MARKET WRAPS
Stocks:
European stocks traded mostly higher on Wednesday ahead of the U.S. inflation data.
"Will today's figures confirm that inflation is stuck at too high levels or will they provide hope that the first quarter was a temporary delay on the road to a permanently lower inflation rate?" SEB asked.
SEB is cautiously optimistic, but market jitters are palpable. If the outcome deviates clearly from forecasts, the reaction in interest rates, stocks and currencies may be substantial, it added.
Stocks to Watch
Anglo American could face a hostile bid from mining rival BHP, which looks likely to make one final offer, given the lack of engagement from Anglo's board on the two prior approaches, Berenberg said.
U.S. Markets:
Stock futures were steady while bond yields fell, though moves were muted ahead of inflation data that may impact the Fed's policy trajectory.
Stocks to Watch
Boeing declined 1.5% after the Justice Department said the company violated the terms of a settlement reached three years ago over its employees' role in two fatal 737 MAX jet crashes that occurred within five months of one another.
GameStop was rising 24% in premarket trading. It closed 60% higher on Tuesday and 74% on Monday.
Forex:
Investors await U.S. CPI data, following a higher-than-expected producer price print on Tuesday, which could well move EUR/USD after the recent jump above 1.08.
The 'diverging U.S./eurozone inflation' narrative and the widening gap between the Fed and ECB policy doesn't support the positive breakout above the 1.08 level, Swissquote Bank said.
"Hence, the recent gains in the EUR/USD are vulnerable to an 'emperor is naked' moment, if investors realize that the latest rise in the U.S. inflation may not be a blip."
Uncertainty over the dollar outlook has risen, especially in view of the reduced visibility on the Fed front, MFS Investment Management said.
The USD does appear to be tactically overvalued, but the macro signals for a downward correction are a bit weaker than a few months ago, it said.
MFS IM views the U.S. election risk as a major consideration, especially given the significant uncertainty surrounding the future policy agenda.
Sterling is expected to rise against the dollar, breaking through 1.26, if the U.S. inflation data is weaker than expected, UniCredit Research.
Bonds:
The elevated starting yields prevalent across much of the bond market bode well for capital appreciation, Pimco said. It favors intermediate maturities.
"That said, as the outlook and scope of inflation, growth, and central bank policy diverge among countries, sovereign bond performance may be likely to diverge as well."
Desynchronization in central bank trajectories between the U.S. and other major developed economies creates prospects for diversifying bond allocation and seeking attractive returns, Pimco added.
Energy:
Oil prices edged higher on reports of a larger-than-expected draw in U.S. crude inventories, but remained broadly under pressure on prospects of higher-for-longer rates due to sticky inflation.
"The lack of progress on bringing down inflation continues to lower expectations of a rate cut in the near term," ANZ Research said.
Metals:
Gold futures rose as investors turned their attention to the crucial CPI data due later.
Gold has found support elsewhere in haven demand, especially amid geopolitical tensions in the Middle East, but as these ease it is left vulnerable to pressure from rate expectations, XS.com said.
EMEA HEADLINES
Hapag-Lloyd Lifts Lower-End of Guidance as Red Sea Situation Raises Rates
Hapag-Lloyd lifted the bottom end of its full-year guidance range as the current situation in the Red Sea has tightened industry capacity, helping stabilize freight rates.
The container-shipping industry entered 2024 in deep overcapacity as cargo volumes failed to keep up with a glut of new vessels, sending freight rates tumbling from their pandemic-fueled highs. Shippers had begun to slash costs and adjust their networks as falling demand and the excess newbuilds prompted gloomy forecasts.
Thyssenkrupp Cuts Sales, Profit Forecasts After Hit From Write-Downs, Emission Contracts
Thyssenkrupp again cut its sales and profit forecasts for its fiscal year after write-downs and contracts to offset carbon emissions hit its second-quarter results.
The German industrial company said Wednesday that it expects a net loss in the low three-digit-million-euro range for the year ending September, after previously expecting to roughly break even. Sales are now projected to be below the previous year's level, compared with a flat performance forecast earlier.
Allianz Backs 2024 Guidance After Profit Jump
Allianz confirmed its 2024 guidance after growth across all of its segments over the first quarter boosted its net profit by 22%.
Europe's largest insurer made a net profit of 2.475 billion euros ($2.68 billion) compared with EUR2.16 billion in the year-earlier period, it said Wednesday.
Burberry Profit Falls as Soft Demand, Turnaround Bite
Burberry posted a decline in profit for fiscal 2024 while it keeps struggling to revitalize its business through a turnaround plan against a backdrop of slowing luxury demand.
The British luxury company said Wednesday that it made a pretax profit of 383 million pounds ($482.2 million) for the year ended March 30, down from GBP634 million a year earlier.
GLOBAL NEWS
IEA Lowers 2024 Oil-Demand Growth Forecast on Slow Start of the Year
The International Energy Agency cut its forecast for oil-demand growth this year as subdued industrial activity and mild winter temperatures reduced gasoil consumption across some of the world's largest economies, particularly in Europe.
Oil-demand growth is now seen at 1.1 million barrels a day from previously 1.2 million barrels a day, the Paris-based organization said in its latest monthly report. Total demand is still expected to average 103.2 million barrels a day.
Retail Sales Data Are Yet Another Test for the Consumer
Retail sales are expected to have grown at a slower pace in April, reflecting growing concerns that consumers are finally starting to crack under the pressure of higher interest rates and inflation.
Economists predict April's retail sales will tick up by 0.4% from the prior month, marking a deceleration from March's 0.7% increase, according to FactSet consensus estimates. Excluding the more volatile auto and fuel categories, retail sales are projected to increase about 0.3% month-over-month.
European Development Bank Flags Higher Risk Premium as Lingering Cost of Russia's War
The economies of central Europe are set for stronger growth this year and next as inflation cools, but Russia's invasion of Ukraine will continue to cast a shadow over their prospects in the form of higher borrowing costs, the European Bank for Reconstruction and Development said Wednesday.
The London-based development bank also noted a surge in Chinese investment in parts of Europe and North Africa last year as businesses sought to avoid barriers to their exports.
The Lopsided Reality of the Russia-China Relationship
When Russian President Vladimir Putin visits Chinese leader Xi Jinping in Beijing this week, the two leaders will seek to project their customary united front against the U.S.-led global order.
Beneath the surface, however, the relationship isn't one of equals.
Hamas Shift to Guerrilla Tactics Raises Specter of Forever War for Israel
Seven months into the war, Hamas is far from defeated, stoking fears in Israel that it is walking into a forever war.
The U.S.-designated terrorist group is using its network of tunnels, small cells of fighters and broad social influence to not only survive but to harry Israeli forces. Hamas is attacking more aggressively, firing more antitank weapons at soldiers sheltering in houses and at Israeli military vehicles daily, said an Israeli reservist from the 98th commando division currently fighting in Jabalia.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
05-15-24 0529ET
