EMEA Morning Briefing : Shares Could Chalk Up Gains; Focus on Powell Speech, Nvidia Earnings

MARKET WRAPS

Watch For:

Flash PMI from Eurozone, Germany, France, UK; EU FCCI flash consumer confidence indicator; trading updates from Sasol, Prosus

Opening Call:

Shares look set to open in positive territory in Europe on Wednesday, ahead of Friday's widely anticipated Jackson Hole speech by U.S. Federal Reserve Chair Jerome Powell and Nvidia's earnings. In Asia, stock benchmarks were mixed; Treasury yields fell; the dollar weakened; while oil was mixed and gold gained.

Equities:

European stocks could continue chalking up gains upon opening on Wednesday, with the market still focused on two events this week: Wednesday's quarterly report from Nvidia, which could test investors' faith in the artificial-intelligence trade, and Friday's speech from Fed's Powell, which could hold clues to the path of interest rates.

Money managers will scrutinize Powell's remarks for signs of how committed officials are to lowering inflation to their target level and whether they plan to raise rates again to do so.

"The Fed holds all the keys. That's what everybody's watching," said Frost Investment Advisors.

A suggestion from Powell "that investment and therefore potential economic growth may be moving higher, as a result of the climate transition or digital infrastructure required for artificial intelligence, could be perceived as hawkish, since it would suggest that the policy rate could stabilize at a higher level," said New York Life Investments.

Traders are also preparing for results from Nvidia, which has soared this year on investors' excitement about artificial intelligence technology. The chip maker's shares have more than tripled this year, making the company the top performer in the S&P 500.

If Nvidia's results or comments from company executives were to throw cold water on the investing case for artificial intelligence, it could threaten the rally in tech stocks that has helped power the market this year.

Forex:

The dollar lost ground in Asia amid falling Treasury yields, which undermine the appeal of U.S. fixed-income assets and demand for the U.S. currency.

Market participants have remained cautious about the Fed's interest-rate outlook, Commerzbank said.

They will probably look to Powell's speech at the Jackson Hole Economic Symposium for clues on this outlook, it added.

Powell will reinforce a "hawkish until further notice" message, said Torsten Slok, chief economist at Apollo Global Management. The Fed will "just continue to be in a wait-and-see mode and monitor" upcoming data, he said.

"I still think that the status quo of what they said in the last press conference including what came out in the minutes last week will be also the message on Friday," when Powell speaks.

Bonds:

Treasury yields declined after U.S. July existing home sales data came in lower than expected.

Existing sales were 4.07 million, down from June's 4.16 million and compared with the consensus of 4.15 million in a WSJ survey.

Piper Sandler said supply "is up smartly from its early 2022 low," a sign that demand is weakening faster than supply. They expect the imbalance to increase down the road and "housing to suffer another leg down next year," but for now "the sector will likely remain stable."

Powell's speech at the Fed's annual symposium in Jackson Hole is likely to reinforce the "higher for longer" message being seen in U.S. rates, "but we don't expect much commitment to a September hike or much change to the data dependent tone," said TD Securities.

Fed funds futures traders are currently pricing in an 84.5% probability that the Fed will leave interest rates unchanged at a range of 5.25%-5.5% on Sept. 20, according to the CME FedWatch Tool. The chance of a 25-basis-point rate hike to a range of 5.5%-5.75% at the subsequent meeting in November is seen at 39.9%.

Energy:

Oil futures were mixed amid divergent signals.

"The possibility of lower-for-longer OPEC+ supply given Saudi's reiterated commitment to cuts is bullish," Goldman Sachs said.

However, a further rise in supply from Iran adds a bearish risk, it said.

In addition, "China news is mixed, with downside risk to GDP from the property slump but a still solid China oil demand nowcast," it noted.

Worries about interest rates may also be affecting trade, ahead of the central bankers' gathering at Jackson Hole this week.

"There's always been a risk of U.S. rates remaining higher for longer, while China's recovery has been sluggish for months, as has their response to it," Oanda said. "We need to see a significant change in the trend of the data to seriously change the outlook for crude and we haven't seen that."

Metals:

Gold rose in Asia after the recent selloff in bond markets eased.

The decline in Treasury yields gave some support to investor demand for the precious metal, ANZ said.

Bond yields move inversely to prices, and lower yields tend to boost the appeal of the non-interest-bearing metal.

