European Midday Briefing : Investor Focus Turns to Economic Data

MARKET WRAPS

Stocks:

European stocks struggled for momentum on Monday as investors awaited fresh cues from economic data later this week.

The economic calendar focuses on inflation, with U.S. PCE data on Thursday, German CPI on Thursday and eurozone CPI on Friday, as investors continue to look for clues on when central banks will start to cut interest rates.

Shares on the Move

Bunzl fell almost 5% after the company guided for lower revenue and operating margin for this year due to a slower-than-expected start to trading in North America.

U.K. housebuilders were lower after the competition regulator launched an investigation into whether eight housebuilders have shared commercially sensitive information with their competitors, with Persimmon down 2.1% and Taylor Wimpey losing 1.8%.

U.S. Markets:

Stock futures were lower as investors faced a week filled with a slew of earnings reports from tech companies and retailers and the release of the PCE data.

Stocks to Watch

Berkshire Hathaway reported strong earnings over the weekend, while Warren Buffett's annual letter divulged $8 billion of gains from bets on Japanese stocks. Shares climbed roughly 5% in premarket trading.

Nvidia edged higher, looking to extend their climb after blockbuster earnings last week. Options traders were also piling into bets on the artificial-intelligence chip maker.

Forex:

The current gap of around 15 basis points between the market's pricing of interest-rate cuts by the ECB and the Fed still looks low, which leaves the euro at risk of weakening further, Barclays Research said.

The euro risks falling towards Barclays' first-quarter target of $1.05 against the dollar as markets could price in more rate cuts by the ECB, it added.

Barclays Research also said the fundamental backdrop for the dollar remains positive and the currency could gain momentum as inflation data point to Fed interest-rate cuts being delayed.

Meanwhile, ING said the dollar could be set for a good week as U.S. PCE inflation data on Thursday encourage less aggressive bets on interest-rate cuts by the Fed.

"We see dollar rates receiving one - potentially final - round of support on the back of strong PCE figures and the dollar to have a good week."

However, beyond the short term, ING expects the dollar to fall.

The combination of high gilt yields and cheap valuation should lift sterling throughout this year , BNP Paribas Markets 360 said as it upgraded forecasts on sterling against the euro.

It now forecast EUR/GBP to end the year at 0.83.

Bonds:

Danske Bank Research expects 10-year German Bund yields to continue to trade in the 2.25%-2.45% range this year, ending at close to 2.35%.

Short-end rates will probably fall gradually as the first rate cut from the European Central Bank draws closer, it said.

Danske Bank Research continues to expect the first cut in June.

Energy:

Oil prices slipped, extending the sell-off seen at the end of the last week amid slowing demand and rising ex-OPEC supply.

Weekly data from Baker Hughes showed the number of U.S. oil rigs rose by six last week, while the Wafa oil field in Western Libya has resumed operations following a short halt over the weekend, ING said.

Looking further ahead, comments from the International Energy Week scheduled from Tuesday will be closely watched to gauge the market balance, ING added.

Metals:

Base metals and gold prices fell in early trade, though declines were limited as prices traded in a narrow band.

Aluminum slipped as the metal continued to fluctuate within its recent trading range, and investors should expect prices to continue to trade sideways in the near term, Sucden Financial said.

Elsewhere, copper stock builds in China were larger than average over the Lunar New Year, though aluminum and zinc continued to lag, JPMorgan said.

EMEA HEADLINES

U.S. Conducts More Strikes Against Houthi Targets in Yemen

WASHINGTON-The U.S. and the United Kingdom conducted a series of strikes at 18 Houthi targets at eight different locations inside Yemen Saturday, part of a continuing effort to fight back against the Iran-backed group that has continued to attack commercial and military vessels in the Red Sea.

The strikes Saturday hit a number of Houthi targets, including underground weapons storage facilities, other missile storage facilities, one-way attack drones, air-defense systems, radars and a helicopter, according to a statement issued by the Pentagon. The U.S. and U.K. conducted the strikes with assistance from Australia, Bahrain, Canada, Denmark, the Netherlands and New Zealand.

