EMEA Morning Briefing : Shares Seen Higher as Investors Await Fresh Economic Data

MARKET WRAPS

Watch For:

Manufacturing PMI data for Eurozone, U.K. France, Germany, Italy; U.K. house price index, Money and Credit; CPI data for Germany, Brandenburg, Baden-Wuerttemberg, Hesse, Saxony, Bavaria, North Rhine Westphalia; no major trading updates expected

Opening Call:

European stock futures were higher early Tuesday as markets reopen after the Easter break. In Asia, stock benchmarks mostly gained; Treasury yields were broadly lower; the dollar edged higher; while oil and gold futures advanced.

Equities:

European stock futures were tracking higher despite a broadly negative lead from U.S. stocks after new economic data on Monday prompted investors to dial back bets on interest-rate cuts this year.

An Institute for Supply Management report for March showed U.S. manufacturing activity expanded for the first time since the fall of 2022.

Investors focus will be on the manufacturing PMI data due later in Europe, the German inflation data and U.S. February factory orders. Comments of Fed officials speaking at some events will also be on the radar.

"Investors remain at the whim of the Federal Reserve," said Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors, adding that "the Fed continues to push back on the notion that they have to rush to cut interest rates."

This week, U.S. monthly jobs data for March due on Friday will be watched closely, with non-farm payrolls growth expected to fall following a 275,000 rise in February.

Forex:

The U.S. dollar edged slightly higher and may remain supported as Fed rate-cut bets fade. That comes after the ISM report overnight indicated that U.S. manufacturing activity expanded unexpectedly in March.

Waning Fed rate-cut risks as well as the divergence of solid growth dynamics for the U.S. versus sluggish growth for other major countries and regions suggest that any dips in the USD Index should be viewed as buying opportunities, Westpac Strategy Group said.

Bonds:

U.S. Treasury yields edged broadly lower after jumping by the most in more than a month on Monday on signs of persistent inflation in the Institute for Supply Management's manufacturing index and last Friday's PCE report.

Last week's fedspeak "hammered home that better inflation data is needed over the coming months to allow the Fed to begin to dial back the degree of restriction," Deutsche Bank economists said.

Energy:

Oil futures advanced after data showed business activity in the U.S. manufacturing sector expanded at a modest pace last month, while an Israeli air strike on the Iranian consulate in Syria threatened to worsen geopolitical tensions in the Middle East.

The Israeli airstrike has intensified tensions, raising the possibility of oil supply disruptions, ANZ said.

Global oil supply could be further curtailed as Mexico's state-controlled oil company Pemex said it plans to halt some crude exports over the next few months, it added.

Metals:

Gold gained but may be weighed by possible profit-taking following a recent rally to record highs.

The precious metal could face downside risks in the short term after March's surge as traders could seek to secure their gains, Daniel Takieddine, CEO MENA at BDSwiss said.

Gold may also be pressured by the potential waning of demand in the jewelry market due to high prices, Takieddine adds.

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Copper rose, supported by positive manufacturing data out of China.

Market sentiment for copper is improving amid the prospect of further supply tightness, ANZ Research analysts said, with ongoing supply issues in South American mines likely to curb any weakness for the base metal.

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Iron ore futures advanced with signals of fresh stabilization of prices supported by the better-than-expected manufacturing activity data from China, Westpac analysts said.

However, the China Iron and Steel Association has urged domestic mills to lower steel production amid the slowdown in the infrastructure and property sector which could weigh on iron ore, they added.

TODAY'S TOP HEADLINES

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Israel Blamed for Attack Killing Iranian General in Damascus

Syria and Iran accused Israel of a missile attack on an Iranian diplomatic building in Damascus that killed a senior Iranian general, in a potential escalation of a shadow war between Israel and Iran that has intensified during the war in Gaza.

Iranian state media said the attack on Monday killed a senior leader in the elite Quds Force of Iran's Islamic Revolutionary Guard Corps, which oversees Tehran's network of militia allies throughout the region. The commander, Gen. Mohammad Reza Zahedi, managed Iranian paramilitary operations in Syria and Lebanon, according to Iranian state media and U.S. officials.

