European Midday Briefing : Investors Wary on Eve of U.S Election

MARKET WRAPS

Stocks:

European stocks were little changed in a cautious opening session on Monday as investors held fire ahead of the U.S. election.

The tight contest and potentially protracted fallout will dominate the agenda in the coming days, even with potential interest-rate cuts also expected by both the Federal Reserve and the Bank of England.

Economic Insight

Sweden's Riksbank is likely to cut its key policy rate by 50 basis points to 2.75% on Thursday, with inflation under control and policymakers keen to quickly support the country's fragile economy, Nordea said.

DNB Markets said the central bank opened up the possibility of a 50 basis-point cut before year-end and markets have largely discounted the cut happening at this week's meeting.

U.S. Markets:

Stock futures were subdued as investors exercised caution at the start of a week beset by uncertainty.

Earnings expected from the likes of CostCo and AirBnB in the coming days are unlikely to gain much traction with the presidential election and rates decision taking precedence.

Forex:

The dollar fell as the presidential election and the Fed loom large.

"[The] U.S. dollar shrugs off poor nonfarm payrolls, but suffers from election polls," Commerzbank Research said.

A well-respected poll put Kamala Harris ahead of Donald Trump in Iowa.

Friday's jobs data were well below forecasts, hit by one-off weather events and strikes.

The BOE's staff assessment of the new Labour government's budget could support sterling slightly, Monex said.

The assessment will likely hint that the higher spending planned in the budget will require a "marginally slower" pace of interest-rate cuts.

This should be positive for sterling, albeit at the margin.

The Turkish lira steadied against the dollar after S&P upgraded Turkey's credit rating to BB- from B+ with a stable outlook and praised the central bank's tight grip on monetary policy.

Bonds:

10-year Treasury and Bund yields were lower and Pepperstone said there was some more room for final positioning ahead of the presidential election.

"Some further hedging, de-risking, and position squaring could well be seen as election day looms large."

In the Treasury market, Monday's $58 billion 3-year note auction could be of interest, particularly after last week's 2- and 5-year sales both notched sizeable tails, Pepperstone added.

Commerzbank Research said volatility in bond markets remains assured with the election showdown and impending rates decisions.

"After last week's memorable spread and curve moves, markets are set to remain jittery while yearning for the U.S. election results."

Energy:

Oil prices gained more than 2% after OPEC and its allies pushed back a planned production increase by a month, signaling caution amid growing concerns about weaker global demand and lower prices.

A group of eight OPEC+ members led by Saudi Arabia and Russia extended voluntary production cuts of 2.2 million barrels a day until the end of December, according to a statement from the group over the weekend.

The planned production increase-originally set to gradually start in October 2024 and run through September 2025-had already been delayed by two months in September.

ING said it expects the market to still be in surplus unless OPEC and its allies continue to extend production cuts through next year.

"While the delay does not change fundamentals significantly, it does potentially leave the market having to rethink the strategy of OPEC+," ING said.

"This delayed supply increase means that maybe the group is more willing to support prices than many believe."

DNB Markets said the OPEC+ decision indicates the group isn't comfortable with oil prices in the low $70s.

"It is quite striking that OPEC+ continues to delay the scheduled production increases, at the same time as OPEC's oil market report insists that oil market is deeply undersupplied."

"We have argued all year that OPEC's oil market balance is out of sync with reality."

The cartel forecasts global demand to grow by 1.93 million barrels a day this year and 1.64 million barrels a day the next.

Metals:

Gold edged lower as investors take a cautious approach ahead of this week's major events.

Futures are still up nearly 3% on the month and more than 30% year-to-date, with uncertainty around the election outcome stoking demand for the safe-haven asset in recent days, ANZ said.

Meanwhile, traders expect the Fed to cut rates by 25 basis points, making gold more appealing.

"While long term drivers for gold remain in place, a pause or shallow rate cuts will provide reason for investors to book profit after the recent price rally."

RHB Retail Research said gold appears to be extending its consolidation phase , based on the daily chart, and keeps its positive trading bias for the precious metal, with the nearest resistance at $2,800/oz.

EMEA HEADLINES

Ryanair to Carry Fewer Passengers Next Year Due to Delayed Boeing Plane Deliveries

Ryanair Holdings reported a fall in first-half net profit, missing analysts forecasts, and said it expects to carry fewer passengers in fiscal 2026 than forecast due to delays in Boeing plane deliveries.

The Irish budget airline said Monday that it expects the remaining nine B737 Gamechangers to be delivered in the fourth quarter of this fiscal year, having previously expected them in the third quarter, due to the recent Boeing strikes. It said the risk of further delays is high, and it now expects to carry 210 million passengers in fiscal 2026 compared with the previous guidance of 215 million passengers.

Schneider Electric Removes CEO Peter Herweck

Schneider Electric said it removed Peter Herweck from his role as chief executive officer due to differences on the implementation of the company's roadmap, and appointed Olivier Blum as his replacement.

The French energy management and automation company said Monday that Blum's appointment is effective immediately. Herweck had been in the role for 18 months.

Clariant Backs Mid-Term View

Clariant confirmed its mid-term targets as it aims to focus on energy transition, sustainability-conscious consumers and brands and recyclable products.

The Swiss chemicals company reiterated its 2027 targets, expecting compound annual sales to grow 4% to 6% at local currencies and earnings before interest, taxes, debt and amortization margin of 19% to 21%. It sees its free cash flow conversion at around 40%, it said Monday at an investor event.

Volvo Car Sales Rose 3% on Year in October

Volvo Car said global sales rose 3% on year in October, mainly driven by strong sales of electrified models in Europe.

The Swedish automaker, which is majority owned by China's Zhejiang Geely Holding Group, sold 61,686 cars in October, up from 59,861 in the same month last year, it said Monday.

GLOBAL NEWS

China Isn't Planning a 'Bazooka' Stimulus-at Least Not This Year

With scant detail on how Beijing aims to stimulate its way out of its economic downturn, some investors have speculated that the U.S. presidential election might prompt the big "bazooka" markets have hoped for.

According to people involved in policy discussions, that is wishful thinking: A bazooka isn't coming-at least not this year.

Fed Prepares Rate Cut Amid Economic Contradictions

Federal Reserve officials are expected to cut interest rates by a quarter percentage point at their meeting Thursday because inflation has continued to make progress toward their 2% goal.

Officials began lowering rates at their previous meeting in September by making a larger half-point cut. They are trying to figure out where, exactly, rates should settle after high inflation over the past three years led to a dramatic series of rate increases.

Harris and Trump command the market's attention - but Jerome Powell may steal the spotlight

Investors are anxious about the possibility that it could take days, or even weeks, for the results of this week's U.S. presidential and congressional races to be known.

But Tuesday's vote is hardly the only major market-moving event on the calendar. In fact, it's quite possible that Federal Reserve Chairman Jerome Powell could steal the show when he steps up to the podium on Thursday to deliver his postmeeting press conference.

Iran Tells Region 'Strong and Complex' Attack Coming on Israel

Amid U.S. warnings against a counterattack on Israel, Iran is sending a defiant diplomatic message: It is planning a complex response involving even more powerful warheads and other weapons, said Iranian and Arab officials briefed on the plans.

It remains to be seen whether the Iranian threats are real or just tough talk. Israel's punishing airstrike against Iran on Oct. 26 shredded the country's strategic air defenses, leaving it badly exposed and sharply raising the risks to Iran if it follows through.

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

(END) Dow Jones Newswires

11-04-24 0529ET