European Midday Briefing : Caution Dominates with ECB Decision in View

MARKET WRAPS

Stocks:

European stocks made little progress on Thursday in a cautious opening session, as traders awaited the European Central Bank's latest interest-rate decision.

UniCredit Research said sluggish decreases in inflation and a closing window of opportunity were among the main reasons why the ECB was likely to raise rates one last time on Thursday.

Meantime, Metzler Research said it was probably fair to assume that even the Governing Council "will not know until the last minute what the outcome of the discussion/vote will be...there are sufficiently pressing arguments for both sides."

Heavyweight miners and oil-linked stocks led London's FTSE 100 higher, helped by rising crude prices. Miners were boosted by a broker upgrade on Rio Tinto from JPMorgan.

Movers

Italian banks traded lower after Prime Minister Giorgia Meloni ruled out scrapping a windfall tax on lenders' profits but said details of the measure could be amended provided the state receives the expected inflow.

"If there are corrections to be made, they can be considered, but I don't intend to backtrack," Meloni said on Italian television, adding changes could be made as long as the tax still yields the "just under" EUR3 billion in expected revenue.

Stocks to Watch

European real-estate companies performed well in the first half of the year, with most of them confirming their earnings forecasts and a few upgrading them, Deutsche Bank said, as it raised its target prices on Immofinanz, LEG Immobilien, TAG Immobilien and Vonovia, and lowered them for Icade and Unibail-Rodamco-Westfield. Read more .

U.S. Markets:

Stock futures edged higher ahead of a busy day of economic data. Retail sales, weekly jobless claims and the producer price index are all due out ahead of the opening bell.

Adobe is set to post quarterly results after markets close.

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Forex:

The euro was firmer in early trading, but it could come under pressure as traders await the outcome of the ECB meeting, DHF Capital said.

"While the ECB is facing elevated inflation, the deteriorating economic conditions in the euro area could affect its interest rate decision, creating some doubts over whether it would raise rates or keep them unchanged," it said.

In addition, the weaker outlook for European economies, with Germany's expected to shrink this year, could continue to weigh on the euro's performance, DHF added.

DZ Bank said the ECB's rate decision will be key for euro moves.

The ECB Governing Council "will have to weigh up the continuing persistence of inflation against the worsening economic outlook," DZ Bank said, which favors "monetary policy standstill" but a further interest-rate increase cannot be ruled out in principle.

"For the euro, the absence of another rate hike could be a disappointment, as market participants now expect a hike of 25 basis points with a probability of 60%," it said.

Read Sell Sterling, Buy Euro, BlackRock Says

Read Dollar Slips as Market Assumes Fed Will Focus on Falling Core Inflation

Energy:

Oil prices rose, with Brent setting a fresh 10-month high as investors anticipated a supply shortfall throughout the rest of the year.

Brent has risen in 11 of the last 15 trading sessions as Saudi Arabia's supply cuts bite, cuts that Riyadh has said it will continue until the end of the year.

OPEC and the IEA both issued reports this week which foresaw of a sharp deficit forming towards the end of the year if cuts remain in place. That could see Brent hitting $100 a barrel, ANZ said.

Metals:

Base metals were mixed and gold was lower as a strong dollar and the possibility of more rate hikes from the Federal Reserve pressured dollar-backed commodities.

All eyes will be on the ECB's decision, Peak Trading Research said.

"The euro comprises 58% of the U.S. dollar index, so today's ECB policy decision and the currency impact on our commodity markets could be significant."

The uranium market is very tight and prices are likely to move higher heading into the year-end and 2024, Sachem Cove said.

"The rubber is meeting the road for supply and demand" after years of inventory drawdowns, it said, adding that it expects utilities to ramp up talks for uranium, conversion and enrichment via requests for proposals or private negotiations during the fall in the Northern Hemisphere. Read more .

Read Uranium Miners May Be Slow to Respond to Shortfall

Read Metallurgical Coal Gets Boost From Supply Snags

DOW JONES NEWSPLUS

EMEA HEADLINES

ECB May Hike Rates Again Thursday. But It's a Close Call.

The European Central Bank may raise interest rates for a 10th consecutive meeting on Thursday. But it's a close call.

Like the Federal Reserve, the ECB has rapidly increased borrowing costs to squeeze inflation out of the economy. But unlike in the U.S., where the economy has remained resilient, the outlook for growth is darker in Europe-and the inflation rate is considerably higher.

Thyssenkrupp to Reorganize Portfolio, Combine Units With Energy Transition Technologies

Thyssenkrupp said on Thursday that it will reorganize its portfolio and combine business units with key technologies useful for the decarbonization of industry, while also launching a group-wide performance program.

On Oct. 1, Thyssenkrupp Rothe Erde, Thyssenkrupp Nucera, Uhde and Polysius will be combined into the new Decarbon Technologies segment, the German industrial company said.

Fuel Prices Are Soaring. Who Is Feeling the Pinch?

Rising diesel prices are inflating the bills Brett McMahon is getting from the companies that truck in the plywood, rebar and other supplies his concrete-contracting business needs. Asking his clients to renegotiate contracts to ease that pain, he said, has been "hit or miss."

"In the private construction world, you're not going to get a terribly sympathetic ear for that," said McMahon, chief executive of Bethesda, Md.-based Miller & Long. "It's, 'Hey, you knew the risks when you signed the deal.'"

Arms Megadeal Collapsed When China, Russia Links Emerged

RIYADH, Saudi Arabia-American defense giant RTX and a Saudi weapons firm were heading toward a multibillion-dollar deal when it was abruptly called off early this year. The reason, say people familiar with the talks, was RTX's concerns that its Saudi partner's companies were pursuing business with sanctioned Chinese and Russian entities.

That unease was a deciding factor for an advisory board of retired American military officers to resign from the Saudi company, Scopa Defense, the people said. Scopa fired its American chief executive who had raised the sanctions concerns with his company's owner and U.S. officials. And now other major Western defense companies are reconsidering early-stage agreements primarily because of the concerns around engagement with Russian and Chinese entities, the people said.

GLOBAL NEWS

U.S. to Shift Millions in Military Aid From Egypt to Taiwan

WASHINGTON-The U.S. plans to redirect some of its foreign military financing allocated for Egypt to Taiwan over what it says is Egypt's failure to make progress on human rights and other issues, according to U.S. officials.

The Biden administration has notified Congress that it would withhold $85 million in aid conditioned on the release of political prisoners, officials said, and some lawmakers are pushing to withhold another $235 million in conditional assistance that goes to Egypt, amid growing calls by Democrats to penalize Cairo for its human-rights record.

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

(END) Dow Jones Newswires

09-14-23 0554ET