European Midday Briefing : Rising Bond Yields Weigh on Mood

MARKET WRAPS

Stocks:

European shares traded mixed on Tuesday as concerns about rising bond yields returned to weigh on sentiment and as positive news over the weekend on the U.S. avoiding a government shutdown faded.

Stocks to Watch

ArcelorMittal could report a sequential decline in numbers in the third quarter, hurt by contracting margins and lower volumes, Deutsche Bank said. Read more .

Read ArcelorMittal's Possible Involvement in US Steel Consolidation Sparks Unease

Shares in Novartis's generics spinoff Sandoz could be pressured when they start trading as a standalone stock Wednesday given that there is lukewarm appetite from investors in its current parent, Jefferies said. Read more .

U.S. Markets:

Stock futures ticked higher, but Treasury yields held near a 16-year-high of around 4.7%, as investors bet that the economy's strength will mean higher borrowing costs for longer.

Economic data set for release include JOLTS jobs openings data for August.

Stocks to Watch

Ford and General Motors have laid off roughly an additional 500 workers combined as the ongoing strike by the United Auto Workers forces the auto makers to idle more factories. Both rose 0.2% in premarket trading.

Meta is weighing a proposal that would charge Europeans almost $14 a month for ad-free versions of Instagram or Facebook, WSJ reported . Shares rose 0.4%.

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Forex:

The dollar hit its highest since late last year against a basket of currencies and the euro as U.S. government-bond yields rose further.

"The bid in dollar is relentless at the moment as is the march higher in yields," RBC Capital Markets said.

"While markets are net long dollar, few have the position on in large size, which is facilitating the speed of the current move - most are watching on the sidelines thinking it must be near an end and yet it keeps going."

Bonds:

Inflation-linked bonds provide investors with an "excellent risk-reward ratio" because they provide protection both against the risk that interest rates are too high and the risk that projected inflation is too low, Saxo said.

These bonds have "dual exposure to inflation and rates," it said.

"If inflation rises, their [inflation-linked bonds'] notional and coupon will increase. However, if inflation reverts to its mean, linkers will gain from a drop in interest rates."

Energy:

Crude oil prices moved lower, as the prospect of more rate hikes and uncertain demand pegged back key benchmarks.

BMI raised its 2023 average price forecast to $83 a barrel for Brent from $80 a barrel, after September's rally, but noted that it expects prices to soften this quarter.

"Economic trends will inevitably impact on physical oil demand, but Brent is also highly sensitive to shifts in macro sentiment," BMI said. "Our current expectation is for the current economic downcycle to bottom out next year, before returning to growth heading into 2025."

Metals:

Base metals and gold prices were falling in early trading, with the prospect of further monetary tightening from central banks adding pressure to commodity markets.

Read Natural Graphite Seen Getting Bigger Role in Batteries

DOW JONES NEWSPLUS

EMEA HEADLINES

ECB Chief Economist Says Wage Growth Needs Cooling to Reach Inflation Target

The European Central Bank hasn't yet won its battle against inflation, with wage growth a particular obstacle to reaching its 2% target, according to ECB Chief Economist Philip Lane.

At some level, there are signs that price increases will be less intense in the course of this year, Lane told a conference at Lithuania's central bank on Tuesday. But the overall message is still that price increases are well above 2%, he said.

Russian ruble tumbles to near 100 vs dollar, a level not seen since August

The Russian ruble was once again under pressure on Tuesday, pushing toward a level not seen since August.

The dollar USDRUB rose to 99.55 rubles, up 0.7%, having reached a session high of 100.03 rubles.

Turkish Inflation Keeps Rising, Leaving Central Bank With Few Options

Turkey's inflation rate continued to accelerate in September, suggesting the country may need to further increase already high interest rates as it battles to rein in rampant price rises.

The consumer price index increased by 61.5% in September compared with 58.9% the month before, data from the country's statistics agency showed Tuesday. This was largely in line with economists' expectations, according to a FactSet poll.

Sika Raises Midterm Earnings Goals, Combines Auto and Industry Segments

Sika lifted its midterm earnings targets on the back of a new business strategy and what it called a strong market position.

The Swiss chemical company and car-industry supplier on Tuesday raised its annual sales growth target to between 6% and 9% to 2028, in local currencies, from 6% to 8% to 2023. The move comes despite a volatile market in the short term, Sika said. Trends like increasing world population, urbanization, resource scarcity, digitalization and climate change will drive demand, Sika said.

GLOBAL NEWS

Japan Ready to Take Measures Against Sharp Yen Falls, Finance Minister Says

TOKYO-The Japanese government stands ready to take action if the yen weakens too sharply, Finance Minister Shunichi Suzuki said Tuesday.

"We are watching [the foreign exchange market] with a strong sense of urgency," Suzuki said at a news conference on Tuesday. "We will take every possible measures" against excessive moves in the yen.

Why Rising Interest Rates Hurt Bank Stocks Instead of Helping Them

For years, bank investors were itching for higher interest rates. They finally got them but it hasn't gone as investors hoped.

The Federal Reserve has lifted the federal-funds rate by 5.25 percentage points over the past18 months and the KBW Nasdaq Bank Index (ticker: BKX) is down by 40% over the same period. This rate-hiking cycle hasn't gotten investors excited about a surge in net interest income. Instead, Wall Street has focused on the negatives of rapidly rising rates: higher funding costs and hefty unrealized losses on bank balance sheets.

Matt Gaetz Launches Bid to Oust Kevin McCarthy as House Speaker

WASHINGTON-Rep. Matt Gaetz (R., Fla.) and House Speaker Kevin McCarthy (R., Calif.) have been on a collision course since the start of the year. Now, the two lawmakers will finally square off in the Capitol in a historic vote over the party's direction and leadership.

Gaetz, 41 years old and a fourth-term member of the House, took to the House floor late Monday to formally move ahead with a vote to oust McCarthy as speaker, known as a motion to vacate. "Declaring the office of speaker of the House of Representatives to be vacant, resolved that the office of the speaker of the House of Representatives is hereby declared to be vacant," Gaetz said in brief remarks laying out his motion.

Trump Goes to Court for Opening of Civil Fraud Trial

NEW YORK-An agitated Donald Trump stewed through the first day of trial in a Manhattan civil-fraud case that has the potential to cripple his business, as New York's attorney general sought to build upon an initial ruling last week that the former president broke the law.

Monday's proceedings formally kicked off what is likely to be a long legal season for Trump, who is looking to cement his big lead in the 2024 GOP presidential race while simultaneously fighting a series of cases that threaten his livelihood-and his freedom.

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

(END) Dow Jones Newswires

10-03-23 0546ET