Investors Gear For Key U.S. Inflation Data

European stocks advanced on Thursday before a report that's expected to show tame U.S. inflation, which would likely kill the prospect of an interest-rate increase by the Federal Reserve at its next meeting. Read What to Watch in the CPI Report: A Mild Inflation Reading Could Keep Fed on Hold The positive mood in the markets was helped by news that a Chinese state fund raised its stakes in the country's four biggest banks, boosting hopes that Beijing will step up efforts to support the economy. Read Chinese Bank Stocks Gain After State Fund Raises Stakes

Following Ericsson's sales miss, Citi fears Nokia too will miss views, leading the bank to reduce its third-quarter estimates and open a short-term negative catalyst watch on the Finnish company. Citi had expected the radio access network market to return to low growth in 2024, but now forecasts a 3% decline in both 2023 and 2024, driven by a much more muted rebound than previously anticipated in the U.S.

Read Nokia Sales at Risk After Ericsson Miss

U.S. Markets:

Stock futures rose as Treasury yields held near two-week lows ahead of the September CPI inflation report.

Other U.S. economic updates set for release on Thursday include the weekly initial jobless claims report, while Boston Fed President Susan Collins is scheduled to talk about the economic outlook.

Stocks to Watch

Ford was down 1.5% in premarket trading after the UAW union called a strike at the auto maker's Kentucky Truck Plant in Louisville.

With nearly 9,000 workers, the Kentucky plant is Ford's largest in the world. The union said the surprise move marked a "new phase" in its ongoing strike.

Microsoft fell 0.3% after it said it had received a notice from the IRS that it owes $28.9 billion in back taxes, plus interest and fines, covering the period from 2004 to 2013.

Microsoft said SEC that it disagreed with the proposed adjustments, and would "vigorously contest" the IRS request through administrative appeals, and if necessary, in court. Microsoft said a resolution likely would take several years.

Forex:

Sterling was little changed after the latest U.K. GDP data, which was in line with the consensus forecast by economists in a WSJ survey.

"Thursday's reading is unlikely to encourage a change of stance from the Bank of England, with policymakers having recently paused their hiking cycle signalling a high-for-longer stance," Monex Europe said.

Read UK Economy Expanded in August, Driven by Services-Sector Rebound

Bonds:

While U.S. CPI data should underscore that inflation is still noticeably above target, weaker oil, flows and geopolitical risks keep Bunds supported, Commerzbank Research said.

"Falling oil prices, flows and apparently geopolitics keep the long-end supported and could extend into today's session unless these factors were to reverse, which appears unlikely," it added.

Bond curves have flattened from both ends, underscoring that central banks will probably remain restrictive for some time to come.

Bergos said government and corporate bonds with good credit ratings are currently the conservative cornerstones of a multi-asset solution, with the one- to five-year segment giving a very attractive offer.

It said emerging market bonds are a good addition to the mix, while high-yield bonds should be treated with caution.

"Their additional risk is currently not particularly well remunerated and default rates are likely to rise."

Energy:

Oil prices moved higher as the dollar eased back ahead of the U.S. CPI data.

Yet, concerns over a broader conflict in the Middle East have eased slightly after U.S. intelligence indicated Iranian officials were surprised by Hamas's attack, according to analysts.

"The risk premium continues to erode with the conflict largely contained to Israel and Hamas," ING said.

Metals:

Base metals and gold inched higher, helped by a slightly weaker dollar and lower bond yields following the release of Federal Reserve Minutes on Wednesday.

However, ING noted that copper inventories were rising. "LME on-warrant copper stockpiles rose by 8,150 metric tons yesterday to 177,125 tons, the highest since Aug. 25, 2021."

Berenberg said the metals and mining sector is in a holding pattern, with prices looking for direction from Chinese economic support.

"For now we take a neutral/negative stance on base and bulks ex-coal due to weak demand expectations, while we think that the gold price has opportunistic upside if any unexpected slips occur in the U.S. economy or geopolitical risk escalates."

Read Gold Shines as Metal Prices Await Direction From China

EMEA

IEA Warns of Increased Risk to Oil Markets Amid Israel Conflict

The conflict in Israel and rising tensions across the Middle East are raising risks to the global oil market, as demand for crude is set to rise to a record in 2023, according to the International Energy Agency.

