European Midday Briefing : Cautious Start to Week Packed with Policy Decisions

MARKET WRAPS

Stocks:

Stocks in Europe were lower on Monday as traders took a cautious view ahead of a number of central bank policy decisions this week.

"We may see final rate hikes from the BOE and the SNB, while the Fed is probably already done but hasn't explicitly indicated so yet, and the BOJ may just be about to start, although probably not," OANDA said.

"Needless to say, it could be a wild one for the markets."

Stocks to Watch

Renault isn't getting the positive attention it deserves from the market, Bernstein said, pointing out the car maker's sales momentum in its most important markets has improved in August after a strong performance in July. Bernstein now sees Renault's 2023 adjusted operating margin at 8.2%, which is above the company's top-end guidance of 8%. Read more .

Economic Insight

The German economy isn't likely to emerge from its current malaise for some time, Commerzbank Research said. Forecasts by economic institutes remain too optimistic, pinning their hopes on an upswing starting at the end of this year as inflation eases and wages rise, it said. Read more .

U.S. Markets:

Stock futures and Treasury bond yields edged upward, after a slump in tech companies on Friday weighed on the broader market.

Airbnb and Blackstone are set to join the S&P 500 before the market opens on Monday as part of a quarterly rebalance. The companies will replace Lincoln National and Newell Brands.

Premarket Movers

Ford and General Motors stocks climbed cautiously higher after negotiations between the 'Big Three' car makers and the UAW union resumed over the weekend.

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Forex:

The recent rise in eurozone bond yields has sparked increased foreign-investor inflows into eurozone debt markets, which may give structural support to the euro against the dollar this year, BNP Paribas Markets 360 said. This could explain why the euro has held up well even in the face of negative news from the eurozone.

"While energy price increases are a risk for the euro, they are unlikely to be sufficient to push EUR/USD down materially, in our view."

Metzler said it expects the euro to end the year at $1.06, before climbing to $1.07 and then $1.08 in the first and second quarters of 2024, respectively.

"The [U.S.] economy is weakening, but then it keeps surprising on the upside, and not only on the U.S. labor market, but also for example, recently again with retail sales," Metzler said. "In addition, U.S. inflation has seen its low point for this year and should tend to rise again in the remaining months."

Read Sterling Could Weaken Vs Euro Ahead of BOE Rate Decision

Read Dollar's Medium-Term Prospects Look Weaker

Bonds:

Greek government bonds marginally outperformed their eurozone peers after Moody's upgraded Greece by two notches to Ba1 with stable outlook on Friday.

"The two-notch upgrade reflects Moody's view that the Greek economy, public finances, institutions and the banking system are witnessing profound structural change that will support a continued improvement in credit metrics and resilience to future potential shocks," Moody's said. Read more .

Energy:

Oil futures rose after registering their third consecutive weekly gain, as the market is expected to head into a deep deficit.

Saudi Arabia's 1 million barrel-a-day production cut, plus its plan to extend the cuts until year-end, appear to be working to boost prices.

ANZ estimate the oil market will witness a 2 million barrel-a-day supply deficit this quarter thanks to the cuts and growing demand in China.

Metals:

Base metals edged higher across the board though traders remained cautious about the prospects for China's property sector.

More positive Chinese data led some Western investors to increase their bullish bets on copper but that was quickly countered as Shanghai traders took profits, TD Securities said.

"This highlights the still shaky environment for industrial metals. Indeed, property-market weakness has persisted in [China] despite the stronger data, and looking forward we see little evidence that recent dynamics in the red metal have shifted."

DOW JONES NEWSPLUS

EMEA HEADLINES

CEO of Naspers and Prosus Steps Down

Bob van Dijk has stepped down as chief executive and board member of Naspers and its Prosus unit, after running the South African internet and media conglomerate for more than nine years.

Naspers didn't give a reason for the change, which it said was mutually agreed to and effective Monday. It appointed Ervin Tu, the group's chief investment officer, as interim CEO, and said van Dijk would help with the leadership transition and remain as a consultant until the end of September 2024.

Societe Generale Sees Slower Revenue Growth Through 2026

Societe Generale is targeting slower average annual revenue growth between 2022 and 2026 than for the 2021-25 period, and aims to streamline its portfolio and reduce oil-and-gas exposure as part of a new strategy.

The French bank on Monday outlined its new strategic plan to 2026 that Chief Executive Slawomir Krupa said will strengthen the group with a simplified business portfolio. The bank intends to focus on its core franchises going forward, it said.

Lonza CEO Pierre-Alain Ruffieux to Leave

0713 GMT - News of the abrupt departure of Lonza Group Chief Executive Officer Pierre-Alain Ruffieux is unlikely to be taken well and won't help to build confidence going into next month's capital-markets day, RBC analyst Charles Weston says in a research note. "While the recent two downgrades of expectations did mean that some investors were uncertain about Mr. Ruffieux's execution and thus could potentially see this as positive, the unexpected and abrupt departure of the CEO is unlikely to provide the market with confidence heading into the [capital-markets day on Oct. 17], when we expect new mid-term targets to be announced," RBC says. A positive capital-markets day was necessary to drive a recovery in the Swiss life-sciences company's shares, RBC says. ([e-mail])

UK House Prices Creep Up On-Month But Below the Usual Annual Trend

The average house price in the U.K. rose 0.4%, or 1,386 pounds ($1,720) in the month to Sept. 9, lower than usual for this time of year according to new data from Rightmove released on Monday.

The average price of property coming to the market rose on month to GBP366,281, falling behind the usual rise of 0.6% for the month, the online property portal said. On an annual basis, house prices fell 0.4%, worsening from a 0.1% slip in August and the biggest drop since March 2019.

GLOBAL NEWS

Is China's Economic Predicament as Bad as Japan's? It Could Be Worse

HONG KONG-Starting in the 1990s Japan became synonymous with economic stagnation, as a boom gave way to lethargic growth, declining population and deflation.

Many economists say China today looks similar. The reality: In many ways its problems are more intractable than Japan's. China's public debt levels are higher by some measures than Japan's were and its demographics are worse. The geopolitical tensions that China is dealing with go beyond the trade frictions Japan once faced with the U.S.

An Even Bigger Housing Crisis Threatens China's Economy

China's giant housing industry is lurching into a new crisis that threatens to be the country's worst yet.

Two years ago, the debt-laden developer China Evergrande Group spiraled into insolvency, bursting the country's real-estate bubble and setting off a chain of developer defaults and business losses. The industry's troubles have dragged down China's economy.

Republican Groups Craft Short-Term Bill to Keep Government Open

Two major groups of House Republicans put together a short-term funding proposal to prevent a government shutdown, moving to break the deadlock in their party ahead of down-to-the-wire negotiation with Democrats to keep the government funded past Sept. 30.

The proposal unveiled Sunday by leaders of the hard-right Freedom Caucus and more-centrist Main Street Caucus contains sharp spending cuts and a border-security provision that will make the legislation a nonstarter in the Democratic-controlled Senate. But the proposed monthlong extension signals that House Republicans are working to find a way to fund the government once the current fiscal year runs out, after efforts to pass legislation last week stalled amid conservative protests.

Ukraine Hunts for Cash as Fighting Drains Coffers

War in Ukraine is cruel, but also expensive.

The counteroffensive aimed at driving Russian occupiers from its southern region has bogged down. Faced with another year of fighting-and a more than $40 billion budget deficit in 2024-finance officials in Kyiv are grasping for cash to keep the wartime economy running.

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

(END) Dow Jones Newswires

09-18-23 0550ET