MARKET WRAPS
Stocks:
European stocks moved into positive territory on Wednesday after a survey showed confidence in the eurozone economy ticked up in March, albeit still at subdued levels.
The eurozone sentiment indicator, an aggregate measure of business and consumer confidence, matched consensus expectations and moved closer to its long-term average, marked by a reading of 100.
However, gains for stocks were tentative on increased caution, as investors await inflation data from the U.S. and eurozone to determine central banks' interest-rate path.
"[Markets] are awaiting key U.S. and European inflation readings and comments from central bank officials for insight into the interest rate outlook," Tickmill Group said.
Stocks to Watch
The market now appreciates BMW's strong position amid the industry transition and its cash returns have been priced in, Jefferies said, as it cuts its rating on the stock to hold from buy.
"We believe the combination of post-Covid trading conditions and the industry's technology transition help create an environment of reduced earnings cyclicality and better investment discipline that enable higher cash returns than in the past."
But BMW has already returned essentially all of its free cash flow to shareholders in recent years, and returns for Chinese minority shareholders of its Brilliance JV could restrict future payouts.
No legacy carmaker has handled the electric-vehicle transition better, but the market now appreciates that, Jefferies said.
U.S. Markets:
Stock futures gained and bond yields were little changed on Wednesday, with traders again wary of taking bold positions ahead of this week's inflation data.
There are no top-drawer U.S. economic data releases on Wednesday, though there is some Fedspeak, with Christopher Waller making comments on the economic outlook after the U.S. close.
Earnings reports are expected from Carnival, Cintas, Jefferies Financial, RH, Braze, H.B. Fuller, and Sprinklr.
Stocks to Watch
GameStop reported fiscal fourth-quarter revenue that missed estimates and shares of the videogame retailer were down 17% in premarket trading.
Trump Media & Technology Group was up 12% in the premarket session after closing with a gain of 16% on Tuesday in its first day of trading. The stock rose as much as 59% on Tuesday.
Forex:
The dollar has been edging higher recently, helped by prospects of the Fed keeping interest rates high for longer than previously expected, renewed focus on tariffs and other central banks coming closer to cutting rates, J.P. Morgan said.
It expect the currency to strengthen, maintaining a medium-term 'bullish bias', but it has reduced exposure for now due to improving growth in China and Europe. It also points to ongoing weakness in the yen despite the Bank of Japan's first interest-rate hike in 17 years.
The yen hit its weakest level against the dollar in 34 years on waning expectations the Bank of Japan would raise interest rates further after it dropped its negative interest rate policy last week.
Traders are looking at the psychologically-important Y152.00 level against the dollar, RBC Capital Markets. said.
It added that concerns about potential intervention by Japanese authorities "have not seen the [dollar/yen] pair pullback much at all, merely capping it for now."
Bonds:
Front-end eurozone government bonds are now too cheap, with the market a little too conservative in its European Central Bank rate-cutting cycle scenario, Natixis Research said.
In particular, the short end of the Italian curve offers a higher yield than Spanish or German bonds, and the carry roll-down is also more attractive, it said.
Against this backdrop, Natixis recommends investors enter a long in Italy's September 2025 BTP at a yield of 3.37%, targeting a yield of 3.10%, with stop-loss at 3.55%, with the trade idea having a three-month horizon.
Commerzbank Research said German Bund yields remain range-bound but potential weakness in bond markets following Spanish inflation data, due at 0800 GMT, could offer better entry opportunities.
"Setbacks from a rising Spanish inflation rate today should provide better buying opportunities ahead of Easter, with quarter-end flows providing support and euro area inflation likely to drop next week."
It added that Bunds remain stuck in a range as bearish flattening of the Treasury curve and underperformance versus Bunds limit the downside for Bund yields.
Lombard Odier said it may be time to lock in higher bond yields with rate cycles peaking in developed markets, remaining overweight on fixed income.
"Yield curves are increasingly reflecting this new reality, as short-term rates fall faster than longer term ones."
Its earlier focus on Treasurys now extends to euro and U.K. sovereign bonds, and it retains a bias to add duration as rate cuts unfold.
Lombard Odier's portfolios now have more exposure to core assets, including fixed income and private assets, to reflect the environment of higher "neutral" interest rates and asset class returns.
