European stocks mostly inched lower on Tuesday as investors looked ahead to U.S. consumer-price data this week which could set expectations for how the Federal Reserve will approach monetary policy at its coming meetings.
In recent weeks, better-than-expected corporate earnings and strong labor market data have dispelled concerns about an imminent U.S. recession, helping stock markets rebound from their lows.
That has lifted hopes that the Fed may temper its aggressive cycle of interest-rate rises. But with inflation running at a multidecade high, investors say Wednesday's CPI print will be key to the outlook for rates and the direction of the market.
"Corporate earnings are holding up OK and consumers are still spending, that is the bottom line," said Brian O'Reilly, head of market strategy at Mediolanum International Funds. Recent economic data "takes any talk of an immediate recession off the table for now," he added.
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Sanofi has hit some stumbling blocks in key pipeline programs, and growth is expected to decrease despite a 2022 guidance raise, said UBS.
The pharma major is expected to see a low-single-digit EPS growth and flat sales growth next year, as it will head into patent expiry for its multiple-sclerosis treatment Aubagio, UBS said.
Costs related to R&D are also expected to rise, and litigation around heartburn drug Zantac in early 2023 could also become an overhang, according to UBS which has downgraded the stock to neutral from buy,. UBS has a price target of EUR103 on the stock.
Stock futures inched higher as investors monitored earnings reports and economic data ahead of this week's key inflation figures.
Earnings season is winding down, though some major companies are still set to report figures. Warner Music Group, TPG and Emerson Electric are among the companies set to report ahead of the opening bell. Roblox and Wynn Resorts will release figures after markets close.
Ahead of the opening bell, Novavax slumped almost 30% after cutting its sales forecasts due to poor uptake of its Covid-19 vaccine. Clover Health Investments fell 10% after delivering a mixed earnings report and saying its chief executive was stepping down.
Data on U.S. labor productivity due Tuesday are expected to show a decline for a second straight quarter.
The euro may continue to trade sideways against the dollar even after upcoming U.S. inflation data, said Commerzbank, adding that it can't think of any good reasons why EUR/USD should break out of its current 1.00-1.04 range at present.
Friday's U.S. nonfarm payrolls data failed to do that and U.S. inflation data on Wednesday probably won't succeed either as everyone knows inflation will remain high and the Fed will continue raising interest rates decisively.
The European Central Bank is unlikely to change its view either for now, Commerzbank said.
The dollar edged lower still on signs U.S. inflation may have peaked last month after a Fed survey showed consumers lowered expectations of future inflation, said Swissquote.
A survey by the Federal Reserve Bank of New York showed a median expectation in July for annual inflation of 6.2% in one year, down from 6.8% in June.
"Investors are confident that inflation in the U.S. may have peaked last month. For economists, inflation expectations are more important than the actual data." However, Wednesday's CPI print "will say the last word, " said Swissquote.
The recovery in German Bunds from Friday's falls has come in thin volumes, leaving them vulnerable to sharp moves, said Commerzbank.
"Yesterday's recovery has yet to be backed by volumes," with only 364,000 contracts traded in the Bund future on Monday, around 200,000 less than the 10-day moving average.
"Although this might still be in line with the current stage of the summer season, thin trading liquidity renders markets vulnerable to sudden shifts in positioning," said Commerzbank.
Oil futures were down around 1%, with the prospect of Iranian exports returning to global markets following the latest talks between Washington and Tehran.
"The U.S. and Iran have weeks to decide whether they will revive the 2015 nuclear accord, which would open the door for Iran to resume oil exports," said Commonwealth Bank.
"The deal rests on Iran eliminating their stockpiles of enriched uranium first before the U.S. lifts economic sanctions," with European Union diplomats presenting the two countries with the final draft of the accord.
Base metals were higher in early trading, with macro sentiment improving on lower risk drivers.
"The macro mood feels better this morning," said Peak Trading Research. There was "a mild risk recovery" after Nancy Pelosi's visit to Taiwan with agricultural commodities also being boosted by the improved sentiment.
Peak said most investors are looking to Wednesday's consumer inflation data release.
"Investors and the Fed want to see a lower inflation print, which would help reinforce the 'worst Fed hikes are behind us' narrative."
DOW JONES NEWSPLUS
Munich Re Cuts Guidance on Investment Returns Amid Economic Slowdown, Rising Rates
Muenchener Rueckversicherungs-Gesellschaft AG said Tuesday that it was cutting its full-year guidance for return on investment on a cooling economy and higher rates, though profit and premiums beat second-quarter expectations as it overcame bigger losses.
The German reinsurer downgraded part of its full-year guidance after its investment result tumbled to 971 million euros ($990 million) in the second quarter from EUR1.93 billion in the same period last year, which it blamed on impairment losses on equities, triggered by falling equity markets.
Carlsberg Raises Full-Year Guidance on Europe, Asia Performance
Carlsberg AS late Monday upgraded its full-year guidance after a strong performance in Europe and Asia.
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InterContinental Hotels 1H Recovery Continued Amid Eased Restrictions; To Launch $500 Mln Buyback
InterContinental Hotels Group PLC said Tuesday that its first-half performance continued to recover as the easing of travel restrictions supported a rise in travel demand, and said it was launching a share buyback program of up to $500 million.
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EU Presents 'Final Text' to Iran for Reviving Nuclear Deal
U.S. and European officials announced Monday that a text for restoring the 2015 nuclear accord had been completed and that negotiations were finished, saying Iran must now decide whether to take or leave the deal.
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U.K. Retail Sales Rose as Consumers Faced Record-High Temperatures
U.K. retail sales increased in July as the heat wave boosted sales of hot-weather clothing, picnic treats and electric fans, according to the latest British Retail Consortium and KPMG report.
Retail sales rose 1.6% in July on a like-for-like basis, which compares with an increase of 4.7% in July 2021, the report said.
Ben & Jerry's Tells Court That Unilever Could Undermine Its Social Mission
Ben & Jerry's board members on Monday called for parent company Unilever PLC to be prevented from transferring the ice cream maker's assets to a local licensee in Israel, saying the brand's products could be used to oppose social issues that it supports.
Lawyers representing Ben & Jerry's independent board members made the comments in a court hearing about their request last month to block Unilever's sale of the brand's Israel operations-an unusual case of a brand taking on its corporate owner.
Russia Says it Won't Allow U.S. Inspection for Now of Its Nuclear Weapons
The crisis over Russia's invasion of Ukraine spilled into the realm of arms control on Monday when Moscow said it won't support the resumption of inspections of its nuclear arsenal under the New START nuclear arms treaty because of travel restrictions imposed by the U.S.
The accord, which cuts long-range nuclear arms, is the last major agreement regulating the nuclear competition between Washington and Moscow. Both sides have been observing its limits.
Attacks at Ukraine Nuclear Plant Are Suicidal, U.N. Chief Warns
KYIV, Ukraine-The international crisis over the weekend shelling of Europe's largest nuclear power plant deepened on Monday as Russia and Ukraine traded blame for missile attacks and the United Nations secretary-general warned that an attack on a nuclear facility would be suicidal.
Ukraine's nuclear regulator Energoatom on Monday accused Russia of bombing power lines to sever the Zaporizhzhia plant from the Ukrainian electrical grid and goading Ukrainian forces positioned across the river into attacks. It said the plant's staff were forced to close one of its six reactors over the weekend after an attack that severed a high-voltage power line, damaged three radiation monitors and shattered 800 square meters of window surfaces.
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