In its monthly report, the Paris-based organization said a sharp escalation in geopolitical tensions in the Middle East has put markets on edge. The region accounts for a third of seaborne oil trade.

UK Economy Expanded in August, Driven by Services-Sector Rebound

The U.K. economy rebounded moderately in August, driven exclusively by output in the services sector, evidence that the country has a path to escape a recession despite an uncertain economic backdrop.

Gross domestic product rose 0.2% compared with the previous month, data from the Office for National Statistics showed Thursday, recovering from the downwardly revised 0.6% contraction recorded in July. It matched forecasts from economists polled by The Wall Street Journal.

Publicis Raises Guidance Again After Organic Growth Beats Expectations

Publicis Groupe raised guidance for the second time this year after third-quarter organic net revenue growth beat expectations, saying market-share gains allowed it to offset a challenging economic backdrop.

The Paris-based advertising group said Thursday that it now expects organic net revenue growth to be between 5.5% and 6% this year, against its previous projection of around 5%, which had already been upgraded in July. Organic growth is a closely watched industry metric that refers to the change in net revenue excluding the impacts of acquisitions, asset sales and currency movements.

easyJet Delivers Record Performance Over the Summer; To Reinstate Dividends

easyJet delivered a record financial performance over the summer, allowing for the resumption of dividends and said it expects to report a rise in headline pretax profit for the fourth quarter of fiscal 2023 as demand has remained strong.

The low-cost carrier also said Thursday that booking momentum continuing into fiscal 2024 allows it to set new medium-term targets, which include achieving a pretax profit per seat of around 7 pounds to 10 pounds ($8.62 to $12.31).

Givaudan Continues to Increase Prices After Posting Lower 3Q Sales

Givaudan reported a decline in sales for the third quarter in what it called a challenging environment in some of its markets and segments, and said it continues to implement price increases to offset higher input costs.

The Swiss flavor-and-fragrance company achieved sales of 1.7 billion Swiss francs ($1.88 billion) compared with CHF1.81 billion for the prior-year period, it said on Thursday.

Global

Fed Minutes Show Officials Divided on Future Rate Rise

Federal Reserve officials were split over whether they would need to raise interest rates again this year when they decided last month to hold their benchmark policy rate steady.

"A majority of participants judged that one more increase in the target federal-funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted, " said the minutes from the Fed's Sept. 19-20 policy meeting released Wednesday.

The fear premium in oil from the Hamas attack on Israel already has evaporated

The market has priced out all the fear put into oil's price after the surprise Hamas attack on Israel, which could be a bet that the fighting will not spill over to OPEC member Iran.

In early electronic trade on Thursday, crude CL00 futures inched up to $83.57 per barrel, having risen to nearly $87 on Monday.

Iran Knew Hamas Was Planning Attacks, but Not Timing or Scale, U.S. Says

WASHINGTON-Tehran likely knew Hamas was planning operations against Israel but didn't know the precise timing or scope of the surprise attack the group mounted last week, according to a preliminary unclassified assessment by U.S. intelligence agencies.

The judgment by the American intelligence community represents an initial effort to determine what role Iran might have played in an attack that has sent shock waves through the region.

Republicans Nominate Steve Scalise for House Speaker Over Jim Jordan

WASHINGTON-House Republicans narrowly picked Rep. Steve Scalise as their nominee for speaker only to have a new band of GOP holdouts emerge, putting the party's divisions back on display as it moved toward another unpredictable leadership fight.

In a secret ballot Wednesday, Republicans voted 113-99 to select Scalise of Louisiana, the House majority leader, over Jordan, a fiery Ohio conservative who chairs the Judiciary Committee and is backed by former President Donald Trump.

Israel's Netanyahu Forms Unity Government to Direct War

TEL AVIV-Israeli Prime Minister Benjamin Netanyahu agreed to form a national unity government that includes members of the opposition and former military leaders, a move aimed at reassuring a country still reeling from the deadly attack by Hamas militants that killed 1,200 Israelis.

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10-12-23 0538ET