European stocks posted modest gains on Tuesday, ahead of critical data on U.S. inflation that's likely to determine whether the recent rally continues.
UniCredit Research said the U.S. CPI print is expected to have moderated in August, but a lower figure is unlikely to deter the Federal Reserve from hiking interest rates by 75 basis points at its meeting on Sept. 20-21.
It added that the U.S. labor market is still tight and the Fed could worry about a wage-price spiral. In addition, monthly core inflation remains too high.
The data will be published at 1230 GMT.
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Henkel is likely to raise its guidance for organic sales growth and Ebit margin in 2022, Berenberg said.
The strong pricing-led organic sales growth seen in 2022's first half, better visibility on input cost pressures, and the progress management has made on its turnaround plans support the case for the upgrades, Berenberg said.
It has forecast 7.5% organic sales growth for 2022 and said management could boost 2022 guidance to 6%-8%. It could also increase the EBIT margin outlook from 9%-11% to 10%-12%.
"These changes would imply potential upgrades to 2022 consensus earnings estimates in the high single-digit range, which could support a stock recovery on the day."
U.S. futures rose around 0.4%, pointing to a fifth day of gains for the major indexes, with bond prices also higher.
The yield on the 10-year Treasury note fell to 3.325%, from 3.361% on Monday.
Pimco said that barring a material downside surprise, the U.S. CPI report won't change the outlook for another 75 basis-point interest-rate rise in the Fed funds rate at the September FOMC meeting.
" The recent commodity price decline is expected to lead to a negative month-over-month CPI print; however, we think core will be similar to last month--down from the alarming pace seen earlier this year, but still uncomfortably firm."
The dollar edged lower against a basket of currencies as Ukraine recapturing territory from Russia reduces flows into safe-haven assets.
MUFG Bank said the currency could extend losses if today's inflation data undershoot expectations.
It said the dollar declined after July's weaker-than-expected CPI print but the Federal Reserve has since downplayed the importance of the figures.
"A second consecutive weaker CPI report would though cast more doubt on market expectations for the Fed to deliver a third consecutive 75 basis points hike at the September 21 meeting."
GBP/USD hit a two-week high after data showed the U.K. unemployment rate fell to its lowest level since 1974 and wage growth accelerated, likely increasing pressure on the BOE to deliver another 50bp -rate rise at its next meeting, Capital Economics said.
The unemployment rate fell to 3.6% in the May-July period from 3.8% in the previous quarter while average earnings, excluding bonuses, rose 5.2%. Analysts polled by the WSJ expected a jobless rate of 3.9% and wage growth of 5.1%.
Read: UK Labor Market Data Support Case For Further BOE Rate Rises
RBC Capital Markets expects 10-year Bund yields to peak at 2% in 2022, above its year-end target of 1.80%, and envisages a mild flattening pressure on the curve.
"Given that we now think it is unlikely the ECB can be seen to pause anytime soon, given that the peak implied in forwards is still below 2.50% and given that we also think a QT [quantitative tightening] debate is likely to ensue before the end of the year, we expect markets to push Bund yields even higher into year-end."
Germany's 0.40% September 2024-dated Schatz has cheapened "hugely" since the European Central Bank's policy meeting last Thursday, but investors might be hesitant to buy ahead of the U.S. CPI data release, Mizuho said.
"We don't sense much appetite from outright yield buyers to step in prior to U.S. CPI, but after the lagging the rally in 5Y+ maturities yesterday, some catch-up may be possible post-supply."
The German Finance Agency will offer EUR5.5 billion in the September 2024 Schatz, with auction results due at 0930 GMT.
Oil prices held minor gains as supply concerns balanced with demand worries.
While oil has largely remained on a lower trajectory, investors still expect supply concerns to dominate later in the year pushing prices higher.
UBS has lowered its end-of-year Brent forecast to $110 a barrel, from $125 a barrel but expects an end to U.S. strategic reserve oil sales and EU efforts to halt Russian purchases will push prices higher in the coming months.
UBS expects Brent to hit $125 a barrel in March 2023.
Metals prices were mixed with traders looking ahead to the U.S. inflation data to provide more indications as to the state of the economy.
Gold has been "able to defend that $1,700 support level on a number of occasions in recent days, suggesting that dip-buyers are trying to take advantage of downbeat prices," City Index said.
