MARKET WRAPS
Stocks:
European stocks struggled for momentum in a cautious opening session, as investors eye economic data in the coming days that may clarify the timing of Federal Reserve interest-rate cuts.
The PCE price index will be published before Wall Street opens on Thursday, and any notable uptick in the gauge may finally kill off any lingering hopes of a May rate cut.
"It's more a wait-and-see environment than a risk-on or risk-off environment," according to B. Riley Wealth Management.
Stocks to Watch
BAE Systems share price has more than doubled and been the most steady European defense stock over the past 2 years, Bernstein said, which has an outperform rating and a price target of 1,450 pence.
"Its recent H2 2023 result was the latest demonstration that it is well-positioned for sustained higher growth."
But BAE is not just growing faster and generating more cash. It continues to return more cash, with the dividend yield still at 2.4% despite the strong run, Bernstein said.
U.S. Markets:
Stock futures were falling as investors turned their attention to data on U.S. economic growth and inflation, with the yield on the benchmark 10-year Treasury note hovering around 4.3%.
Forex:
EUR/GBP has had a whirlwind couple of weeks, currently trading back above the 0.85 mark, but it's expected to rise in the coming months, Danske Bank Research said.
Danske expects relative growth outlooks and broad central bank pricing to weigh on sterling against the euro going forward. It forecasts EUR/GBP to rise to 0.88 in six to 12 months, from 0.8560, though notes a possibility of the U.K. economy outperforming the euro area which could pose a risk to this call.
For now, EUR/GBP "seems caught around the 0.85 with lack of any meaningful directionality in the global investment environment," Danske said.
The dollar is likely to stay supported now that "exuberance" over Fed monetary easing is over, J.P. Morgan said, adding it has the potential to rise over the medium-term as rate-cut expectations are scaled back.
Money markets price in three interest-rate cuts by the Fed for this year, according to Refinitiv.
Bonds:
Strong demand for Italy's third retail-only BTP Valore issue in the first two days of subscriptions "has sent a positive signal to the BTP market more in general," UniCredit Research said. This positive signal has been highlighted by ongoing spread tightening.
Demand for the retail bond has reached EUR11 billion so far, more than for the previous issues after the end of the second day of subscriptions, UniCredit said.
"With three more days to go, this deal seems set to reach a size similar to the previous two."
Energy:
Oil futures were down, as weaker demand in China and mixed supply and inventory data have weighed on prices this week, analysts said.
The discount on Russian crude oil has narrowed close to zero relative to Brent, mostly due to countries outside of the G7 coalition buying up more of the country's oil, according to estimates using the most recent customs data for December, Goldman Sachs said.
Meanwhile, news that OPEC+ might further extend their output cuts was offset by data pointing to increased U.S. crude stocks.
Metals:
Metals were weaker with the dollar regaining some lost ground ahead of the second estimate of U.S. fourth quarter GDP data and Thursday's U.S. PCE inflation print, IG Group said.
EMEA HEADLINES
U.K. Banks' Margins Expected to Rebound, Despite Rate Cuts - Talking Markets
British lenders' incomes have been buoyed by higher interest rates over the past two years, and while this is set to abate in the near-term with upcoming cuts, banks have levers in place to soften the blow and keep reaping the benefits of boosted rates.
Bank of England policymakers are expected to start lowering interest rates in the third quarter of 2024 as inflation gets more under control. Market consensus currently prices in the first 0.25% cut in August from its actual 5.25% base rate. The change will ripple through banks' top lines, bringing a visible dip in their net interest income, or NII, which is the difference between what lenders earn on loans and what they pay out on customer deposits and is tied to central bank rates.
Swisscom in Advanced Talks to Buy Vodafone's Italy Unit for $8.7 Bln
Swisscom said it is in advanced talks to buy Vodafone Group's Italy business for 8 billion euros ($8.68 billion), weeks after the U.K. group turned down a bid from Xavier Niel's Iliad Group.
The Swiss telecommunications company said Wednesday that it plans to merge Vodafone Italia with its Italian subsidiary Fastweb, potentially shaking up one of Europe's largest telecoms markets.
Atos Says 2023 Earnings Release Rescheduled, Talks for Unit Sale Fall Through
Atos rescheduled the release of its 2023 results to allow time to complete an audit of an impairment charge and said talks to sell its Tech Foundations business fell through.