In focus is the Jackson Hole symposium this week, which investors will be watching for more clues on the Fed's policy stance.

"Powell's intervention could create some volatility as traders monitor any hints over the developments in monetary policy in particular after the release of the Federal Reserve's minutes created some uncertainty," Wael Makarem, senior market strategist, MENA at Exness, said.

"Subsequent economic data on the U.S. job market and on inflation could determine the next steps in monetary policy and could affect gold's performance," he said.

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Copper prices were higher after Beijing released support measures to boost the yuan.

China pushed up funding costs in the offshore market and set a record with its stronger-than-expected reference rate for the yuan on Tuesday.

"This triggered a wave of buying across the industrial metals complex, which has been under pressure in recent weeks amid the weak economic backdrop," ANZ said.

The gains were also supported by upbeat demand signals.

Chinese apparent demand for refined copper grew around 9% in the first half, according to data from the International Copper Study Group.

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Iron-ore futures climbed on expectations of stronger demand for the ferrous metal.

The Chinese government has reportedly approved the issuance of CNY1.5 billion of special financing bonds by 12 provinces, which could help improve funding for construction and infrastructure projects, ANZ Research said.

This report comes ahead of China's key construction period, it added.

TODAY'S TOP HEADLINES

Wall Street's China Dreams Slip Away

BlackRock became the first global asset manager to operate a wholly owned mutual fund business in China in 2021, roughly a year after Chief Executive Larry Fink called the country "one of the biggest opportunities."

Two years later, the world's largest asset manager is struggling to compete in the market. BlackRock ranks 145th among nearly 200 Chinese mutual fund houses in terms of domestic assets under management, according to Wind, a financial data provider. Fidelity International and Neuberger Berman's wholly owned China subsidiaries rank even lower.

Commerce Secretary Gina Raimondo to Visit China

WASHINGTON-Commerce Secretary Gina Raimondo is heading to China this weekend bearing a portfolio of difficult economic issues while pushing forward an effort by both governments to stabilize rocky U.S.-China relations.

Raimondo's four-day visit, which begins Sunday and includes stops in Beijing and Shanghai, has been months in the planning. In announcing the trip, the Commerce Department said Tuesday that the visit is aimed at deepening communications with Beijing.

Mining Companies Want to Turn Scrap Metal Into Green-Energy Treasure

Some global mining companies are taking their hunt for materials that can power the energy transition to city scrapyards.

Rio Tinto and Glencore have signed deals this year to expand critical metals recycling, branching out from investments over the past decade that involve running giant mines in countries including the U.S., Australia and Congo.

Ukraine Chalks Up Small Advance in Southern Push

ZAPORIZHZHIA, Ukraine-Ukrainian forces said they had seized the village of Robotyne, taking another small step in Kyiv's efforts to cut through Russian defenses in southern Ukraine.

Robotyne's capture by Ukraine's 47th Mechanized Brigade on Tuesday gives Kyiv something to celebrate, after two months of hard fighting, substantial casualties and minimal gains since the long-awaited counteroffensive began.

Facebook Marketplace Lets Users Sell Recalled Baby Products, Lawmakers Say

A group of bipartisan lawmakers told Meta Platforms in a letter that it is not doing enough to prevent users from selling recalled products, including deadly baby items, on its Facebook Marketplace.

Four Congress members wrote a letter last week to Meta Platforms Chief Executive Mark Zuckerberg saying his company's actions have risked public safety. Meta doesn't appear to have taken action in response to several letters and thousands of federal requests to take down recalled-product listings, the letter said.

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Expected Major Events for Wednesday

04:30/NED: Aug Consumer confidence survey

06:00/DEN: Aug Consumer expectations

06:00/NOR: Jul Credit Indicator C2

06:00/DEN: 2Q Labour force survey

07:15/FRA: Aug France Flash PMI

07:30/GER: Aug Germany Flash PMI

08:00/EU: Aug Eurozone Flash PMI

08:00/ICE: Jul Labour Force Survey

08:30/UK: Aug Flash UK PMI

09:00/MLT: Jul RPI

12:00/POL: Jul Broad money M3

14:00/EU: Aug FCCI Flash Consumer Confidence Indicator

All times in GMT. Powered by Onclusive and Dow Jones.

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08-23-23 0016ET