European Midday Briefing: Stocks Lower on Weak China Data

MARKET WRAPS

Stocks:

European stocks traded lower on Monday after data showed Chinese gross domestic product growth slowed sharply in the second quarter and as investors reacted to the weekend's assassination attempt on Donald Trump.

The slew of Chinese economic data released earlier was a mixed bag, but overall doesn't seem very promising, IG said. While industrial production and fixed asset investment were more stable, retail sales were disappointing.

The FTSE 100's fall was led by luxury goods stock Burberry , which dropped around 15% after it reported a weak first quarter, suspended its dividend and said its CEO had stepped down.

U.S. Markets:

Stock futures rose alongside government bond yields, as investors assessed the implications of the assassination attempt on Donald Trump.

"The assassination attempt is shocking emotionally, but probably doesn't do much to either the political trajectory of the campaign or the outlook for the U.S. economy," Arbroath Group said.

Earnings season revs up this week, with results due from Goldman Sachs and BlackRock on Monday.

Overall, analysts expect S&P 500 companies to report a fourth straight quarter of earnings growth, according to FactSet.

Stocks to Watch

Coinbase Global gained more than 6% in premarket trading, amid a rebound in crypto prices. Other Bitcoin-linked stocks including Marathon Digital and MicroStrategy also rallied. Bitcoin traded at around $63,000.

Tesla rose more than 4% premarket, putting the stock on track to extend its climb. Tesla's stock has risen 25% in July, cutting nearly all its losses for the year.

Forex:

The safe-haven dollar edged higher, helped by falls in equities after data showed second-quarter Chinese economic growth slowed significantly, while the assassination attempt on Donald Trump had limited impact on markets, ING said.

"We are not observing any material turmoil in markets following Saturday's shooting in Pennsylvania, where Donald Trump was injured. It is too early to tell whether this can have implications for the [presidential] race."

Risks to the dollar are "quite balanced" this week, ING said, with investors awaiting upcoming economic data after last week's drop in U.S. inflation lifted chances of a September interest-rate cut.

Rabobank said that although the softening in U.S. economic data has continued, the assassination attempt on Donald Trump has helped the dollar in the spot market.

Betting odds point to Trump winning the presidency in November and the market is focusing on prospects of inflationary tariffs and tax cuts, it added.

Bonds:

A potentially higher possibility of Donald Trump winning the presidential elections following the assassination attempt could drive up Treasury yields, especially long-dated yields, UniCredit Research said.

The prospects of a Trump win may also lift the dollar, it said. "On the other hand, we see this as neutral for corporate credit spreads."

Gilt yields were relatively unchanged as investors awaited U.K. inflation data due on Wednesday to gain insight on when the Bank of England could start cutting interest rates.

"An upside surprise/reacceleration in services inflation could put the August cut in question," Bank of America said.

It predicts U.K. headline CPI for June to remain unchanged at 2% while core inflation rises to 3.6% from 3.5% in May. "We stick to our base case of an August cut but acknowledge that it is a close call."

Energy:

Oil prices edged down as the dollar gained, with investors speculating about the chances of Trump winning the upcoming U.S. election in the wake of the weekend shooting in Pennsylvania.

"The market needs a fresh catalyst to bring in a new round of sizeable speculative buying, particularly with demand concerns hanging over the market," ING said.

Metals:

Gold futures fell but remained above the $2,400 mark after the softer-than-expected U.S. inflation data on Thursday boosted the case for a dovish pivot towards easing monetary policy at the July Federal Reserve meeting, JPMorgan said.

Traders have fully priced in a September rate cut, consistent with JPM's commodity price expectations--which should be bullish for gold and silver going into the year-end.

This expected rate cut should have positive knock-on effects for base metals, too, JPM added.

RHB Retail Research said gold's underlying bullish trend is growing stronger, based on its bullish crossover on the daily chart.