Here's why the Fed and other experts on the economy missed the mark on inflation

Last year, following the Great Inflation of 2021-22, central banks, leading academics and international institutions issued a smattering of postmortems. Yet even before the ink was dry on their analyses, inflation forecasts were being revised down almost as fast as they had been revised up during the two preceding years.

For example, in June 2023, the U.S. Federal Reserve's median projection for core year-on-year personal-consumption expenditures inflation (excluding food and energy prices) in the fourth quarter was 3.9%, with the Federal Open Market Committee's projections ranging from 3.6% to 4.5%. In actuality, it was 3.2%.

Inside the Russian Shadow Trade for Weapons Parts, Fueled by Crypto

A self-described Russian smuggler in China received a request from the manufacturer of the legendary AK-47 rifle. Russia's largest maker of small arms, Kalashnikov Concern, needed electrical parts for drones that have been among the most effective weapons against Ukrainian armor.

The smuggler, Andrey Zverev, took the late 2022 order to a Hong Kong electronics distributor. The U.S. was trying to cut off such deals, and even sanctions-wary Chinese banks were blocking payments from Russia.

Disney Winning Proxy Fight Against Trian With More Than Half of Votes Cast

Walt Disney has pulled ahead in its proxy battle against Nelson Peltz's Trian Partners with more than half of all shares voted, according to people familiar with the matter.

BlackRock, Disney's second-largest shareholder, is among the major investors backing Disney, the people said. The money manager owns around 78 million Disney shares, giving it a 4.2% stake worth around $9.5 billion, according to FactSet.

Two Members of Warner Bros. Discovery's Board Resign to Resolve Antitrust Concerns

Two independent board members of Warner Bros. Discovery resigned after the Justice Department told them it was investigating whether their presence on the board violated antitrust laws.

The two board members, Steven Miron and Steve Newhouse, have ties to the cable and broadband provider Charter Communications through Advance/Newhouse Partnership, a privately held company that owns about 12% stake in Charter, which Warner Bros. Discovery has said is a "peer group company" in regulatory filings.

Trump Media Shares Tumble After Recent Cash Crunch Disclosed

Shares of Truth Social's parent tumbled Monday after Donald Trump's social-media company disclosed it nearly ran out of cash last year and would have struggled to survive without the recent deal that took it public.

The stock slid 21%, giving it a market value of about $6.7 billion and erasing more than $1 billion from the presidential candidate's approximately 57% stake in the company.

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Expected Major Events for Tuesday

00:01/IRL: Mar Ireland Manufacturing PMI

05:00/NED: Mar Netherlands Manufacturing PMI

06:00/UK: Mar Nationwide House Price Index

06:00/ROM: Feb PPI

06:30/HUN: Feb PPI

06:30/SWI: Feb Retail Sales

07:00/CZE: 4Q LFSS Employment & Unemployment

07:00/POL: Mar Poland Manufacturing PMI

07:00/SPN: Mar Unemployment

07:15/SPN: Mar Spain Manufacturing PMI

07:30/CZE: Mar Czech Republic Manufacturing PMI

07:30/SWI: Mar procure.ch Purchasing Managers' Index

07:45/ITA: Mar Italy Manufacturing PMI

07:50/FRA: Mar France Manufacturing PMI

07:55/GER: Mar Germany Manufacturing PMI

08:00/GER: Mar Bavaria CPI

08:00/GER: Mar North Rhine Westphalia CPI

08:00/GER: Mar Saxony CPI

08:00/GER: Mar Brandenburg CPI

08:00/GER: Mar Hesse CPI

08:00/GER: Mar Baden-Wuerttemberg CPI

08:00/EU: Mar Eurozone Manufacturing PMI

08:30/UK: Feb Monetary & Financial Statistics

08:30/UK: Feb Bank of England effective interest rates

08:30/UK: Feb Money and Credit - Lending to Individuals, Lending to Businesses, Broad Money and Credit

08:30/UK: Mar S&P Global UK Manufacturing PMI

09:00/CYP: Jan Retail trade

09:00/CYP: Feb Retail trade

10:00/POR: Feb Industrial production index

12:00/GER: Mar Provisional CPI

16:59/AUT: Mar Unemployment figures

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

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

(END) Dow Jones Newswires

04-02-24 0015ET