The French IT company said Wednesday that revenue and margin results for last year were in line with guidance. Revenue rose 0.4% to 10.69 billion euros ($11.59 billion) on an organic basis, and the operating margin was 4.4%, up from 3.1% a year earlier.
Uniper Expects Profit Decline on Falling Energy Prices
Uniper returned to profitability last year but expects lower earnings in 2024 due to an estimated decline in energy prices that has also clouded the forecast of its European peers.
The German gas importer said Wednesday that it expects adjusted earnings before interest, taxes, depreciation, and amortization in 2024 of 1.5 billion euros ($1.63 billion) to EUR2 billion and an adjusted net profit between EUR0.7 billion to EUR1.1 billion.
Reckitt Benckiser Sales Miss Expectations, Profit Drops
Reckitt Benckiser profit fell while sales missed market expectations after the consumer-goods company booked one-off impairments at its infant formula business.
Shares at 0923 GMT were down 8.6% to 5,334.0 pence, which would be their lowest closing price in 21 years.
Casino Posts $6 Billion Loss Amid Financial Restructuring
Casino Guichard-Perrachon reported a multibillion-euro loss for last year, when it continued to amass debt ahead of a planned restructuring that will see a consortium led by Czech billionaire Daniel Kretinsky take control of the embattled French supermarket owner.
The group on Wednesday posted a net loss of 5.66 billion euros ($6.14 billion) for last year due to disposals and its financial restructuring, compared with a EUR316 million loss for 2022. Its debt pile climbed to EUR6.18 billion at the end of December from EUR4.48 billion in 2022.
Taylor Wimpey Pretax Profit Fell on Lower Completions
Taylor Wimpey said pretax profit fell as revenue decreased due to a fall in completions, and that its operating profit margin in the first half will reflect the slightly lower pricing in its order book.
The London-listed housebuilder said its operating profit margin will also be hit by cost inflation and investments to drive operational efficiencies.
GLOBAL NEWS
Hong Kong Takes Drastic Action to Avert Property Slump
Hong Kong has taken a bold step to ease a real-estate slump, scrapping a series of property taxes in an effort to turn around a market that is often seen as a proxy for the city's beleaguered economy.
The government has removed longstanding property taxes that were imposed on nonpermanent residents, those buying a second home, or people reselling a property within two years after buying, Financial Secretary Paul Chan said in his annual budget speech on Wednesday.
Shutdown Fears Fade After White House Meeting
WASHINGTON-Democratic and Republican congressional leaders struck an optimistic tone that they would avert a government shutdown this weekend after a White House meeting in which lawmakers also stepped up pressure on House Speaker Mike Johnson (R., La.) to allow a long-stalled vote on Ukraine aid to go forward.
Johnson is expected to put forward legislation in coming days that would keep the government fully open, but the details remained uncertain. The Congress has until Saturday at 12:01 a.m. to fund the departments of Veterans Affairs, Transportation, Agriculture, Energy and several other agencies that have been operating on temporary extensions since Sept. 30. The funding for the rest of the federal government expires after March 8.
Are U.S. stocks in a bubble? History says no.
The S&P 500's torrid and top-heavy advance over the past year has convinced some bearish investors that U.S. stocks are in a bubble. But history says otherwise.
Since 1974, the S&P 500 has risen 100% of more during the three years that preceded every bubble peak, according to an analysis from a team of analysts at DataTrek.
Biden Wins Michigan Democratic Primary, With 'Uncommitted' in Second Place
DEARBORN, Mich.-President Biden won the Michigan primary Tuesday evening, but lost votes from some who are angry over his support of Israel's military campaign against Hamas as he heads toward a re-election rematch against former President Donald Trump in November.
Democratic voters in heavily Arab-American suburbs of Detroit and elsewhere chose "uncommitted" on the ballot in protest of Biden's foreign policy. With 50% of the ballots in, Biden has 375,280 votes, 80.8%, compared with 62,238 for uncommitted, 13.4%, according to the Associated Press, which called the race for Biden as the polls closed. In 2016, Trump won Michigan's electoral votes by just shy of 11,000 votes more than Hillary Clinton. Biden won the state in 2020 by some 154,000 votes.
Donald Trump Continues March Toward GOP Nomination With Michigan Win
GRAND RAPIDS, Mich.-Donald Trump won Michigan's Republican presidential primary Tuesday, marking the fifth straight victory for the former president in this year's major nominating contests and delivering the latest blow to Nikki Haley's underdog bid.
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02-28-24 0531ET
