MARKET WRAPS
Stocks:
Most European stock indexes edged cautiously higher on Monday as concerns resurfaced about the stability of China's property market.
The financial struggles of Country Garden Holdings, China's top surviving privately run developer, have been front-and-center since it missed interest payments on two U.S. dollar bonds a week ago.
The property giant said on Monday that trading in 11 of its yuan-denominated domestic bonds had been suspended, and that it intended to discuss repayment plans with investors. Read more.
Stocks to Watch
Rheinmetall heads into the second half with its defense business on a solid footing and gaining momentum, according to Berenberg, adding that shares remain attractively priced, trading on 14.1x 2024 P/E, in line with the European defense sector. Read more.
Siemens remains a compelling long-term investment opportunity and it's attractively valued, offering investors an appealing re-entry opportunity, Berenberg said, upgrading the stock to Buy from Hold. Read more .
U.S. Markets:
Stock futures were rising as markets have stumbled to add to this year's rally during August.
The focus for Wall Street this week will be on minutes of the Federal Reserve's latest policy meeting and earnings reports from some of the biggest U.S. retailers.
Stocks to Watch
AMC Entertainment shares fell 27% in premarket trading after the movie-theater chain won approval to move ahead with a planned conversion of AMC Preferred Equity, or APE, units into common shares. APE units rose 30%.
U.S. Steel's share price rose more than 20% premarket, after it rejected an unsolicited offer from rival Cleveland-Cliffs, whose shares fell more than 5%.
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Forex:
Although eurozone economic growth in the second quarter was slightly better than expected, the underlying trend remains weak and a likely recession in Germany has become a burden on the euro, DZ Bank said.
"While the eurozone will probably only narrowly escape a downturn in 2023 as a whole, Germany, the former economic engine, will hardly be able to avoid it. This development has currently become a burden on the euro," DZ said, adding that the currency has depreciated 3% against the dollar since mid-July.
Bonds:
In the eurozone government bond market only the ZEW economic indicator, due on Aug. 15, has the potential to attract significant attention in the coming days, LBBW said. A stabilization of economic expectations at a depressed level could already be perceived as a tentatively positive sign, it added.
"This is particularly true as the public debate is currently increasingly revolving around gloomy prospects for the future, especially with regard to the German economy," LBBW said.
Barclays said German Bund yields are still trading in tight ranges but their sensitivity to foreign shocks appears to have been increasing lately.
Since the early parts of the second quarter, the beta-a measure of volatility-has shown signs of renewed upward momentum, Barclays said.
"We think this likely reflects the stream of positive surprises in the U.S. labour market, driving increased focus on the implications for Federal Reserve policy, and ultimately the policy trajectory for central banks more broadly."
Commerzbank Research said the upside in bond yields still seems to be the path of least resistance for now and 10-year Bund yields could oscillate a bit higher toward the year-to-date highs, but breaching key highs would require a better economic outlook.
"Yet, clearer evidence of a more optimistic growth outlook would be required for yields to rise beyond these crucial levels."
Commerzbank Research sees disappointing data are more likely to come in the coming months, with the ZEW index likely to emphasize Germany's worsening growth prospects, which should provide support for Bunds, particularly at the long-end.
Read Upcoming Holiday Could Moderate Eurozone Bond Trading Activity
Energy:
Oil prices weakened, along with other risk assets on the Country Garden news.
Investors are eyeing a batch of important Chinese economic data later this week, including industrial output on Tuesday, for clues on the nation's economy.
Metals:
Base metals were mixed and gold slightly weaker, with worries over demand, especially in China, hitting sentiment.
"Concerns over liquidity of...Country Garden brought back into focus the troubled property sector. Any failure to pay its debt would hurt already fragile sentiment," ANZ said.
DOW JONES NEWSPLUS
EMEA HEADLINES
Philips Can Recover From Its Health Crisis
When venerable industrial companies fall on hard times, things can look bleak: They are often over-indebted, overstaffed and overly complex. But the stocks have a way of bouncing back because the high-tech markets they serve aren't easy to disrupt.