If there's a "weaker-than-expected print on CPI, then this would further support the 'peak inflation' narrative" and consequently City Index said it would "expect the metal to rise a bit more meaningfully on the back of that."
ANZ said base metals may be supported by the onset of China's construction season, which in turn could boost the beleaguered Chinese property market.
It added that more Chinese cities have announced credit support and subsidies for home buyers.
DOW JONES NEWSPLUS
Germany's Economic Expectations Fall Further in September
Expectations for economic growth in Germany worsened in September for the third consecutive month, data from the ZEW economic research institute showed Tuesday.
The index of economic expectations fell to minus 61.9 in September from minus 55.3 in August. Economists polled by The Wall Street Journal had projected the index declining to minus 58.0.
German Inflation Resumed Upward Trend in August
German inflation accelerated again in August after easing in both June and July, confirming the first estimate, in a sign that price pressures persist as the energy supply crisis lingers.
The consumer price index--a measure of what consumers pay for goods and services--rose 7.9% in August compared with the same month a year ago measured by national standards, up from 7.5% in July, final data from German statistics office Destatis showed Tuesday.
UK Unemployment Rate Fell to Lowest Level Since 1974 in Three Months to July
The U.K.'s unemployment rate decreased to its lowest level since 1974 in the three months to July and pay growth accelerated, a sign the country's job market remained tight despite some easing in labor demand.
The U.K.'s unemployment rate was 3.6% in the three months to July, down from 3.8% in the preceding three-month period, data from the Office for National Statistics showed Tuesday. Economists polled by The Wall Street Journal expected the jobless rate to increase to 3.9%.
ProSiebenSat.1 Buys Streaming Platform Joyn in Full, Cuts 2022 Earnings Outlook
ProSiebenSat.1 Media SE said it is lowering its earnings outlook after acquiring all shares in streaming platform Joyn from media conglomerate Warner Bros Discovery Inc.
The German broadcaster said Tuesday that it would acquire the outstanding 50% of the shares in Joyn, a streaming platform that it aims to put at the center of its digital entertainment business.
Ocado Group Warns of Lower FY 2022 Sales as Inflation Hits Consumers
Ocado Group PLC said Tuesday that revenue increased in the third quarter of fiscal 2022, but that it expects to see a decline in full-year sales as inflation hits consumers' spending ability.
The online grocer and retail-technology specialist said revenue for the 13 weeks ended Aug. 28 increased 2.7% to 531.5 million pounds ($621 million) a year earlier, boosted by an 11% rise in average orders per week.
UBS to Raise 2022 Dividend
UBS Group AG said Tuesday that it will raise the accrual for the 2022 ordinary dividend to $0.55 a share from $0.51.
The adjustment marks an increase of 10% from the previous year's dividend, the Swiss bank said.
Russian Swap Auction Prompts Strong Investor Demand for Moscow's Debts
Investors placed orders for over $1 billion of Russian bonds as part of a long-anticipated credit-default swap auction on Monday, more than three months after the Kremlin was ruled in default for failing to pay back creditors.
The high demand for Russia's sovereign bonds reflects growing investor appetite for its bonds despite punishing sanctions on the Kremlin. While U.S. investors were forbidden from purchasing Russian debt this summer, the U.S. Treasury Department has allowed for the bonds to freely trade over the next week to best allow for investors to settle their swap contracts.
Russia Withdraws More Forces From Northeast Ukraine as Kyiv Presses Advance
Russia withdrew more forces from the Kharkiv region on Monday, retreating from a swath of northeastern Ukraine as Kyiv's forces continued their push into Russian-occupied territory and the government pledged that all areas seized by Moscow would be retaken.
"The Russian occupiers are running so fast under pressure from Ukrainian soldiers that they're leaving whole ammunition arsenals behind," Ukraine's SBU intelligence service said. "We know what to do with them and will be sure to use them according to purpose-against the enemy."
U.S. Gasoline Prices Are Down 13 Weeks in a Row
U.S. gasoline prices have fallen for 13 weeks in a row, the longest consecutive weekly slide in more than three years, as global demand for oil continues to fall.
The average price of regular unleaded gasoline fell to $3.70 a gallon, the lowest since early March, according to OPIS, an energy-data and analytics provider, and is approaching the average price that predated Russia's invasion of Ukraine. Average gas prices have fallen 26% from the record above $5 a gallon set in June.
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