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EU flash estimate euro area inflation; Italy unemployment; trading update from Nokia

Opening Call:

Shares are set to open in the red in Europe on Wednesday, weighed down by growing doubts that the U.S. Federal Reserve has fully tamed inflation. In Asia, stock benchmarks fell; Treasury yields were mostly lower; the dollar consolidated; while oil and gold rose.


European shares could start out on shaky ground on Wednesday, as investors grow less confident the Fed will cut rates three times this year.

Cleveland Fed President Loretta Mester said she still expects rate cuts in 2024, though she ruled one out at the May Fed meeting.

Rising oil prices also stoked inflation concerns.

Analysts are beginning to chatter about the possibility that the Fed doesn't cut interest rates at all this year.

"The market is trying to digest if rate cuts will come later, if we'll see fewer cuts, and the growing possibility of no cuts this year," said SoFi.


The dollar consolidated in Asia, but may strengthen as Fed rate-cut bets fade further.

It's "good news is bad news" as strong U.S. data have dented optimism over the Fed's policy pivot, said Mizuho Bank.

This notion is underpinning Treasury yields and the dollar, it added.


Treasury yields lost some traction after the U.S. Labor Department said February job openings were little changed from January, at 8.8 million.

The data suggest that labor markets "are now easing at a more gradual pace, but that isn't a surprise when most indicators of slack have already returned to pre-pandemic norms," Capital Economics said.

Easing jobs markets could revive bets on an interest-rate cut this summer, but the most important data set will be the March payrolls on Friday.


Oil prices were higher in Asia on rising geopolitical risks and signs of strong demand, ANZ Research said.

The market is becoming increasingly concerned that risks of oil supply disruptions have risen sharply after Iran vowed revenge on Israel for an airstrike on its embassy in Syria, it said.

Meanwhile, sentiment has been bolstered by China's strong manufacturing PMI data, which should bode well for oil demand by the world's biggest oil importer, it added.


Gold edged higher, buoyed by safe-haven demand spurred by geopolitical tensions.

The recent Israeli attack near the Iranian embassy in Syria has exacerbated worries over stability in the Middle East, said.

This has bolstered the appeal of gold as a haven for investors amid uncertainty, which has led to increased demand for the precious metal, it added.


Copper prices rose in Asia. The metal has extended gains after China reported strong economic data recently, ANZ Research said.

This has raised hopes of a pick-up in demand for copper, it added.

The strong Caixin PMI data released Monday was then followed by an unexpected rise in the U.S. ISM manufacturing gauge.

"Any rise in demand would be met with a more constrained supply side," ANZ said.


Iron ore fell amid prolonged concerns over the Chinese property sector.

Price softness persists even after China's March PMI data signaled that the economy is stabilizing, as this "masks weakness in China's property sector," Westpac said.

Weakness in the property sector is the root cause of wider losses seen at China's steel mills, Westpac added.


Fed's Mester still expects 3 rate cuts in 2024 but it is a 'close call'

Cleveland Fed President Loretta Mester said Tuesday that she still expects three interest rate cuts in 2024, but added it was a close call.

"I still think three is reasonable, but it's close call," Mester told reporters after a speech.

China's Service Economy Expands Further, Adding to Signs of Recovery

A private gauge of China's services activities notched a 15th straight month of growth, adding to signs of green shoots in the world's second-largest economy as government stimulus measures kick in.

The Caixin services purchasing managers index rose to 52.7 in March from 52.5 in February, Caixin Media Co. and S&P Global said Wednesday. A reading above the neutral 50 mark suggests expansion, while one below indicates contraction.

NATO Turns 75 Facing an Old Foe and New Squabbles

BRUSSELS-NATO, fresh from a bruising fight over Sweden's accession, turns 75 on Thursday amid a new spat over who should next lead the military alliance.

The dispute casts a shadow over what was meant as a celebratory gathering of the top diplomats from the North Atlantic Treaty Organization's 32 members this week. It pits early members against ones that joined after the Cold War, widening a rift that emerged with Russia's invasion of Ukraine.

Israel-Iran Conflict Threatens to Spill Into Open Warfare

ISTANBUL-The airstrike that killed top Iranian military officials in Syria on Monday threatened to put Israel into open conflict with Iran, illustrating how the countries' long-simmering shadow war has entered a dangerous new phase.

Iran's Supreme Leader Ayatollah Ali Khamenei and President Ebrahim Raisi vowed on Tuesday to respond to the attack, which Syria and Iran said hit an Iranian consulate. Israel didn't confirm or deny responsibility for a strike that Israeli analysts said took the country's covert military campaign against Iran and its allies to another level, because of the diplomatic target and the Iranian leaders who were killed.

Biden's Approach to Israel-Gaza Conflict Angers Both Sides

WASHINGTON-The Israeli strike that killed seven aid workers in Gaza is the latest example of a persistent political problem for President Biden: His approach to the Israel-Hamas war has left him squeezed on both sides.

The deadly attack late Monday on the World Central Kitchen workers, which Israel called an accident, sparked an outcry from progressive Democrats in Congress, who have renewed calls for a cease-fire and to suspend U.S. aid to Israel. It also cast a cloud over Biden's planned event at the White House on Tuesday, when he was slated to commemorate the holy month of Ramadan with Muslim and Arab-American leaders.

Elon Musk's X Names a New Head of Safety

Elon Musk's social-media platform X named a new head of safety as the company tries to rebuild relationships with advertisers.

Kylie McRoberts, a current X employee who has worked on platform security and labels for sensitive content such as violence or nudity, is the new safety head. She will oversee the team responsible for maintaining X's policies and developing new features.

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Expected Major Events for Wednesday

04:30/NED: Mar Flash Estimate CPI

07:00/TUR: Mar PPI

07:00/TUR: Mar CPI

08:00/ITA: Feb Unemployment

09:00/CYP: Jan Retail trade

09:00/EU: Feb Unemployment

09:00/EU: Mar Flash Estimate euro area inflation

09:00/CYP: Feb Retail trade

15:00/DEN: Mar Foreign Exchange & Liquidity

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

(END) Dow Jones Newswires

04-03-24 0016ET