Israel's Netanyahu Won't Agree to Hostage Deal Until Hamas Backs Down on Demands

TEL AVIV-Israeli Prime Minister Benjamin Netanyahu on Sunday said he won't agree to a deal to free the remaining hostages held in Gaza until Hamas yields on its demands, and that Israel will press ahead with a campaign to defeat the militant group's remaining battalions in the southernmost reaches of the strip.

Speaking on CBS's "Face the Nation," Netanyahu said Israel's military would have to invade Rafah, on Gaza's southern border with Egypt, regardless of any deal to free some of the 130 remaining hostages who were seized from Israel during the Hamas-led attacks on Oct. 7. Israel's total victory over the group was in reach, he said, and once the operation there begins, the most intense phase of the war "would be weeks away from completion."

Zelensky Says 31,000 Ukrainian Troops Killed in Two Years of War

KYIV-Around 31,000 Ukrainian soldiers have been killed since Russia launched its invasion two years ago, President Volodymyr Zelensky said, highlighting the scale of Ukraine's sacrifice ahead of a decisive vote in the U.S. Congress on military aid to Ukraine.

"Every such loss is a great loss to us," he said in a press conference Sunday. It was the first time Zelensky had offered a figure for Ukraine's war losses, but he declined to name the number of wounded troops because he said doing so would help Russia understand how many were out of action.

GLOBAL NEWS

Warren Buffett Was There for the Japanese Market Rally

Warren Buffett was into Japanese stocks before their recent comeback.

Buffett's company, Berkshire Hathaway, revealed in August 2020 that it had built stakes of about 5% in five Japanese trading companies. Berkshire has since added to its positions in Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo, themselves conglomerates with wide ranges of businesses and investments.

Do stock-market investors care more about Nvidia than the Fed? Inflation data will provide a test.

It might seem at times that investors care more about Jensen Huang than Federal Reserve Chair Jerome Powell.

Huang is the longtime CEO of chip maker Nvidia Corp. NVDA, which stole the show last week by blowing away already lofty earnings expectations and leading stocks to new rounds of all-time highs, even as nagging worries over resurgent inflation continued to percolate in the background. Huang declared that the artificial intelligence industry, of which Nvidia is a prime supplier of crucial chips, has reached a "tipping point" that will see the technology go "mainstream."

Surging Nvidia Stock Keeps Drawing In More Believers

Nvidia's historic run is minting profits for investors big and small. Many are betting the boom is just beginning.

They are piling into trades that the chipmaker's shares, which have more than tripled over the past year, are headed still higher. Some have turned to the options market to look for ways to turbocharge their bets on artificial intelligence after a blockbuster earnings report sent the stock up 17% over the past two days.

Biden's Biggest 2024 Challenge to Date: 'Uncommitted' in Michigan

WASHINGTON-Democrats are warning President Biden to take Tuesday's Michigan primary results seriously, as activists push him to change course on the war between Israel and Hamas.

The election is shaping up as Biden's most significant voting test yet, as Arab-American and young voters attempt to use the primary as a vehicle to protest the president's policies. While Biden is all but assured victory, the outcome could augur general election troubles in the battleground state where polls show the president is currently trailing former President Donald Trump, his expected Republican challenger.

Trump Tightens Hold on GOP, Crowding Out Even Popular Rivals

Donald Trump's 20-point victory over Nikki Haley in South Carolina's Republican primary not only shows the powerful hold that Trump commands over his party's voters, but also the inability of any GOP leader to rally support against him as he moves to the brink of securing the presidential nomination.

The primary results have shown resistance to the former president among voters he likely would need in November, particularly among professional-class, suburban voters. But Trump has now won the first five nominating contests in convincing fashion, a performance that has all but wiped out opposition within the GOP's leadership ranks.

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

(END) Dow Jones Newswires

02-26-24 0546ET