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EMEA Morning Briefing: Mixed Start Seen for Europe as Investors Digest Fed Minutes

08/18/2022 | 12:45am EDT


Watch For:

Eurozone July harmonized CPI, June construction output; updates from Bang & Olufsen, Adyen, Koninklijke BAM Groep, Boskalis Westminster

Opening Call:

Shares in Europe are expected to open mixed, with the FTSE 100 likely to open flat while the DAX may push higher. In Asia, stocks were mostly tracked U.S. equities' declines; Treasury yields were mixed; the dollar, oil and gold posted mild gains.


European stocks are poised to open mixed Thursday, after Wall Street closed lower as investors reviewed another batch of earnings from retailers and studied the latest signals from the Fed about future interest-rate moves.

"In a microcosm, today tells you how closely the market is looking for any indication of the Fed's next step," said Jim Baird, chief investment officer at Plante Moran Financial Advisors. After the minutes' release, "everyone came back to the other side of the boat. That tells you what the market is focused on right now," he said.


The dollar edged higher in Asia after paring gains following the release of the Fed's most recent meeting minutes saying officials anticipate ongoing increases for the Fed funds rate.

The minutes also revealed that many officials saw a risk that the Fed could tighten more than necessary, given the constantly changing nature of the economic environment and long, variable lags in monetary policy's impact. Some officials also said the benchmark fed-funds rate target was still below neutral, or the level which neither stimulates nor restrains economic growth, even after July's rate hike.

Investors remain unsure about the future pace of tightening by the FOMC.

"While the FOMC minutes continue to emphasize the need to contain inflation, there is also an emerging concern the Fed could tighten more than necessary," said FHN Financial Chief Economist Chris Low.

"There is an inkling of improvement on the supply side of the economy, there is a bit of hope in some product prices moderating, but there is still a great deal of concern about inflation and inflation expectations."

"All of this translated into a 75bp rate hike in July, a decision to keep tightening at future meetings, a decision to soon moderate the tightening pace and--from some participants--a reluctance to ease quickly once peak Fed funds is reached," Low said.


Treasury yields were mixed in Asia after the yield on the 2-year note reached a two-month high overnight following the release of the Fed minutes.

Treasury yields remained higher after the Fed minutes revealed that policy makers saw the need to raise its benchmark interest rate to a "restrictive" stance given the risk of the public questioning their resolve to bring down inflation.


Oil futures pushed slightly higher after closing higher overnight on data showing a weekly drop of more than 7 million barrels in U.S. domestic supplies.

"It was a bullish EIA report as US crude exports rose to a record as Europe scrambles for alternatives to Russian oil," Oanda's Edward Moya said.

Oanda added that the oil market will remain tight, given that there is limited spare capacity and hopes of a revival of the Iran nuclear deal appear to be dwindling. "It looks like oil needs to head higher," Moya said.


Gold futures edged higher after weakening overnight on a strong dollar and rising Treasury yields.

The precious metal will likely trade within a limited range for now, with markets keeping an eye on next week's Jackson Hole Symposium, Oanda said.

"Although gold is seen as a hedge against inflation, rising U.S. interest rates dull non-yielding bullion's appeal," Phillip Securities said.


Aluminum pushed a tad higher amid signs of tighter supply as Europe's energy crisis persists.

Norsk Hydro said earlier this week that it is closing primary aluminum operations at its Slovalco plant in Slovakia as high electricity prices have made operations financially unviable. Aluminum is sometimes referred to as a solid form of electricity due to its energy intensive process, ANZ noted.

Meanwhile, traders are also keeping a close watch on Sichuan, China's aluminum hub, where officials are rationing electricity amid extreme weather, ANZ added.


Iron-ore futures slid in Asia, extending recent declines amid demand concerns.

Steel-making profitability has weakened again and steel mills aren't sufficiently motivated to increase output, Huatai Futures said.

In the medium term, prices of the raw material may lack upward momentum in part due to a gloomy outlook for the Chinese property sector, Huatai added.


Fed Officials See Need for Continued Interest-Rate Increases, but Less Certainty Over Destination

Federal Reserve officials agreed at their monetary-policy meeting last month they needed to keep raising interest rates enough to lower inflation, but signaled greater caution with the pace of coming increases.

The central bank has raised rates this year at its fastest pace since the 1980s. Minutes from the Fed's July 26-27 policy meeting, released Wednesday, showed officials were sensitive to two opposing risks as they weighed how and when to slow those increases.

U.S., Taiwan to Begin Formal Talks for Trade, Investment Pact This Fall

WASHINGTON-The U.S. announced Wednesday that it and Taiwan will start negotiations for a bilateral trade and investment initiative this fall to deepen ties on a range of issues including technology and agriculture.

The new pact will also address ways to respond to "distortive practices of state-owned enterprises and nonmarket policies and practices," the U.S. Trade Representative's office said, in a clear reference to China's policies without naming the country.

Iran Renews Demands for U.S. Guarantees in Nuclear Deal Talks

BERLIN-Iranian demands for guarantees from the U.S. have once again stalled efforts to revive a 2015 nuclear pact, leaving Washington and European capitals unsure if a deal is possible.

Tehran on Monday sent a response to the European Union, which chairs the nuclear talks, neither accepting nor rejecting an EU draft text of a deal but raising several issues Iran wanted incorporated into the agreement. The EU had said its draft was the "final text" of a possible deal when it sent it out, announcing that negotiations were over.

