EMEA Morning Briefing : Key Inflation Data in Focus

MARKET WRAPS

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EU flash estimate GDP, flash estimate employment EU and euro area; IEA Oil Market Report; Germany ZEW Indicator of Economic Sentiment; UK monthly unemployment figures; trading updates from Vodafone Group, Imperial Brands, Land Securities Group, DCC, Babcock International Group, Informa, ConvaTec Group, SEB, Compass Group, Sibanye-Stillwater, RWE, MFE-MediaForEurope

Opening Call:

European stock futures were little changed as markets await the U.S. CPI print later in the day. Asian stocks were largely higher; the dollar and Treasurys steadied; while oil futures rose and gold edged lower.

Equities:

Stock futures wavered early Tuesday as traders brace for a slew of economic data releases this week, including U.S. CPI today and U.K. inflation on Wednesday.

"We obviously have a big [U.S.] inflation data print [today] and think markets will generally get what they're looking for, which is a slow decline in headline inflation," said John Luke Tyner, a portfolio manager at Aptus Capital Advisors.

"But there's still a tug of war playing out, with markets getting ahead of the Fed and betting on inflation coming down faster than expected and on rate cuts occurring sooner rather than later."

Forex:

Weaker-than-expected U.S. CPI and retail sales could cause USD to weaken and support buying of Asian currencies, SMBC said. Some U.S. indicators have already suggested that the country's economic growth has been slowing, SMBC added.

Bonds:

Treasury yields were little changed in Asia after finishing mixed Monday as investors prepared for data on U.S. inflation in the next few days.

"The process of consolidation continues in the U.S. rates market as investors await Tuesday's CPI release," said BMO Capital Markets. "CPI is unlikely to shift the Fed's thinking regarding another pause in December, still the most likely outcome."

"However, any upside surprise on the inflation front would, at a minimum, push rate cut forecasts further into 2024. We maintain that the market is discounting Powell's hawkish resolve and the [FOMC]'s willingness to maintain a restrictive policy stance even as the real economy shows increasing evidence of slowing to the point of contraction," BMO said.

Energy:

Oil futures ticked higher in Asia after OPEC released its monthly market report for November. Oil market fundamentals remain strong and negative sentiment around demand is exaggerated, the group said.

OPEC also raised its forecast for global oil demand growth in 2023 to 2.46 million barrels a day, up 20,000 barrels from last month's estimate, Saxo Markets said. The report also noted that China's crude oil imports are very healthy and Asian refining margins are strong, Saxo added.

Metals:

Gold fell slightly early Tuesday ahead of U.S. CPI data. Along with the precious metal, Treasury yields and the dollar were also flat as traders await the inflation report to gauge the Fed's next move, Oanda said.

If the inflation data disappoints, it may give the precious metal another push above the $2,000 level, which it has repeatedly failed to break significantly, Oanda said.

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Copper was steady in the morning Asian session. Traders are wary ahead of U.S. inflation data, which could determine the Fed's next move on rates, ANZ said.

The Asia Copper Week being held in Shanghai is also in focus, where talk has been about China's rapid expansion of its copper industry, amid record high production this year, which is driving strong appetite for copper ore overseas, ANZ added.

TODAY'S TOP HEADLINES

What to Watch in the CPI Report: Did Inflation Heat Up or Cool Down Last Month?

Americans paid less for gasoline last month, helping keep inflation in check, but underlying price pressures remained steady in October, analysts estimate. Such an outcome would leave inflation elevated and reflect why the Federal Reserve isn't declaring an end to its historic campaign of interest-rate increases.

Wall Street is bracing for inflation data that includes problematic undertones for the Fed

Just as consumers' expectations for inflation are moving higher, Wall Street firms are now preparing for the likelihood that Tuesday's consumer price index for October will reflect underlying problems for the Federal Reserve.

