European Midday Briefing : Trader Focus Shifts to This Week's Powell Speech

MARKET WRAPS

Stocks:

European stocks were higher on Monday as investor focus shifted to the Federal Reserve's annual Jackson Hole symposium later in the week.

"The fear of decidedly hawkish Fed is already priced in, and if there is no more hawkish surprise from this week's Jackson Hole meeting, tensions among investors could ease by next week, and give markets some breathing room," Swissquote Bank said.

Meanwhile, China's benchmark lending rate was lowered by a smaller-than-expected margin after the central bank cut its key policy rates last week to offer more support for the slowing economy.

Read Rates in China Cut Again, but by Less Than Expected

Read Market Hoping for 'Big-Bang' China Stimulus

Stocks to Watch

Crest Nicholson's profit warning comes after U.K. house builders have struggled with worsening trading conditions over the summer, and the issues aren't going away soon, Interactive Investor said.

With mortgage borrowing becoming increasingly expensive, U.K. house builders are feeling the squeeze, "particularly given that strong wage growth and core inflation means that interest rates are expected to remain elevated for some time," it said.

The profit warning weighed on other sector stocks like Taylor Wimpey, Persimmon and Barratt Developments, which are trading at the bottom of the FTSE 100.

U.S. Markets:

Stock futures moved higher.

Treasury yields gained, as the 10-year Treasury yield headed back up toward 4.3%.

Stocks to Watch

Meta is expected this week to launch of desktop version of its microblogging app Threads, a competitor to X, the former Twitter, WSJ reported. Shares were up 0.4%.

Read Meta's Threads App to Launch Web Version as Rivalry With X Enters New Stage

Tesla rose nearly 3% premarket. Shares lost more than 11% last week, as the company released cheaper versions of some key U.S. models, and cut some prices in China.

Follow WSJ markets coverage here

Forex:

The euro was little moved against the dollar at the start of the week as traders wait for new factors to trade on, DZ Bank Research said.

Later in the week, flash estimate purchasing manager surveys and Germany's Ifo business climate index could move the euro, ahead of the Fed's annual Jackson Hole symposium.

Read Euro Could Struggle as Investor Sentiment Deteriorates

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The dollar should hold onto its recent gains this week due to rising government-bond yields and anticipation of Powell's speech at Jackson Hole, ING said.

"It looks too early for the Fed to sound the all-clear on inflation and the dollar probably holds its gains," ING said, adding that the DXY dollar index can probably edge up to 104.00 this week.

Bonds:

Eurozone government bond yields traded higher as global weakness in bonds continued as markets come to terms with the prospect of higher interest rates for a longer period, Deutsche Bank Research said.

"In aggregate, global bonds have now lost ground for 5 weeks running, and U.S. Treasuries are back in negative year-to-date territory," it said.

"In large part, those moves have been driven by the growing realisation that interest rates are set to remain higher for longer."

Read Lowest Weekly Government Bond Supply Expected in Eurozone This Week

Read Finnish Bond Syndication Expected to Come Soon

Energy:

Oil prices rose, with speculators looking to position for higher prices in the near future, amid tight inventories globally.

"The latest positioning data shows that speculators increased their net long in ICE Brent by 19,748 lots to 230,735 lots," ING said. Traders took advantage of the lower prices seen last week to set their long positions.

"The market appears to be concerned about the fact that ARA gasoil inventories are still looking quite tight and we are yet to start seeing a build in inventories as we edge closer towards the start of winter."

Natural Gas

Natural gas prices rose as worries over strikes at Australian producer Woodside Energy threatened to limit supplies, with workers saying they would inform the company by Wednesday if they are planning to take industrial action.

Woodside's North West Shelf facilities are equivalent to a little over 4% of global supply, ING said, however more strike action at Chevron's Gorgon and Wheatstone facilities could threaten exports even more.

ING indicates that European prices would likely be capped given stores are 91% full. More of the issue would be for Chinese and Asian cargoes.

Metals:

Base metals prices were mixed while gold edged higher in early London trading, with indexes continuing to be stifled by weak global growth.

