EMEA Morning Briefing : Stocks Seen Lower at Start of Week

MARKET WRAPS

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Trading update from Anglo American Platinum

Opening Call:

European stock futures declined at the start of the week. Asian benchmarks were mixed as Chinese markets returned from holiday with slight gains; the dollar steadied; oil futures fell while gold rose.

Equities:

Stock futures fell early Monday, retreating from Friday's gains amid weak cues from Asia, as Chinese equities returning from the extended Lunar New Year holidays notched muted gains. Trading may be thin as U.S. markets are closed for a holiday Monday.

Calendar events in focus this week include EU inflation data and more corporate earnings.

Forex:

The dollar weakened against Asian currencies early Monday amid hopes for improved sentiment in China.

With reports that some areas of demand were strong in China during the Lunar New Year holidays, notably tourism and spending, the question is whether sentiment is poised to shift to better footing, said Paul Mackel, global head of forex research at HSBC. This would be timely ahead of China's "Two Sessions" meetings scheduled for early March, where further policy support could be announced, Mackel added.

Bonds:

The last U.S. January inflation print confirms that the last mile of disinflation may prove to be a lot harder than markets expect, and investors should brace for more volatility and a possible move of 10-year Treasury yields back in the 4.25%-4.50% range, said Franklin Templeton's Fixed Income Chief Investment Officer Sonal Desai.

The January CPI has dealt what looks like the final blow to hopes of a March interest-rate cut, she said. The Fed will need to be very patient on monetary easing, and the new equilibrium being trended toward will have markedly higher rates than what markets have been used to in the pre-inflation surge period, Desai added.

Treasurys didn't trade due to a U.S. holiday on Monday.

Energy:

Oil futures fell early Monday after the U.S. benchmark settled at its highest since early November on Friday.

Brent crude oil futures should give up gains in the coming weeks, CBA said. Although Houthi attacks on ships have spurred a decline in oil tanker traffic via the Suez Canal and Red Sea, oil supply has mostly been unaffected given the alternative to re-route trade around Africa, CBA said.

Metals:

Gold edged higher in Asia amid USD weakness. Positioning in the gold market suggests that macro traders are historically under-positioned ahead of a possible Fed rate-cut cycle, TD Securities said. For now, incoming U.S. economic data will probably remain the notable catalyst for a potential short-covering rally in the precious metal, TD added.

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Copper fell in possible position adjustments, but losses are likely limited by hopes for China demand following the end of the Lunar New Year holidays.

Construction activity in China is expected to increase in coming weeks with the seasonal winter lull coming to an end, ANZ said. Stronger consumption will probably face tight supplies, given a series of mine closures late last year, ANZ added.

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Iron ore prices rose on the first trading day in China after the Lunar New Year break. Prices rose on the Singapore Exchange during the holidays, driving Chinese market sentiment to pick up, Baocheng Futures said.

However, profitability of Chinese steel mills remains poor and inventory of finished products has increased significantly during the holidays, as a result of which the momentum for mills to increase production may not be strong, Baocheng said. But a silver lining is that mills' replenishment needs after the holidays may rise.

TODAY'S TOP HEADLINES

How War in Europe Boosts the U.S. Economy

Proponents of support for Ukraine usually invoke U.S. strategic interests or moral obligations. Lately, they are making a more calculating case: It is good for the economy.

In the two years since Russia invaded Ukraine, the U.S. defense industry has experienced a boom in orders for weapons and munitions. Business is coming from European allies trying to build out their military capabilities as well as from the Pentagon, which is both buying new equipment from defense manufacturers and replenishing military stocks depleted by deliveries to Ukraine.

Fed's Daly says patience is needed to finish the job on inflation

The Federal Reserve should take its time before cutting interest rates, given the risks that some of the factors that have been pushing down inflation might peter out or even reverse, San Francisco Fed President Mary Daly said on Friday.

"We will need to resist the temptation to act quickly when patience is needed, and be prepared to respond agilely as the economy evolves," Daly said in a speech at the National Association for Business Economics conference in Washington, D.C.

EU regulators reportedly will fine Apple more than $500 million in antitrust probe

European regulators are reportedly set to slap Apple Inc. with a fine of more than $500 million, saying the tech giant unfairly hindered its music-streaming rivals.

The Financial Times and Bloomberg News reported Sunday that European Commission antitrust regulators are preparing to impose a roughly $500 million euro ($539 million) fine against Apple AAPL, after finding that it created an anticompetitive environment by failing to inform iPhone users that cheaper, alternative music-streaming apps were available outside its App Store.

The Man Who Tamed the World's Most Troubled Bank

Christian Sewing barreled down a German autobahn to meet clients in a former milltown when a friend called. Credit traders had zeroed in on Deutsche Bank, the lender Sewing had nursed back to health after he took over five years earlier.

It was March 2023 and markets were looking for the next victim after Credit Suisse and two U.S. regional banks collapsed. The cost to insure Deutsche Bank's debt surged to its highest level since the pandemic.

Novartis, Roche's Food Allergies Treatment Xolair Gets FDA Approval

Novartis and Roche Holding said the U.S. Food and Drug Administration approved their Xolair treatment to reduce allergic reactions following the exposure to one or more foods.

The pharmaceutical companies on Friday said Xolair has been approved for patients aged one year and older with the IgE-mediated food allergy.

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Expected Major Events for Monday

00:01/UK: Feb Rightmove House Price Index

06:00/FIN: Jan CPI

07:00/SWE: Jan CPI

08:00/SPN: Dec Trade Balance

11:00/POR: Jan PPI

All times in GMT. Powered by Onclusive and Dow Jones.

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

(END) Dow Jones Newswires

02-19-24 0016ET