China to Join Russia Military Exercises as U.S. Rivals Deepen Ties

The People's Liberation Army of China said it would join military exercises led by Russia in the latest demonstration of partnership between the two U.S. rivals.

Building on a "no limits" pact their presidents signed this year, the Russian and Chinese militaries will drill side-by-side starting later this month in the Russian Far East, according to China's Ministry of Defense. The exercises will mark their second joint show of force in the region this year after bombers from each country in May conducted a 13-hour drill close enough to Japan and South Korea that those nations scrambled jet fighters, as President Biden was visiting Tokyo.

Oil Giants Must Face Climate-Liability Suits in States, Appeals Court Rules

A federal appeals court ruled that lawsuits by Delaware and Hoboken, N.J., seeking compensation from oil companies for the impacts of climate change should be decided in state, not federal courts.

The decision Wednesday is the latest procedural victory by state and municipal governments, which have sought to bring climate-liability cases against companies such as Exxon Mobil Corp., Chevron Corp. and Shell PLC under state laws, after similar earlier efforts under federal laws proved unsuccessful.

U.K. Government to Pay Thousands of People Who Were Infected by Tainted Blood

The United Kingdom will pay thousands of people who were infected with hepatitis C or HIV through contaminated blood about $120,000 each, the government said Wednesday.

The government payments follow recommendations from a yearslong inquiry examining the tainted blood scandal in the U.K. in the 1970s and 1980s. Thousands of people with hemophilia and other blood disorders were infected with HIV and hepatitis C through blood treatments from the National Health Service. At least 2,400 people died, according to a 2017 estimate from the government.

Russia Hunts Saboteurs in Crimea After Blasts

DNIPRO, Ukraine-Russia's intelligence services were hunting for saboteurs in Crimea on Wednesday after an explosion at an ammunition depot rattled Moscow's grip on the peninsula.

Tuesday's blasts followed an explosion last week at an air base in Crimea, which was annexed by Moscow in 2014.

Amazon Seeks Top Film Executive Amid Expansion of Entertainment Arm

Amazon.com Inc. is searching for a senior movie-studio executive to help lead its growing entertainment division, turning to rivals for a chance to poach an experienced Hollywood player.

Amazon Studios has held conversations with several Hollywood leaders about the role, including Netflix Inc.'s film head, Scott Stuber, one of the streamer's most powerful and visible executives, according to people familiar with the matter.

Write to hoishan.chan@dowjones.com

Expected Major Events for Thursday

04:30/NED: Jul Unemployment

06:00/SWE: 2Q Industrial inventories

06:00/SWI: Jul Trade Balance

06:00/SWE: 2Q Industrial capacity utilization

06:00/NOR: Jun Monthly GDP

07:00/SPN: Jun Industrial Orders & Turnover

07:00/SVK: Jul Harmonized CPI

07:00/AUT: Jul CPI

07:00/SPN: Jun Trade Balance

08:00/BUL: 2Q Labour force survey

08:00/NOR: Norges Bank monetary policy decision

09:00/CYP: Jul Harmonised CPI

09:00/EU: Jul Harmonised CPI

09:00/MLT: Jul Harmonised CPI

09:00/EU: Jun Construction output

11:00/TUR: Turkish interest rate decision

23:01/UK: Aug UK Consumer Confidence Survey

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

Write to us at newsletters@dowjones.com

(MORE TO FOLLOW) Dow Jones Newswires

08-18-22 0044ET

Stocks mentioned in the article
ChangeLast1st jan.
ADYEN N.V. 1.58% 1282.8 Real-time Quote.-45.37%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.03% 0.6434 Delayed Quote.-10.04%
BRITISH POUND / US DOLLAR (GBP/USD) -0.07% 1.07195 Delayed Quote.-20.22%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.05% 0.7283 Delayed Quote.-6.95%
CHEVRON CORPORATION 0.04% 141.02 Delayed Quote.20.17%
DAX -0.72% 12139.68 Delayed Quote.-23.58%
EURO / US DOLLAR (EUR/USD) -0.10% 0.95859 Delayed Quote.-15.39%
EXXON MOBIL CORPORATION 2.10% 85.74 Delayed Quote.40.12%
FTSE 100 -0.52% 6984.59 Delayed Quote.-4.92%
GOLD -0.06% 1627.62 Delayed Quote.-10.12%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.12% 0.012239 Delayed Quote.-8.35%
KINGDOM HOLDING COMPANY -1.39% 8.54 End-of-day quote.-15.45%
LONDON BRENT OIL 0.06% 86.22 Delayed Quote.11.58%
MSCI TAIWAN (STRD) 0.44% 476.856 Real-time Quote.-34.31%
NETFLIX, INC. 0.13% 224.36 Delayed Quote.-62.76%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.10% 0.5622 Delayed Quote.-16.03%
NORSK HYDRO ASA 0.14% 57.44 Real-time Quote.-17.49%
ROYAL BAM GROUP N.V. -1.08% 2.57 Real-time Quote.-3.42%
ROYAL BOSKALIS WESTMINSTER N.V. -0.06% 32.68 Real-time Quote.27.63%
S&P GSCI ALUMINUM INDEX -0.12% 133.647 Real-time Quote.-24.04%
SHELL PLC 1.45% 2243.5 Delayed Quote.36.36%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.69% 57.75 Delayed Quote.-24.61%
WTI -0.04% 78.548 Delayed Quote.1.76%
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