Commonwealth Bank of Australia forecast falling prices for both gold and base metals in the fourth quarter on the back of a stronger dollar and weak demand.

It forecast a gold price of $1,875 an ounce in the fourth quarter and $7,810 a ton for copper.

"Our outlook for a recession in most advanced economies, alongside growing evidence of fading demand in China heightens the risk of a global copper surplus in 2023."

DOW JONES NEWSPLUS

EMEA HEADLINES

UK House Prices Fell at Fastest Rate on Month Since 2018

The average house price in the U.K. fell 1.9%, or 7,012 pounds ($8,938) in the month to August 12-the biggest fall in asking prices in a month since 2018-according to new data from Rightmove released on Monday.

The average price of property coming to the market fell on month to GBP364,895, outpacing the usual summer slowdown of a drop of 0.9% for the month, the online property portal said. On an annual basis, house prices fell 0.1%, swinging from growth of 0.5% in July.

America's Tech Giants Rush to Comply With New Curbs in Europe

BRUSSELS-The hammer is about to come down on some of the world's biggest tech companies.

Meta Platforms, Apple, Alphabet's Google and other large-and largely American-tech companies will by next week start facing the first of new European Union tech rules set to come into effect over coming months, marking the largest expansion in digital regulation ever in the West.

U.A.E. Cashes In on Russia's Economic Woes

DUBAI-A year and a half into the Ukraine conflict, few countries have capitalized on the economic opportunities quite like the United Arab Emirates, giving Russian President Vladimir Putin's war effort a lift while boosting this Persian Gulf state.

Banks here are poaching talent from Moscow to manage a gusher of Russian money. Dubai traders are moving more Russian oil and gold than ever before. And Russian buyers fuel this city's real-estate boom, often dealing in cash.

Russian Strike on Ukrainian City Kills Seven, Injures More Than 100

KYIV, Ukraine-At least seven people were killed and more than 100 injured in a Russian missile strike on the northern Ukrainian city of Chernihiv, according to Ukrainian officials.

The missile struck the center of the city on a busy Saturday morning, ripping through a theater and a university and leaving casualties across a large public square.

GLOBAL NEWS

Big Treasury Rout Lures Fresh Buyers

Bond investors say the summer selloff in U.S. Treasury debt is providing the best buying opportunity in years.

The Federal Reserve's tightening campaign and the economy's refusal to buckle under its pressure have lifted yields to their loftiest levels since the 2008 financial crisis. With the Treasury Department revving up its sales of long-term bonds, it is locking in some of the highest federal borrowing costs in years-a development that means bigger interest bills for taxpayers and stronger returns for many fixed-income portfolios.

Why the Era of Historically Low Interest Rates Could Be Over

Despite the Federal Reserve's raising interest rates to a 22-year high, the economy remains surprisingly resilient, with estimates putting third-quarter growth on pace to easily exceed its 2% trend. It is one of the factors leading some economists to question whether rates will ever return to the lower levels that prevailed before 2020 even if inflation returns to the Fed's 2% target over the next few years.

At issue is what is known as the neutral rate of interest. It is the rate at which the demand and supply of savings is in equilibrium, leading to stable economic growth and inflation.

Kim Jong Un Turns to High-Profile Visits to Mask North Korea's Internal Struggles

SEOUL-With North Korea suffering from starvation and a down economy, Kim Jong Un has increasingly shone a light on the few areas worth touting: His weapons and himself.

Kim, the 39-year-old dictator, inspected a navy unit and oversaw a drill launching strategic cruise missiles from aboard a nearby vessel, state media reported Monday. It was the latest in a string of recent prominent visits highlighting the regime's military prowess and new hardware advances.

U.S., China Try to Draw Nations to Their Side as Divisions Harden

If this isn't another Cold War, it certainly resembles one.

On the one side, leaders of the U.S., Japan and South Korea, touting their shared democratic values, pledged cooperation in confronting China's "dangerous and aggressive behavior."

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

(END) Dow Jones Newswires

08-21-23 0625ET