European Midday Briefing : Week Ahead Heralds Key Inflation Prints

MARKET WRAPS

Stocks:

European stocks started the week with solid gains, as investors looked ahead to some key data releases including inflation figures in the U.S. and U.K. that could confirm policy tightening was near an end.

"Coming off the back of multi-month periods of stagnant or rising inflation, the expectation of a notable decline across both figures should help appease those calling for additional rate hikes in the coming months," https://urldefense.com/v3/__http://Scopemarkets.com__;!!F0Stn7g!CwlVsF2CPlo7pJBPo96HbX8WEJ5y63BDxUb1nMu0uQLVMGLlA5USjjv2b0C351PDbOSsWLgw0bI0ci1E3CNBO4PtnVRy_7AcpC9K0xlQSE4$ said.

However, political uncertainty in the U.S., as lawmakers in Washington race to pass a stopgap government funding bill before Friday's deadline, will likely add a note of caution.

Stocks to Watch

Renault's fully-electric vehicle business, Ampere, should be spun off instead of becoming a publicly listed company, Jefferies said. It likes the idea of separating the electric and internal combustion engine businesses, but has strong reservations about an IPO, saying that it will unnecessarily dilute Renault shares.

"Distributing Ampere shares to existing shareholders would minimize dilution, achieve the benefits of Ampere separation and minimize the risk of capital loss by letting markets determine the absolute and relative valuation of Renault's [internal combustion engine] and EV parts."

U.S. Markets:

Stock futures slipped after indexes finished last week on an upbeat note.

Investors are positioning for a year-end rally, options-market data suggests, after the Federal Reserve hinted it probably won't raise interest rates again in 2023.

Treasurys rose in price, pulling 10-year yields down. Yields had edged up late on Friday after Moody's cut its outlook for the U.S. government's credit rating to negative. Many investors have cited swelling deficits as a worry of late.

Tyson Foods headlines a comparatively light earnings slate. On the data side, the coming days will be busy, with readouts due this week on consumer and producer prices, retail sales and housing starts, among other things.

Forex:

The dollar edged lower after Moody's on Friday switched its AAA rating on the U.S. to negative, and the currency could fall further later in the week, ING said.

It expects Tuesday's inflation data to give a flat reading on the month, which should be neutral for the dollar, though weak U.S. retail sales data on Wednesday could send it lower.

Uncertainty over whether the U.S. government can avoid a shutdown by the end of this week may also hurt the dollar, ING added.

Energy:

Oil futures were more down more than 1% as worries about the global economy and growth weighed.

Peak Trading Research said the macro mood was mixed but energy markets were pulling the commodity space lower.

"Moody's downgraded its outlook on the U.S. credit rating this weekend, citing large deficits, rising interest costs, and political instability ahead of a possible government shutdown this Friday."

Investors will be looking to Monday's OPEC oil market report and Tuesday's report from the International Energy Agency.

Metals

Base metals were mixed with gold slightly higher as weak economic growth counters against support from geopolitics.

"Renewed geopolitical tensions will protect the downside in gold prices, " ANZ said. "This is in addition to the conclusion in the U.S. monetary tightening cycle and an imminent peak in the U.S. dollar."

ANZ added that central bank buying should provide further support, and prices will have to break below $1,930 an ounce before further selling.

EMEA HEADLINES

Novo Nordisk's Wegovy Shows Heart Benefits Beyond Weight Loss, New Data Suggests

The effectiveness of Novo Nordisk's blockbuster obesity treatment Wegovy in reducing heart attacks and strokes could be due to more than weight loss alone, according to new clinical trial data.

The surging popularity of the drug has seen the Danish pharmaceutical giant scramble to boost production as it struggles to meet demand. It has been forced to limit supply of lower-strength doses of Wegovy in the U.S. as it seeks to safeguard supplies for current patients, and has outlined plans to invest more than $6 billion to boost production capacity.

Solvay, Syensqo Set Financial Targets Ahead of Planned Split

Solvay and Syensqo outlined new financial targets ahead of their planned separation.

EssentialCo, which will retain the Solvay name, said it is targeting for annual average organic underlying earnings before interest taxes depreciation and amortization growth at a mid-single digit percentage range.

BAE Systems Expects Strong Growth, Driven by Heightening Geopolitical Risk

BAE Systems expects to report another year of robust sales and earnings growth and strong cashflow generation due to heightened geopolitical risk, and backed its full-year guidance.

The U.K. defense-and-aerospace group said Monday that order flow on both new and existing programs remains strong, underpinning expectations for good top-line growth in the coming years.

GLOBAL NEWS

This week's October inflation data looms large on Washington's economic radar

U.S. inflation data for October is clearly the economic highlight for markets, economists and policymakers this coming week. That's because if price pressures continue their cooling trend from the summer, the Fed might be able to refrain from any more interest-rate hikes.

Stock-market rally faces make-or-break moment. How to play U.S. October inflation data.

It has been a while since a hot inflation report sparked wild gyrations in U.S. stocks, like it frequently did in 2022, but that doesn't mean Tuesday's consumer price index for October is destined to be a snooze-fest for markets.

To the contrary, some Wall Street analysts believe it is possible, even likely, that the October CPI report could emerge as a critical catalyst for stocks, with the potential to propel the market higher on a softer-than-expected number.

China's Spending on Green Energy Is Causing a Global Glut

China's newest solar-energy manufacturers include a dairy farmer and a toy maker.

The new entrants are examples of a green-energy spending binge in China that is fueling the country's rapid build-out of renewable energy while also creating a glut of solar components that is rippling through the industry and stymying attempts to build such manufacturing elsewhere, particularly in Europe.

Israel Rebuffs Calls for Palestinian Authority to Rule Gaza

Israel is diverging from the U.S. and Arab world on a postwar solution for Gaza, after Prime Minister Benjamin Netanyahu ruled out a role for the Palestinian Authority, which Washington and some Arab leaders prefer to take over from Hamas.

Netanyahu, under pressure from his right-wing political base, said Saturday Israel wants a solution other than the Palestinian Authority, led by President Mahmoud Abbas. The Israeli leader didn't put forward an alternative, saying only that Israel wants to avoid governing Gaza and needs to maintain security control over the strip after it defeats Hamas, which Netanyahu has sworn to do.

Ukraine War Slips Toward Violent Stalemate

Ukraine's 47th Mechanized Brigade was equipped with Western armored vehicles and trained for a lightning summer counteroffensive that was supposed to tip the war firmly in Kyiv's favor.

These days, after advancing only a few miles over several months in the south, the brigade is fighting to fend off a Russian attack on a small industrial city in eastern Ukraine.

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

(END) Dow Jones Newswires

11-13-23 0526ET