expected trade data from China.

"There's negative momentum across equities globally with Asian markets in the red overnight and the tech-heavy Nasdaq stateside closing down for the third straight session," Interactive Investor said.

Read China Exports Fall for Fourth Month as Once-Reliable Growth Engine Sputters

Stocks to Watch

Airbus delivered 52 aircraft to customers in August and 433 so far this year, a result that puts the company in a strong position to hit its full-year target of 720 deliveries, Citi said. Read more .

Read Airbus's August Aircraft Deliveries Are Ahead of Deutsche Bank Forecasts

Read Airbus's August Aircraft Deliveries Were Solid

U.S. Markets:

Stock futures fell as investors worried over the prospects that rising inflation will force the Fed to remain restrictive with its monetary policy.

Economic data set for release includes weekly jobless claims, along with a revised look at productivity.

Stocks to Watch

Apple, Nvidia, and Tesla all slipped more than 1% in early premarket trading, suggesting Wednesday's selloff could extend into a new session.

GameStop was rising 5.6% after it reported a narrower-than-expected adjusted second-quarter loss.

Smurfit Kappa confirmed it was in talks with WestRock over a potential merger. WSJ had reported that Smurfit Kappa was nearing a deal to acquire WestRock in a move that would create a global paper and packaging company worth about $20 billion. WestRock shares rose 9.9%. Read more .

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Forex:

The EUR/USD remained weak around 1.07, given poor economic data in the eurozone and despite the possibility of an interest-rate rise by the ECB next Thursday, UniCredit Research said.

The weakness of the single currency prevails "despite efforts by different ECB members to convince investors that they are currently underestimating the possibility of another rate hike by the ECB next week."

Read EUR/USD in Need of Patience Before Central Banks Spark New Triggers

Read Unchanged ECB Rates Could Hurt Euro, Says SEB Research

Sterling could weaken on raised expectations of a BOE interest-rate pause, coming after Wednesday's comments by the central bank which indicated that interest rates are near the peak, ING said.

"Markets are now for the first time starting to cast some doubts about whether the BOE will hike rates at all at the Sept. 21 meeting, with pricing having dropped below 20 basis points after Wednesday's Parliament testimony," ING added.

"EUR/GBP upside potential remains decent in our view."

Read Sterling Falls Vs Dollar After Strong US Services Data, BOE Governor Comments

Bonds:

Eurozone government bond yields were barely changed ahead of several ECB members' scheduled speeches before the blackout period starts.

"Today's line-up of ECB speakers is very decent with Wunsch, Knot, Holzmann, Elderson and Villeroy scheduled to make remarks ahead of the blackout-period," Commerzbank Research said.

"A rather hawkish undertone thus seems likely" which could result in money market forwards pricing even higher odds for an interest-rate rise next week, it added.

Money markets price a 35% probability of a rate rise and 65% that the ECB will leave rates unchanged next week, according to Refinitiv.

Energy:

Oil prices edged lower, halting a run of gains, as traders awaited U.S. inventory data.

Department of Energy data on changes in U.S. stocks is due later Thursday, offering investors a clue on crude oil demand.

Traders were also mulling Chinese trade data, which showed imports and exports both fell in August, though the declines were less than forecasted.

Metals:

Base metals and gold prices were falling in early trading, as concerns over China's economy continued to hurt sentiment.

Data from China showed exports in August had fallen for a fourth month in a row, showcasing the country's current economic malaise.

However, ANZ highlighted a bright spot within commodities, that a number of imports rose on month. Copper ore, for example, rose by more than 36%, while iron ore also was up more than 13%.

"With inventories relatively low, the prospects of further stimulus measures triggered restocking across commodities, which should keep demand strong in the short term," ANZ said.

DOW JONES NEWSPLUS

EMEA HEADLINES

Eurozone Grew Marginally in 2Q, Lagging Earlier Estimates

The eurozone economy barely grew in the second quarter of the year, coming short of prior estimates as domestic consumption stagnated and exports weakened.

The bloc's gross domestic product expanded just 0.1% from April to June, final data from the European Union's statistics agency Eurostat showed Thursday. Previous official estimates had put growth at 0.3%, and the rate had been expected to remain at that level, according to economists polled by The Wall Street Journal.

Paper Companies Near Big Merger Deal

WestRock is nearing a deal to merge with Europe's Smurfit Kappa in a move that would create a global paper and packaging powerhouse worth some $20 billion, according to people familiar with the matter.

After the WSJ published its report, Smurfit Kappa Group in a statement confirmed that it is in talks with WestRock over a potential merger.

The Middle East Becomes the World's ATM

Five years ago, Saudi officials watched a wave of American finance executives pull out of a free investment confab in Riyadh after the murder of a dissident journalist made the kingdom a toxic place to do business.

This year, the conference, nicknamed "Davos in the Desert," is expecting so much demand it is charging executives $15,000 a person.

Ukraine Loses U.K.-Supplied Tank in Push for Counteroffensive Breakthrough

Russian forces struck and immobilized a British tank supplied to Ukrainian forces for the first time as Kyiv pushes some of its best equipment into a salient in the southeast in search of a breakthrough.

The loss of the Challenger 2 tank, confirmed by British officials, comes as Ukraine is seeking to expand cracks in the main Russian defensive line. But multilayered defenses remain a major challenge for Ukraine's counteroffensive momentum.

GLOBAL NEWS

Why Higher Unemployment Is Good News Now

Very rarely should you celebrate rising unemployment. This is one of those times.

Friday's news that the unemployment rate rose to 3.8% in August, an 18-month high, is one of several recent signs that the labor market has softened significantly. This is a necessary stage in the Federal Reserve's campaign to bring inflation back down to 2%, and keep it there. It isn't enough to ensure we avoid a recession, but it helps.

U.S., Allies Should Reduce Dependence on China, Speaker McCarthy Says

TOKYO-House Speaker Kevin McCarthy (R., Calif.) said China's Communist Party is to blame for businesses leaving the country and called on the U.S. to work with allies to reduce dependence on Chinese products.

"You watch the attack on the private sector, the number of businesses that are leaving there," McCarthy said of China. "It's based internally on what they decided. They shifted their policies, they shifted their beliefs," he said, by "allowing the Communist Party to control more."

Trump's 2024 Eligibility Ignites Debate-and Litigation

Since the day Donald Trump supporters rampaged through the Capitol in 2021, legal scholars have pondered whether a post-Civil War clause in the Constitution that disqualifies insurrectionists from public office can prevent him from ever reclaiming the presidency.

As polls show Trump surging toward another Republican presidential nomination, the question of his eligibility under the 14th Amendment is no longer merely academic.

Texas Ordered to Remove Buoy Barrier From Rio Grande

Texas must remove the 1,000-foot floating border barrier it installed in the middle of the Rio Grande, a federal judge ruled on Wednesday.

Judge David A. Ezra, of the Western District of Texas, forbade Texas from lengthening the barrier-made up of giant orange buoys anchored by concrete blocks-and ordered the state to remove the existing barrier by Sept. 15.

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

(END) Dow Jones Newswires

09-07-23 0554ET