Energy:
Crude futures traded lower following reports that U.S. stockpiles rose by 9.3 million barrels in the week ended March 22, according to figures from the API. Official inventory data is set to be released later on Wednesday by the EIA.
Oil was also pressured by a stronger dollar ahead of U.S. PCE inflation data this week, as the market awaits for more cues on the interest-rate outlook.
Metals:
Base metals were lower, with gold trading in a narrow band, as the dollar firmed slightly on increasing nervousness before Friday's U.S. core personal consumption expenditure print. Traders are preparing for a potential bad surprise in advance, Swissquote Bank said.
Expectations for three Federal Reserve interest rate cuts are still intact, but only if the first cut happens by the summer, Swissquote Bank said. If the base case scenario of three cuts plays out, investor interest should broaden from major stocks to gold and copper, among other commodities, it added.
Iron Ore
Iron ore prices would likely struggle to stick at levels below $100/ton for long even if the market continues to weaken, Commonwealth Bank of Australia said.
Prices fell under $105/ton this week on concerns around Chinese steel demand, given ongoing weakness in the country's property sector. CBA expects China's steel demand will track sideways this year, as spending on infrastructure offsets slack demand from property.
CBA said a second support for prices is tied to how seaborne iron ore costs have evolved over the past few years. After the deadly Brumadinho dam spill in Brazil in early 2019, the market replaced the lost iron ore exports with higher-cost supply that BHP estimates to be in the $80--100/ton range.
EMEA HEADLINES
UBS, Apollo Complete Carveout of Former Credit Suisse Business
UBS Group and Apollo Global Management agreed to take the final step in the carveout of Credit Suisse's former securitized products business, as the banking giant presses ahead on the integration of its once rival.
The Swiss bank said Wednesday that it and New York-based asset manager Apollo agreed to end deals for the management of Atlas SP, the former securitized products business of Credit Suisse that Apollo acquired shortly before Credit Suisse's takeover by UBS.
Hennes & Mauritz Net Profit Beats Forecasts as Sales Pick Up
Swedish fashion retailer Hennes & Mauritz posted forecast-beating earnings as well-received spring collections pushed sales higher during February.
H&M is working through a cost and efficiency program to save 2 billion Swedish kronor ($188.8 million) a year as it works toward lowering prices for customers and achieving an operating margin of 10% this year.
DS Smith in Takeover Talks With International Paper
DS Smith is in talks with International Paper regarding an all-share takeover proposal valuing London-listed DS Smith at 5.72 billion pounds ($7.22 billion), potentially sparking a bidding war as the offer price is higher than that of its recently-agreed deal with peer Mondi.
Packaging company DS Smith said Tuesday that International Paper's proposal represents a value of 415 pence for each DS Smith share. Shareholders would get 0.1285 shares of International Paper for each DS Smith share, it said. This is a 48% premium to its closing price of 281 pence on Feb. 7-the day before Mondi disclosed its interest in a deal-based on International Paper's share price of $40.85 on Monday at market close, DS Smith added.
Airbus Has Its Own Issues. Can It Keep Its Lead Over Boeing?
Boeing's pain is European rival Airbus' gain-but that advantage may not last long unless the aircraft maker can ramp up production.
Airbus CEO Guillaume Faury said at a conference in early March that Boeing's well-documented regulatory, production, and safety problems were bad for the industry as a whole. There's probably some truth to that. But in reality, the two have been locked in an intense battle for decades, and the U.S. plane maker's troubles benefit Airbus considerably.
Riksbank Says Rate Cuts Could Start in May or June
Sweden's central bank held its key policy rate at 4.0% and said that rate cuts could start in May or June as long as inflation prospects remain favorable.
Economists polled by Dow Jones ahead of the decision had all expected the policy rate to be held at 4.0%.
Irish Economy Forecast to Return to Growth, Easing Drag on Eurozone
The eurozone economy may be freed of a headwind that enfeebled growth in 2023, with new forecasts pointing to a return to expansion for Ireland, one of the currency area's smallest but most changeable members.
The eurozone economy barely grew last year, in contrast to a booming U.S. Much of that weakness was down to high prices for food and energy, and rising borrowing costs. But it was exacerbated by Ireland's comedown from its pandemic-driven boom.
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