European Midday Briefing : Investors Brace for Economic Data This Week

MARKET WRAPS

Stocks:

European stocks inched higher on Tuesday as focus turned to economic data later in the week.

"It feels like there is a moment of calm and silence in the aftermath of major tech earnings, investors will decide whether this rally deserves to continue higher straight away," Swissquote said.

Investors await U.S. GDP data on Wednesday, then PCE inflation on Thursday and eurozone inflation data on Friday for potential further clues on the timing of interest-rate cuts.

Shares on the Move

Casino shares jumped after a plan to raise funds through a consortium led by Czech billionaire Daniel Kretinsky received approval from the Paris Commercial Court, taking it a step closer to trimming its debt pile.

Economic Insight

The European Central Bank may not even discuss interest-rate cuts at the March 7 meeting, as inflation remains elevated, HSBC Research said.

"We don't think the ECB will be confident enough that the eurozone has gone far enough 'along the disinflation process' [a phrase Lagarde used at the January meeting] even to discuss rate cuts, let alone signal that one is imminent," HSBC Research said.

"Furthermore, while growth remains subdued, it should be past the worst."

It expects the ECB also be more comfortable with the current less aggressive market pricing, and expects the first rate cut in June.

U.S. Markets:

Stock futures edged up ahead of a bevy of economic data later in the week.

Economic updates set for release on Tuesday include durable goods orders for January, the S&P Case-Shiller home price index for December, and February consumer confidence.

Stocks to Watch

Coinbase Global was rising 5.3% after jumping 17% on Monday as Bitcoin rallied . Other crypto-related stocks traded higher. MicroStrategy rose 5.7% and Marathon Digital gained 8.7%.

Zoom Video Communications rose about 11% in premarket trading after it forecast higher-than-expected adjusted profit for this year.

Forex:

A significant increase in the U.S. PCE index, due Thursday, could prompt the Fed to further undermine markets' expectations for an interest-rate cut, potentially strengthening the dollar, Exness said.

For the euro, individual country data then eurozone inflation data on Friday will be watched before next week's European Central Bank monetary policy meeting.

"As a result, the euro could strongly react to the eurozone, German and French inflation data releases," Exness said.

TD Securities expects the dollar to weaken through the second and third quarters as its own indicators suggest the global economy is accelerating.

"While U.S. data trends are strong, the critical ingredient for a global view is to compare the U.S./ROW [rest of the world]," TD said.

The Fed will eventually cut rates, while global financial conditions are also easing. China looks more stable and governments are spending in a key election year, he says. "This backdrop is risk positive and dollar negative."

Energy:

Oil prices rose in early trading on expectations of stronger spot crude purchases in China and a stronger physical market in the U.S.

China is suggested to have been buying crude cargoes at a higher pace since the Lunar New Year holiday in mid-February, while also increasing orders from Saudi Arabia--potentially reflecting advance buying ahead of the maintenance work, when refiners typically reduce imports, ING said.

Separately, local Russian media suggested the country has approved a six-month ban on gasoline exports from March 1, though it doesn't apply to Eurasian Economic Union, Mongolia and Uzbekistan, and shouldn't particularly affect the global gasoline market, ING added.

BofA Securities said oil prices should stay anchored near term but oil demand should embark on a slower growth path into 2025 on structural energy transition changes to various sectors.

"Against a slowing global oil demand backdrop," annual non-OPEC supply growth should average 700,000 bbl/day over 2024-2029, compared with BofA Securities' expectation last year of 860,000 bbl/day over 2023-2028, and its average of 900,000 bbl/day over 2017-2022.

Metals:

Metal prices rose, with gold edging up as the dollar weakened and base metal supply beginning to break.

Gold has remained resilient despite recent Fed pushback on interest rate cuts, with the dollar slipping as investors start to turn their attention to the release of PCE inflation data.

Elsewhere, base metal supply was beginning to tighten, pulling bullish tipping points into clearer view, JPMorgan said.

"Eroding supply looks most significant for copper in the near-term, the base metal where we hold the strongest bullish conviction," JPM said.

EMEA HEADLINES

German Consumer Confidence Ticks Up Despite Gloomy Outlook

Germany's consumer confidence improved slightly, driven by rising income expectations, even as sentiment remains subdued amid a weak economic climate.

The forward-looking consumer-sentiment index, published on Tuesday by research group GfK and the Nuremberg Institute for Market Decisions, forecast confidence to rise slightly to minus 29.0 in March from minus 29.6 this month. The index matched economists' expectations, according to a poll compiled by The Wall Street Journal.

U.K. Shop-Price Inflation Falls in February Driven by Fresh Food Drop, Report Says

Annual U.K. shop-price inflation fell in February to its lowest rate in nearly two years supported by a slowdown in food prices on lower input costs, a report by NielsenIQ and the British Retail Consortium showed Tuesday.

Prices at U.K. stores were up 2.5% on year in the week to Feb. 7 from 2.9% in January and below the three-month average rate of 3.3%. This is the lowest rate since March 2022, the report showed.

Puma Keeps Dividend Stable After Argentine Peso Devaluation Hits Profitability

Puma is leaving its dividend unchanged after the devaluation of the Argentine peso weighed on profitability in the fourth quarter.

The German apparel group said Tuesday that it would propose a dividend of 82 European cents per share ($0.89) for 2023 to its annual general meeting on May 22, the same it paid for the previous year.

Munich Re 4Q Profit Fell, Beat Expectations

Munich Re's profit fell in the final quarter of 2023, partly due to Hurricane Otis, but beat market expectations as the company recovered from a period marked by major losses in its property-casualty reinsurance business.

The German reinsurer said Tuesday that net profit in the three months to the end of December was 1.00 billion euros ($1.09 billion), down from EUR1.14 billion in the same period of 2022, adjusted for new accounting standards.

GLOBAL NEWS

Fed is 'not out of woods' on inflation, new regional bank president says

The battle against rising prices is not over, one of the newest top Federal Reserve officials said Monday.

"When it comes to too-high inflation, I believe we are not out of the woods yet," Kansas City Fed President Jeff Schmid said in his first public speech since joining the central bank six months ago.

Biden Says Israel Would Halt War During Ramadan if Hostages Released

President Biden said Israel has agreed to halt the war in Gaza during the Islamic holy month of Ramadan if Hamas releases hostages, adding pressure to negotiators who are racing to broker a cease-fire this week.

Israeli officials declined to comment on Biden's remarks, made during an appearance Monday on NBC's "Late Night With Seth Meyers." Earlier on Monday, Biden said fighting in Gaza could stop as early as the coming weekend, the most detailed timeline to date from the White House on a cease-fire between Hamas and Israel in Gaza.

As Israel Drives Out Hamas, Lawlessness Hampers Gaza Aid Efforts

TEL AVIV-Israel's drive to eliminate Hamas from power in Gaza is proving increasingly at odds with another objective it is under international pressure to pursue: ensuring delivery of humanitarian aid to Gazans struggling to find food and safety as the war in the south intensifies around them.

Blue-uniformed Gazan police vanished from the streets of southern Gaza earlier this month after as many as nine officers were killed in Israeli airstrikes, according to U.S. and United Nations officials.

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

(END) Dow Jones Newswires

02-27-24 0601ET