EMEA HEADLINES

Atos Signs $1.83 Billion Finance Deal With Banks, Bondholders

Atos agreed to 1.675 billion euros ($1.83 billion) of financing as part of its restructuring plan, backed by a group of banks and bondholders.

The French IT firm said Monday that interim financing of EUR800 million is secured, providing the liquidity necessary to fund the business until close of the financial restructuring plan, and that EUR450 million is already accessible by the company.

Swatch Group Posts Sales Decline on Weak Demand in China

Swatch Group reported a decline in sales for the first half due to a sharp drop in demand for luxury goods in China, and said it expects the Chinese market to remain challenging until the end of the year.

The Swiss watchmaker said Monday that it booked sales of 3.44 billion Swiss francs ($3.85 billion) for the first six months of the year, down around 14% on year at current exchange rates. At constant currency, sales tumbled nearly 11%.

Israel Seeks Proof of Whether Strike Killed Hamas Military Chief

TEL AVIV-Israel's military was assessing on Sunday whether it successfully killed Hamas's top commander Mohammed Deif in an airstrike in southern Gaza a day earlier, military officials said.

An Israeli official said there is reason to believe the strike achieved its aim, but it could be days or weeks until Israeli authorities can determine with certainty whether Deif was killed.

GLOBAL NEWS

Trump shooting offers test for stock market as investors weigh his election odds now

A dark day in U.S. history offered a test for financial-market participants Sunday night as investors reacted to an apparent assassination attempt on former President Donald Trump.

The event so far wasn't sparking a flight to typical safe-haven investments such as Treasurys and gold. It could instead see investors focus on perceptions around how the Saturday shooting at a Pennsylvania campaign rally will affect the race between Trump and President Joe Biden. The initial market reaction, however, was subdued, with U.S. stock index futures trading flat to slightly higher Sunday night.

High stakes for investors as Fed tries curing inflation without causing a recession

Signs of easing inflation are giving the U.S. central bank the go-ahead to do something investors have waited for all year: the first interest-rate cut since the most aggressive rate-hiking cycle of the past four decades began in March 2022.The seemingly impossible task ahead for the Federal Reserve and Chairman Jerome Powell is to achieve a decisive victory against inflation, without pushing the world's largest economy into a recession - or, at the very least, avoid a deep and prolonged one. The stakes are high for investors after U.S. stocks soared to more record closing highs over the past week. The S&P 500 SPX and Nasdaq Composite COMP respectively finished Wednesday's session with their 37th and 27th closing highs of the year, at 5,633.91 and 18,647.45. This came after two days of congressional testimony by Powell, who seemed to move the central bank closer to cutting rates.

Powell reiterated his view that policymakers are holding a dual-edged sword: Cutting rates too little or too late could undermine economic activity, but doing so by too much or too soon might damage the progress made on inflation. The Fed's mandate is to promote full employment and stable prices.

Trump Shooting Spurs GOP Unity, Scrambles Biden Campaign Strategy

MILWAUKEE-The nation's political contrast could hardly be more stark: images of a defiant and bloodied Donald Trump surviving an assassination attempt cast against persistent questions about President Biden's mental sharpness and ability to stay in the race.

In an already turbulent contest, the jarring chaos witnessed in western Pennsylvania Saturday night-and the fear, anger and images it generated-are certain to alter the contours of a campaign where even small shifts of voters could prove decisive.

Elon Musk and Bill Ackman Endorse Trump's 2024 Bid for President After Shooting

Billionaire entrepreneur Elon Musk and hedge-fund manager Bill Ackman formally threw their support behind Donald Trump in the wake of Saturday's assassination attempt, endorsing him for president in the upcoming U.S. election.

Musk, who leads multiple businesses, including electric-car company Tesla and rocket-maker SpaceX, unleashed a flurry of comments on his social-media platform X after the shooting, including his endorsement of the former president and criticism of the Secret Service.

Write to [e-mail]

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

07-15-24 0619ET