EMEA Morning Briefing: Stock Futures Edge Higher as Econ Data Awaited

MARKET WRAPS

Watch For:

Germany ZEW indicator of economic sentiment; UK unemployment; trading updates from Pandora, Henkel, KGHM, Flutter Entertainment

Opening Call:

Stock futures are muted early Tuesday as focus is on key data releases to come. Asian stock benchmarks advanced; the dollar and Treasury yields steadied; while oil and gold futures fell.

Equities:

European stock futures edged higher early Tuesday ahead of a number of economic data releases, including U.K. employment data and the German ZEW index, as well as U.S. PPI.

This string of data will help show "if we are bracing for continued volatility in the markets or if we're exiting the volatile period we just witnessed over the past few weeks," Mark Hackett, chief of investment research at Nationwide.

Some analysts, meanwhile, believe that many of the traders who sold off positions early last week on worries about a worsening economic backdrop escaped mostly unscathed.

"When you get a massive, ugly, cross-asset unwind, a lot of emergency rip cords are being pulled in these portfolios," said Andrew Beer, managing member at DBi.

Like many of its counterparts, DBi has slashed its exposure to the yen by about 80% in recent months as the Bank of Japan began raising interest rates. The firm remains bullish on U.S. stocks.

"Nothing moves in a straight line," Beer said. "There is always that noise."

Forex:

The dollar was steady early Tuesday. Geopolitical tensions are rising in the Middle East and in the Russia-Ukraine conflict, said Michael Wan, senior currency analyst at MUFG Bank. The U.S. warned Monday that Iran or its proxies could launch an attack on Israel this week, while Ukraine has made its largest incursion into Russian territory since the conflict began in 2022, Wan noted. There's also key U.S. CPI data due out this week, Wan added.

Bonds:

Yields on U.S. government debt closed lower overnight as traders watched the latest developments in the Middle East and looked ahead to a busy week of U.S. economic updates.

The U.S. data could offer investors and traders fresh clues about whether the U.S. economy is stalling and inflation is easing enough to warrant anticipated interest-rate cuts by the Federal Reserve.

"We also maintain that the nervousness about U.S. slowdown is overdone. Is the economy slowing? Yes. Is recession likely? No. Is the Fed behind the curve? Yes. Does it matter? Not really, as strong fundamentals, excess capital, instantaneous repricing and an immense policy tool kit can reverse positions quickly with limited damage. In our view, investors continue to reside in a 'twilight' of no recessions, but also no strong recoveries, complemented by lower rates and higher liquidity," said Viktor Shvets, head of global desk strategy at Macquarie Capital.

Energy:

Oil futures declined in Asia as worries over global demand growth offset tensions in the Middle East. In its monthly report, OPEC said it expects demand to grow by 2.11 million barrels a day in 2024 to 104.3 million barrels a day, down 135,000 barrels a day from its July estimate.

The reduction in OPEC's global oil demand growth forecast, partly on weaker expected Chinese demand, "may represent a metaphorical 'throwing in of the towel' when it comes to expectations for a short-term recovery in demand," said Kenny Zhu, an income research analyst at ETF firm Global X.

Metals:

Safe-haven buying amid elevated geopolitical tensions has helped push gold prices higher, ANZ said. "Investors are also preparing for U.S. inflation data which should shed further light on the Fed's outlook for rates," ANZ added.

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Short-term seasonal softness in metals demand has seen copper inventories rise across the board, made worse by a fall in risk appetite, ANZ said. However, copper demand is showing signs of recovery, with mine supply headwinds likely to keep the concentrate market tight and subsequently reduce the output of refined copper, particularly in China, ANZ added. Copper demand will ultimately reap the rewards from stabilizing growth and a rise in infrastructure investments in China,it added.

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Short-selling pressure eases as iron ore prices have reached a low level, Galaxy Futures said. Both demand and supply remain weak, and prices are likely to stay at a bottom over the short term, it added.

TODAY'S TOP HEADLINES

Market Volatility Is Back. Will It Last?

Volatility is back in the stock market after a roughly 18-month slumber.

Turbulence has mounted since mid-July, culminating last week with the S&P 500 logging both its best and worst days since 2022. Traders have wound down some investments that thrived in calm conditions and pulled back from bets that the sideways action would persist.

Wall Street's Trash Contains Buried Treasure

Rebound relationships are best avoided, but maybe not in the stock market.

In a paper that starts out by stating that "no one enjoys getting dumped, " two investing quants reveal some surprising, and potentially lucrative, traits of companies that have really let themselves go. With about half of the money invested in American stocks now sitting in index funds, and many active managers holding portfolios that resemble them-just try beating the market these days without "Magnificent 7" stocks such as Nvidia or Microsoft-index castoffs have a hard time meeting someone new.

The Stock Market Panic Is Over. Or Is It?

Wall Street was chill to start the trading week. It's reassuring to see the stock market's freak-out-it was only seven days ago-was short lived.

The major indexes ended Monday mixed in choppy trading. The Dow fell more than 140 points, or 0.4%, but the S&P 500 finished the session flat and the Nasdaq rose 0.2% after a bigger spike early on.

Feared Iranian attack on Israel a top threat to stocks in a busy week

Geopolitics threatened to deal a fresh blow to investor confidence on Monday just as stocks appeared to be shaking off the most chaotic stretch of the year.

Specifically, an expected attack by Iran against Israel could send stocks reeling once more, with one popular Wall Street strategist-Fundstrat's Tom Lee-warning that such a move represented the biggest risk to equities in a week packed with plenty of other potentially market-moving news.

Europe Pressures Elon Musk to Curb Hate Speech Ahead of Donald Trump Interview

The mere suggestion that Europe thinks it can limit what is said during a U.S. presidential campaign event is an extreme escalation of the continent's efforts to rein in Big Tech.

On Monday, Thierry Breton, the European Union commissioner for the internal market, issued an unprecedented warning to Elon Musk that Monday's interview of former President Donald Trump on the X social-media platform could run afoul of the EU's new sweeping online laws aimed at limiting harmful content.

Israel Puts Military on High Alert as U.S. Sends Assets to Middle East

Israel put its military on high alert and the Pentagon said it is sending a guided-missile submarine to the region and speeding up the arrival of a second aircraft carrier, amid heightened concerns about a possible Iranian and Hezbollah response to the killing of militant leaders in Tehran and Beirut.

Israel set the high-alert level for its military for the first time this month after observing preparations by Iran and Hezbollah to carry out attacks, a person familiar with the matter said. Israel doesn't know whether attacks are imminent and is proceeding cautiously, the person said.

Berkshire Hathaway Could Pay $15 Billion in Taxes on Apple Stock Sale

Berkshire Hathaway will be doing its part to address the $2 trillion federal deficit in the coming year because CEO Warren Buffett's company owes substantial taxes on its big sale of highly appreciated Apple stock.

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Expected Major Events for Tuesday

06:00/UK: Jul UK monthly unemployment figures

07:00/TUR: Jun Balance of Payments

07:00/SPN: Jul CPI

08:00/FRA: Aug IEA Oil Market Report

08:00/CZE: Jun Monthly Balance of Payments

09:05/GER: Aug ZEW Indicator of Economic Sentiment

12:00/POL: Jun Balance of payments

All times in GMT. Powered by Onclusive and Dow Jones.

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

(END) Dow Jones Newswires

08-13-24 0015ET