MARKET WRAPS

Stocks:

European stocks fell on Thursday after the Federal Reserve forecast just one interest-rate cut this year despite evidence of weaker inflation.

Jerome Powell said that while more recent inflation readings have shown improvement, "you don't want to be too motivated by any single data point."

More data on U.S. inflation is awaited, with the producer-price index for May due at 12:30 GMT.

Stocks to Watch

The falls in AXA and SCOR shares provide an entry opportunity--as the pressure is based on sentiment rather than fundamentals--Berenberg said, after President Macron's surprise parliamentary vote announcement. It said the stocks will likely fully recover their declines by the end of August.

U.S. Markets:

Stock futures were mostly higher as traders awaited another look at inflation.

Treasury yields were broadly steady, after sliding more than 0.1 percentage point in the previous session.

Stocks to Watch

Broadcom said it plans a 10-for-1 stock split and reported another quarter of strong demand, with about one-quarter of its sales coming from AI products. Its shares were up 14%.

Tesla rose 7% premarket after Elon Musk said preliminary voting results show shareholders currently backing a proposal to ratify his big pay package.

Forex:

The euro held onto some of the gains it made against the dollar following the U.S. inflation data, with reaction to the Fed rate cut forecast proving limited, analysts said.

"The biggest reaction came on the back of the lower inflation print, which initially sent U.S. yields down 13-15bp across the curve before some of the moves were reversed following the Fed meeting," Danske Bank Research said.

The Fed reduced its forecasts to just one rate cut in 2024 but the weak inflation data means multiple rate cuts this year are still possible, in which case the dollar would fall, MUFG said.

Comments by Jerome Powell that policymakers don't generally update projections when such data comes in the middle of policy meetings hint that the latest projections "were already somewhat stale," it said.

This could tip the balance in favor of more rate cuts this year, backing up MUFG's forecast for the dollar to weaken in the second half of the year.

Brown Brothers Harriman said that "overall, the Fed's guidance that it plans to keep the funds rate higher for longer while other major central banks have started to cut rates is dollar supportive."

"Nonetheless, Fed officials are looking to catch-up faster to the policy easing party in the next two years which can curtail dollar strength."

Bonds:

Eurozone government bond yields rose in early trading, partly reversing the previous day's losses which were caused by lower-than-expected U.S. CPI data, prompting markets to step up their expectations of two Fed rate cuts this year.

The Fed's dot plot, showing only one interest-rate cut in the remainder of the year versus three signaled back in March, "only unwound a part amount of the [bond] rally, with investors much more focused on the positive inflation news, with the hope that further prints like that one will open the door to faster cuts," Deutsche Bank Research said.

Slowing U.S. inflation is likely to coincide with a broader pullback in U.S. economic growth, and the Fed's anticipated rate-cut time frame highlights potential fixed-income opportunities in the current bond environment, American Century Investments said.

As the slowdown persists, American Century Investments expects the Fed will likely ease, and broader interest rates will likely decline. "When this occurs, yields on Treasury bills, savings accounts and other cash equivalents will follow, while bond prices may rise," it said.

"In our view, investors still have time to consider various fixed-income alternatives before the rate and pricing environment changes."

Energy:

Oil prices edged lower after official data showed a surprise build in U.S. crude inventories, while the International Energy Agency cut its oil-demand growth forecast and warned of a looming supply glut.

"Attention has returned back to oil fundamentals this morning with prices under renewed pressure," ING said.

According to the EIA, commercial crude stocks rose by 3.7 million barrels last week against expectations of a 1.2 million barrels fall, mainly due to stronger oil imports and weaker exports.

Metals:

Gold futures fell 1%, and base metals were also lower, after the Fed said it wouldn't cut interest rates any time soon.


EMEA HEADLINES

Stellantis Shifts Focus to Efficient Investments, Shareholder Returns

Stellantis will shift the focus of its capital allocation strategy to efficient investments and shareholder returns, and will target a higher dividend in 2025.

