EMEA Morning Briefing : Earnings in Focus as Markets Await Fresh Cues

MARKET WRAPS

Watch For:

EU FCCI Flash Consumer Confidence Indicator; trading updates from LVMH, Thales, Lagardere, Givaudan, Dassault Aviation, Compass Group

Opening Call:

European stock futures traded mixed. Asian stock benchmarks were mixed; the dollar and Treasury yields edged lower, while oil futures were little changed and gold rose slightly.

Equities:

Stock futures were mixed early Tuesday, as focus shifts to corporate earnings, with Tesla, Alphabet and LVMH on the docket later today.

There has been little consensus among investors and analysts about what President Biden's exit from the presidential race should mean for markets in the short run, and Monday's moves appeared to be influenced by other factors.

Some investors believe recent market moves have less to do with politics, the Fed or even inflation and more to do with what they see as sky-high stock valuations.

"The thing that really worries us is the level of valuations," said Roger Aliaga-Diaz, global head of portfolio construction and chief Americas economist at Vanguard.

Such conditions, he added, leave stocks ripe for a correction even if it is hard to know when that could happen.

Some investors said coming earnings results for large technology companies could go far toward determining whether stocks can extend their momentum from Monday.

Forex:

USD is likely to weaken modestly this week due to potentially weak U.S. economic data, said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia.

Thursday's U.S. advance estimate 2Q GDP is expected to grow only 1.6% and this Friday's June PCE inflation data are likely to be near zero, Capurso said. Further U.S. economic weakness could add to the case for the Fed to cut rates this year.

Bonds:

Fixed-income investors "should shift back to the traditional benefit of bonds: income generation," said LPL Financial's Lawrence Gillum. He said that while interest rates are expected to fall, high forecast budget deficits could keep them relatively elevated.

High yields "offer attractive risk-adjusted returns," even if prices don't rise much. "By moving into high-quality fixed income, investors can lock in these attractive yields for longer," Gillum said.

He added that Treasurys, agency mortgage-backed securities and investment-grade corporate debt are more attractive than other fixed-income options.

Energy:

Oil futures edged lower in Asia. Biden's withdrawal from the presidential race points to risks for a potential policy change that could influence oil production and regulation in the U.S., said Joseph Dahrieh, managing principal at Tickmill.

Harris is likely to be potentially tougher on the oil industry, which could have implications on supply levels in crude-oil markets, Dahrieh said.

Metals:

Gold was steady early Tuesday, underpinned by potential safe-haven demand. Worries over slowing economic growth in China, geopolitical risks from the Russia-Ukraine war and conflicts in the Middle East strengthen gold's appeal as a haven, said Rania Gule, market analyst at XS.com.

However, gold lacks continuous buying strength as traders await key U.S. inflation data later this week for clues on the Fed's monetary policy trajectory, which will determine gold's near-term path.

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Copper rose in Asian trading. Markets are digesting the news of Biden withdrawing from the presidential race, while awaiting the release of the U.S. PCE Index this week for signals on consumer spending and the Fed's next moves, said Daria Efanova, head of research at Sucden Financial.

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Iron-ore prices decline in Asia, dragged by potential weak demand in China, ANZ said. The lack of further stimulus policies for China's property sector has further weighed on market sentiment for iron ore, ANZ said.

However, losses have been contained by an unexpected drop in inventories, with iron-ore stockpiles across ports in China down 0.4% on week last week, data from Steelhome showed.

TODAY'S TOP HEADLINES

Ukraine Secures Financial Reprieve, Agrees to $20 Billion Debt Restructuring

Ukraine struck a deal with creditors that could save it more than $11 billion over the next three years, a boost for the war-torn country as it struggles to keep funding the war with Russia.

The preliminary deal, unveiled Monday, came after months of negotiations with a committee representing Western bondholders such as BlackRock and Pimco. The creditors had initially balked over how much relief Ukraine and its Western backers were requesting on nearly $20 billion of international debt run up before the Russian invasion, plus billions more in interest bills.

Stock market faces crucial test: Can summer rally continue without Big Tech?

U.S. stocks are wobbling after a recent rally beyond Big Tech, with volatility up after investors dumped shares of giant companies that dominate the S&P 500 index in favor of other areas of the equities market.

The S&P 500 SPX fell Friday for a third straight day, closing at its lowest value since the start of July, according to Dow Jones Market Data.

Harris's Support for Gaza Cease-Fire Hints at Foreign-Policy Shift

WASHINGTON-As the administration's most ardent senior-level advocate of securing a cease-fire in Gaza, Vice President Kamala Harris's elevation to the Democratic Party's standard-bearer now puts her in a stronger position to advocate for a shift in U.S. policy toward Israel and to carry out those changes should she win in November.

Though Harris has been careful not to contradict Biden, she has often pushed the envelope of the administration's messaging on the Israel-Gaza conflict. She has at times advocated forcefully, and ahead of other administration officials, for limiting civilian casualties and addressing the humanitarian crisis in the enclave.

Google Talks to Acquire Cybersecurity Startup Wiz Fall Apart

Alphabet unit Google's talks to acquire the cybersecurity startup Wiz for a planned $23 billion have fallen apart, according to a person with knowledge of the discussions.

In an email to employees sent Monday and viewed by The Wall Street Journal, Wiz chief executive Assaf Rappaport said the company is now aiming for an initial public offering.

Alexa Is in Millions of Households-and Amazon Is Losing Billions

Amazon.com's Echo speakers are the type of business success companies don't want: a widely purchased product that is also a giant money loser.

Chief Executive Andy Jassy is trying to plug that hole-and move away from the Amazon accounting tactic that helped create it.

Google Is Keeping Cookies in Chrome After All

In a major reversal, Google is ending a plan to eliminate cookies in its Chrome browser after four years of efforts, delays and disagreements with the advertising industry.

The decision to keep the pervasive tracking technology known as "cookies" in Chrome comes after a series of setbacks, as both digital-advertising companies and regulators objected to the plan and to Google's proposed replacement technologies.

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Expected Major Events for Tuesday

04:30/NED: Jul Consumer confidence survey

05:00/FIN: Jun Labour force survey, incl unemployment

06:00/DEN: Jul Consumer expectations

08:00/POL: Jun Unemployment

12:00/HUN: Jul Hungarian interest rate decision

14:00/EU: Jul FCCI Flash Consumer Confidence Indicator

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

07-23-24 0018ET