This story, familiar to American investors from GE, has a European parallel at Royal Philips. The once-sprawling Dutch conglomerate is now a medical-devices company that competes with GE Healthcare and Siemens Healthineers. Trading about 60% below their peak, Philips shares are the cheapest in the sector after a torrid couple of years marked by the mass recall of machines designed to treat sleep apnea. Now the stock looks ripe for recovery.
Exor Buys 15% Stake in Philips
Exor and Royal Philips jointly said that they have entered a relationship agreement, with Exor picking up a 15% stake in Philips for an undisclosed sum, but worth around 2.58 billion euros ($2.82 billion).
Investment company Exor, which holds stakes in a number of companies such as car makers Ferrari and Stellantis, said Monday that its investment is fully supportive of Dutch health-technology company Philips' leadership, strategy and value creation potential, and gives it the ability to nominate one member to Philips' supervisory board.
The Economic Losers in the New World Order
The world's biggest economies are offering huge subsidies in a cutthroat race to win the industries of the future. The losers: all the countries that can't pay up.
New tax credits for manufacturing batteries, solar-power equipment and other green technology are drawing a flood of capital to the U.S. The European Union is trying to respond with its own green-energy support package. Japan has announced plans for $150 billion of borrowing to finance a wave of investment in green technology. All of them are working to become less dependent on China, which has a big lead in areas including batteries and the minerals to make them.
Texas Sues Shell Over Massive Fire at Houston Chemical Plant
The state of Texas sued British oil giant Shell and the other owner of a petrochemical and refinery complex near Houston that caught fire in May over alleged environmental damage.
The Texas attorney general alleged in court documents that the massive fire caused "mass quantities" of airborne contaminants and illegal flows of wastewater into nearby waterways.
Ukraine's Slog Prompts Focus on Next Year's Fight
Ukraine's current campaign to retake territory occupied by Russian forces could still have many months to run. But military strategists and policy makers across the West are already starting to think about next year's spring offensive.
The shift reflects a deepening appreciation that, barring a major breakthrough, Ukraine's fight to eject Russia's invasion forces is likely to take a long time.
Iran Slows Buildup of Uranium Needed for Weapon
LONDON-Iran has significantly slowed the pace at which it is accumulating near-weapons-grade enriched uranium and has diluted some of its stockpile, people briefed on the matter said Friday, moves that could help ease tensions with the U.S. and allow the resumption of broader talks over its controversial nuclear program.
The more slowly Tehran accumulates highly enriched uranium, the less potential fissile material it has for nuclear weapons.
African Force to Reverse Niger Coup Could Take Months
NAIROBI-Leaders of 11 West African nations this week reinforced their threat to use force to reverse Niger's coup d'état, but Western and African officials say it could take months to attempt such an ambitious operation.
Leaders of the Economic Community of West African States, Ecowas, activated a regional standby force Thursday and ordered its deployment "to restore constitutional order" in Niger, where last month top military officers deposed elected President Mohamed Bazoum.
GLOBAL NEWS
Stock Rally Stalls Despite Better-Than-Expected Earnings Season
Companies are beating Wall Street's earnings expectations. Investors just aren't impressed.
With second-quarter earnings season coming to a close, companies have exceeded analysts' estimates at a greater rate than usual. Of the roughly 90% of companies in the S&P 500 that have reported results, 79% topped analyst estimates, compared with the five-year average of 77%, according to FactSet.
What Wall Street's Top Recession Gauge Is Saying Now
Wall Street is growing confident the U.S. can avoid a recession. But one key market indicator is still sending seemingly bleak signals.
Right now, yields on longer-term U.S. Treasurys remain far below those of shorter-term bonds, an anomaly known as an inverted yield curve that has earned fame as a harbinger of downturns.
What Top Executives Are Saying About a Soft Landing
Is a soft landing in sight? Maybe if you sell burgers or bleach. For videogame makers and real-estate firms, that scenario looks out of reach.
Big companies are split on whether the Federal Reserve will be able to tame inflation without tipping the U.S. economy into a full-blown recession.
China's Worsening Economy Is Hurting Corporate America
HONG KONG-China's deepening economic slump is damaging the fortunes of big American companies deeply rooted there, with some growing increasingly pessimistic that the country's long-awaited postpandemic boom will materialize.
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08-14-23 0545ET