The Netherlands-based maker of Jeep, Dodge and a dozen other brands said Thursday that it will set a liquidity target of 25% to 30% of revenue in the medium term to support shareholder rewards. For 2025, it will target the upper end of its 25%-30% dividend policy compared with 25% in recent years, the company said.


Puig CEO Ready to Deliver on Promises After IPO

Spanish premium beauty house Puig is ready to confront skeptics and make a statement in the cosmetics world.

"We have gone public and have made a number of promises, since there's guidance, so I have to deliver now," Chief Executive Marc Puig said.


BT Shares Rise After Mexican Billionaire Carlos Slim Buys Stake

BT Group shares rose after the company said Mexican billionaire and telecommunications entrepreneur Carlos Slim Helu bought a 3.16% stake, making him the latest prominent investor to back the U.K. company.

At 0810 GMT, shares in the U.K. telecom group traded 2.2% higher at 132.25 pence. BT disclosed the stake shortly before London's stock-market closed on Wednesday, lifting its shares 1.1% at the close.


Atos Shares Continue Downward Slide Amid Work on Financial Rescue

Atos shares lost more of their value in early trading, adding to losses already reported this week as the French IT firm works on implementing its financial rescue.

At 0743 GMT shares traded 5% lower at EUR0.73. The shares have lost around 37% of their value this week alone and are now down around 95% from a year ago.


GLOBAL NEWS

Stung by Past Mistakes, a Wary Fed Takes Its Time

Federal Reserve Chair Jerome Powell's approach to cutting interest rates based on forecasts that inflation will continue moving lower could be summed up by the phrase "Trust, but verify."

On Wednesday, officials held rates steady and offered little evidence that they were prepared to begin lowering interest rates soon, as their counterparts in Canada and Europe began doing last week.


Why Bond Markets Are So Spooked by the French Election

France isn't Greece. And that's increasingly a problem. Unlike Greece, France has had little-to-no pressure to keep its finances under control, running giant budget deficits even as concern about its debt load built. Now, it faces a reckoning in the form of a snap election that polls suggest could be won by the populist far right with a high-spending anti-EU agenda.

Investors didn't like it one bit. They haven't concluded that France is Greece-but increasingly treat the country on a par with Spain or Portugal, once derided as members of the troubled "PIGS" alongside Ireland and Greece.


We're in a Goldilocks Market. Stocks Have Rallied in 2024 Despite Uncertainties.

With growth slowing, but still solid, and inflation stubbornly high, investors aren't quite sure what's in store next for stocks. Sometimes a little uncertainty is just what the market needs.

Investors headed into 2024 confident how the year would play out-with the Federal Reserve cutting interest rates, giving a tailwind to stocks and bonds. That hasn't happened and on Wednesday, it was regarded as a foregone conclusion the Fed would sit pat following its June meeting.


A New Chinese Megaport in South America Is Rattling the U.S.

CHANCAY, Peru-In this serene town on South America's Pacific coast, China is building a megaport that could challenge U.S. influence in a resource-rich region that Washington has long considered its backyard.

The Chancay deep-water port, rising here among pelicans and fishermen in small wooden boats, is important enough to Beijing that Chinese leader Xi Jinping is expected to inaugurate it at the end of the year in his first trip to the continent since the pandemic.


Italy's Prime Minister Shows How Far-Right Parties Can Go Mainstream

A few days ago, Italy's right-wing prime minister, Giorgia Meloni, was campaigning for votes as a scrappy underdog, presenting herself as "that bitch Meloni."

Now she is preparing to ascend the pinnacle of the global elite: hosting President Biden and other leaders of Group of Seven major advanced economies at a summit in southern Italy.


How an Iranian-Backed Militia Ties Down U.S. Naval Forces in the Red Sea

ABOARD THE USS LABOON-It was just after 9 p.m. when radar operators aboard this U.S. Navy destroyer in the Red Sea spotted a tiny arrow on their screens: a missile hurtling toward them at five times the speed of sound.


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


(END) Dow Jones Newswires

06-13-24 0600ET