European shares were stuggling once again as traders eyed U.S. PCE data expected to show inflation picked up last month.

The PCE report is considered the Federal Reserve's favored inflation gauge, and so if it shows the month-on-month rise as expected then it should cement expectations that the central bank may not start cutting borrowing costs until the summer.

U.S. Markets:

Stock futures were falling ahead of the PCE data, while bond yields rose.

As well as the PCE data, Thursday also brings weekly initial jobless claims report, the February Chicago Business Barometer, January pending home sales and a batch of Fed officials making comments.

The S&P 500 and Dow industrials are on track to finish February with their best two-month starts to a year since before the pandemic. The Dow is up 3.3% through Wednesday's close, while the S&P 500 is up 6.3%.

Those gains would represent the indexes' best performances for the period since 2019.


A weaker dollar and small gains for European equities help lift the euro, with the currency shrugging off data showing French and Spanish inflation falling further in February.

Traders are likely to stay sidelined before key U.S. PCE inflation data at 1330 GMT and provisional February eurozone inflation data on Friday, as well as German inflation figures at 1300 GMT.

The euro could benefit again if the national inflation figures surprise upwards, coming in above forecasts, Commerzbank Research said.

"That would at least be a clear indication that we will also see higher values tomorrow," Commerzbank said, referring to Friday's release of the flash estimate eurozone inflation data.

Higher-than-expected eurozone inflation could validate expectations that the European Central Bank is likely to wait some more before starting cutting interest rates.

The dollar edged lower, knocked by gains in equities, but it could get a lift from U.S. PCE inflation data, ING said, with the data likely sufficiently strong to show markets were right to have scaled back Fed rate cut expectations.

"Our expectations are for a 0.4% core month-on-month print, which in our view will endorse the recent hawkish repricing of Fed rate expectations. We see the dollar finding some support today on the back of the release."


In fixed income spreads, "it just looks like a race to the bottom these days," MFS Investment Management said, adding it was "good for excess return, but perhaps less so for the valuation backdrop."

MFS said euro fixed income valuation is lagging its U.S. peer in a substantial way, which means that there is plenty of room for EUR credit spreads to challenge the 2021 level.

S&P's review of Portugal's credit rating on Friday could bring an upgrade in the coming months, potentially as early as this week, Citi Research said. S&P has Portugal at BBB+ with a positive outlook.

"Given S&P's expectation of continued fast reduction in Portugal's debt/GDP ratio...our latest forecasts pencil in a one notch upgrade by S&P to A- over coming months (and potentially this week) and another upgrade to A over the coming years," Citu said.


Oil prices slipped on concerns over reduced demand following a larger-than-expected build in U.S. crude stockpiles and ahead of key U.S. inflation data.

However, losses are limited as prices continue to be supported by expectations that OPEC and its allies will extend their production cuts into the second quarter, a move that would likely tighten the market.


Metals were trading higher as investors awaited the U.S. PCE inflation data. A softer print would put more Fed rate cuts back on the table, weaken the dollar, and boost commodity markets, Peak Trading Research said.


IAG Net Profit Surges on Strong Travel Demand

International Consolidated Airlines Group said travel demand has been strong and sustained, helping net profit rise and beat consensus, and that it was confident in achieving significant free cashflow generation.

The airline group-which houses British Airways, Iberia and Vueling among others-said demand continued to be robust, particularly in leisure travel. It said it was 92% booked for the first quarter, and 62% for the first half, which is ahead of its position last year.

Haleon Backs Views After Profit Rise on Robust Growth

Haleon said pretax profit for 2023 slightly rose supported by better-than-expected sales, with positive volume, price and organic growth across all categories and regions, and backed its targets for 2024.

The consumer-healthcare business, which was spun out of GSK PLC and is partly owned by Pfizer Inc., reported a pretax profit of 1.63 billion pounds ($2.06 billion) compared with GBP1.62 billion a year ago.

Air France-KLM Posts Loss After Israel-Hamas War, Rising Costs Take Toll

Air France-KLM reported net and operating losses well below analysts' expectations for the fourth quarter after the Israel-Hamas war disrupted travel to the Middle East and company expenses continued to rise.

The Franco-Dutch carrier group on Thursday posted a net loss of 256 million euros ($277.5 million) for the three months to the end of December compared with profit of EUR496 million in the fourth quarter of 2022. The company also posted an operating loss of EUR56 million compared with operating profit of EUR134 million for the same period the prior year.

Beiersdorf Guides for Sales Growth Ahead

Beiersdorf said it is targeting sales growth and a slight margin expansion in the year ahead after 2023 earnings and sales rose, although after-tax profit fell.

The German personal-care products maker said Thursday that profit after tax was 749 million euros ($811.9 million), down from EUR771 million the previous year.

Veolia Lifts Dividend, Expects Earnings Growth on Strong Demand This Year

Veolia Environnement increased its dividend and said it expects profit to grow this year amid strong demand.

The French resource-management company said Thursday that its earnings are the result of its positioning in the buoyant ecological transformation market, as well as its ongoing efforts to maintain strict operational control.

MTU Aero's Revenue, Earnings Beat Expectations Despite Pratt & Whitney Engine Woes

MTU Aero Engines posted revenue and earnings ahead of analysts' forecasts for the fourth quarter despite lingering issues linked to Pratt & Whitney engines that forced it to cut shareholder returns.

The German aircraft-engine manufacturer on Thursday reported adjusted revenue of 1.72 billion euros ($1.86 billion), up from EUR1.51 billion in the fourth quarter of 2022.


BOJ Board Member Calls for Discussion of Possible Exit From Monetary Easing

Bank of Japan policy board member Hajime Takata said Thursday that the central bank should start discussing details of a possible exit from its ultra-easy monetary policy.

"Achievement of our price goal is finally coming into sight," Takata said in a speech.

China's Crackdown on High-Frequency Trading Ensnares Another Firm

Chinese regulators have hit another firm with disciplinary action as they keep cracking down on high-frequency trading as part of efforts to stabilize equities markets.

The China Financial Futures Exchange said late Wednesday that Shanghai Weiwan Fund Management recently used high-frequency trading in stock futures to circumvent the trading-limit system trade, making 8.9 million yuan ($1.2 million) in profits.

Lawmakers Reach Deal to Avert Partial Government Shutdown This Weekend

Top congressional leaders unveiled a deal Wednesday to keep the federal government fully operating beyond Friday, when funding is scheduled to lapse for some agencies.

Leaders said they will hold votes on a stopgap bill this week to avoid any lapse in government funding, followed by votes next month on full-year spending bills.

Supreme Court to Decide on Trump Immunity Claim in 2020 Election Case

WASHINGTON-The Supreme Court agreed to consider whether Donald Trump must stand trial on charges he plotted to overturn the 2020 election, after lower courts rejected his claim that he is entitled to absolute immunity because he was president at the time.

The court's move means it will have final say on an issue the judiciary never confronted before Trump. But it also means the former president has bought himself more months before any trial, which had been scheduled to start in early March before the immunity battle scuttled those plans.

Biden's Doctor Declares Him 'Fit for Duty'

WASHINGTON-President Biden's doctor said he "continues to be fit for duty" after the 81-year-old commander in chief underwent an annual physical amid concerns about his age and health.

Dr. Kevin O'Connor, the president's physician, wrote in a letter released Wednesday that a comprehensive assessment by a team of doctors revealed "no new concerns." He said Biden has been using a positive airway pressure machine at night for sleep apnea and that he had a root canal in June.

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

(END) Dow Jones Newswires

02-29-24 0527ET