The reason is that core readings, which kick out volatile food and energy prices to present a purer read on inflation trends, aren't expected to have budged. Barclays UK:BARC, BNP Paribas FR:BNP, and BofA Securities BAC are forecasting a year-over-year core inflation rate of 4.2% as of last month - a touch above economists' estimates - after factoring in a monthly reading that either stayed at 0.3% or nudged up to 0.4%.

Analysts see 40% chance of government shutdown this weekend, as House plans Tuesday vote

A divided Washington could deliver a partial government shutdown after midnight Friday, but for now analysts are optimistic that the Republican-run House and Democratic-controlled Senate will be able to agree on a stopgap funding measure that prevents closures.

This week's negotiations among U.S. lawmakers are unfolding after ratings agency Moody's cut its outlook for the nation's credit rating to negative from stable at the end of last week, citing in part its doubts about the federal government's ability implement effective fiscal policies.

Teck Resources Nears Deal to Sell Coal Business to Glencore

Canadian miner Teck Resources is in advanced talks to sell its coal assets to mining and trading giant Glencore in a deal that would cap a lengthy saga and be one of the biggest in mining this year.

The deal would value the business at close to $10 billion and could be announced as soon as this week, assuming the talks don't fall apart, according to people familiar with the matter.

New Diageo Boss Bets She Can Make the World Love Tequila

LONDON-Shortly after taking the helm at the world's largest spirits maker, Diageo CEO Debra Crew made a bold proclamation: She plans to take tequila global.

Following a surge in popularity in the U.S., tequila is on track to become the country's largest spirit this year, an extraordinary milestone for a drink once associated mainly with sugary margaritas and eye-watering shots.

Chrysler Parent Stellantis Prepares to Offer Buyouts to U.S. Salaried Workers

Jeep maker Stellantis is preparing to offer buyouts to roughly half of its U.S. white-collar employees, as the company cuts expenses amid an expensive transition to electric vehicles and potentially higher labor costs.

Stellantis Chief Operating Officer Mark Stewart said in an all-hands meeting Monday that the company planned to offer voluntary separation packages to nonunion employees with at least five years of experience, according to people familiar with the matter.

ICBC Hackers Used Methods Previously Flagged by U.S. Authorities

The hackers who infiltrated the New York arm of the Industrial and Commercial Bank of China and disrupted trading in the U.S. Treasury market appeared to exploit three vulnerabilities that had been flagged by U.S. officials earlier this year.

In an email sent to financial-services executives and trade groups Monday that was viewed by The Wall Street Journal, Treasury officials said that the ICBC attack stemmed from Lockbit 3.0 ransomware and two tactics that target users of services managed by Citrix, a cloud-computing company.

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Expected Major Events for Tuesday

05:30/NOR: 4Q Consumer Confidence

06:00/FIN: Sep Retail sales

06:00/FIN: Oct CPI

07:00/ROM: Sep Industrial production

07:00/SWE: Oct CPI

07:00/UK: Oct UK monthly unemployment figures

07:00/ROM: 3Q Evolution of GDP (estimated data)

07:30/SWI: Oct Import Price Index

07:30/SWI: Oct PPI

07:30/HUN: 3Q Preliminary GDP

08:00/SPN: Oct CPI

08:00/SVK: 3Q Flash estimate of GDP

08:00/SVK: 3Q Flash estimate of total employment

08:30/NED: Sep International trade

08:30/NED: 3Q GDP - 1st estimate

08:30/NED: Sep Consumer Spending

09:00/POL: 3Q Flash estimate GDP

09:00/FRA: Nov IEA Oil Market Report

09:00/BUL: 3Q Flash Estimate GDP

10:00/GER: Nov ZEW Indicator of Economic Sentiment

10:00/CYP: 3Q GDP (Flash Estimate)

10:00/EU: 3Q Flash Estimate GDP

10:00/EU: 3Q Flash estimate employment EU and euro area

11:00/FRA: Sep OECD Harmonised Unemployment Rates

15:59/UKR: Sep Trade

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

(END) Dow Jones Newswires

11-14-23 0017ET