EMEA Morning Briefing : Stock Futures Little Changed as U.K. Budget Eyed

MARKET WRAPS

Watch For:

ECB Financial Stability Review, EU FCCI Flash Consumer Confidence Indicator; UK Autumn Statement, CBI Industrial Trends Survey; trading updates from ThyssenKrupp, Johnson Matthey, Sage Group, Severn Trent, Britvic, TCS Group, Kingfisher, Iberdrola

Opening Call:

Stock futures were little changed early Wednesday as trading thins ahead of a U.S. holiday. Asian stock benchmarks were mixed; the dollar and Treasury yields steadied; while oil and gold futures edged lower.

Equities:

European stock futures were little changed amid mixed cues, while trading activity is expected to be muted ahead of the U.S. Thanksgiving holiday.

On the one hand, the Fed's latest meeting minutes generated little market reaction and Nvidia's reported results beat forecasts, Saxo Markets said, but noted that risk-on sentiment has been hindered by Wall Street's overnight losses.

Geopolitics may be in focus after Israel and Hamas reached a deal to free 50 civilian hostages held by militants in Gaza in return for the release of Palestinian prisoners from Israeli jails and a series of pauses in the fighting.

Meanwhile, U.K. Treasury chief Jeremy Hunt is expected to announce some tax-cutting measures at today's autumn statement but these could be limited and won't benefit the economy in the near term, Berenberg economist Kallum Pickering said.

The government "is unlikely to change the cautious approach" followed since previous prime minister Liz Truss's 2022 mini budget sparked market panic, he said.

Forex:

The U.S. dollar steadied against peers early Wednesday in possible position adjustment ahead of the U.S. Thanksgiving holiday on Thursday.

The main market theme has been consolidation, Commerzbank said. There's also been limited reaction in foreign-exchange markets to the FOMC minutes, which reiterated the Fed's cautious approach on future rate moves, the bank said.

Bonds:

The U.K.'s 2023-24 gilt remit is expected to be revised down by around GBP3 billion to GBP234 billion, UBS said. The key driver will be the fact that the deficit, or public sector net borrowing, is "tracking better than expected."

Risks are skewed toward a larger reduction in the gilt remit "if not all the 'fiscal headroom' is spent," UBS said. The Debt Management Office will announce the planned gilt remit just after Wednesday's autumn budget statement.

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Longer-dated Treasury yields held mostly steady overnight after the Fed's minutes showed officials remained concerned that the strong U.S. economy would cause inflation to reaccelerate.

"The committee seems to be in a 'wait and see' mode, willing to be patient as more data helps clarify the inflation trajectory," said Jeffrey J. Roach, chief economist at LPL Research.

Energy:

Oil pulled back slightly early Wednesday. Recent losses may have paved the way for a further extension of supply cuts by Saudi Arabia and Russia, Han Tan, chief market analyst at Exinity Group.

Saudi Arabia is likely to roll over its 1 million barrels/day voluntary reduction through 1Q 2024, Citi said. Russia is expected to extend its 300,000 barrels/day production cut, though compliance may slip over time, the bank said.

Metals:

Gold edged lower in Asia. Physical demand appears strong, with Switzerland's gold exports increasing to 151.3 tons in October from 99.1 tons in September, ANZ said. Also, gold shipments to India tripled to 49.4 tons ahead of the country's festive demand, the bank noted.

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Copper fell slightly after rising overnight amid supply disruptions in Panama. Goldman Sachs thinks the recent copper rally will extend into the end of 2023 and early 2024 on expectations of more China easing in the near term and larger-than-expected supply disruptions in Panama.

Copper prices have also been supported by a weaker U.S. dollar, Goldman said.

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Iron ore futures gained, with sentiment boosted by the Chinese government's recent stimulus measures for the property market.

ANZ notes a media report that the Chinese government is drafting a list of 50 property developers eligible to obtain funding, which could help steel demand from the construction sector to stabilize.

TODAY'S TOP HEADLINES

The Fed Wants More Evidence Before Changing Rate Stance

Federal Reserve officials were unwilling to conclude they were done raising interest rates when they decided earlier this month to extend a pause in rate increases.

But minutes of their most recent policy meeting suggested they might be comfortable holding rates steady for at least the rest of the year.

A TIPS Auction Saw Its Highest Yield Since 2009, Thanks to Slowing Inflation

Tuesday's sale of 10-year Treasury inflation-protected securities was weak, a sign that traders believe inflation will continue to decelerate.

On Tuesday, investors were offered $15 billion in 10-year Treasury inflation-protected securities, or TIPS, which are U.S. government debt securities whose principal, or face value, goes up and down with the pace of inflation. The auction was awarded a 2.18% yield at the upper end, the highest yield offered at an auction on 10-year TIPS since Jan. 6, 2009.

Israel, Hamas Reach Deal to Release 50 Hostages

Israel said it agreed to a deal with Hamas to free 50 civilian hostages held by militants in Gaza in return for the release of Palestinian prisoners from Israeli jails and a series of pauses in fighting.

The Israeli cabinet approved the deal after a long deliberation that started Tuesday and went into the early morning hours of Wednesday in Jerusalem. It capped weeks of painstaking negotiations brokered by Qatar, Egypt and the U.S., marking the first major diplomatic breakthrough since the war began on Oct. 7. Hamas confirmed the deal in a statement.

Blackstone Nears $2.5 Billion Deal to Buy Software Developer Civica

Blackstone is in advanced talks to buy Civica in a deal valuing the U.K.-based software developer at close to $2.5 billion including debt, according to people familiar with the matter.

The tie-up, if completed, could be announced as soon as Wednesday. It would mark Blackstone's latest bet in the U.K. following its recent purchases of two hotels-one in Birmingham and another outside of Edinburgh-and a project to build affordable housing across the U.K.

U.S. Warns Iran Is Weighing Sending Short-Range Missiles to Russia

WASHINGTON-The U.S. fears Iran is preparing to provide Russia with advanced short-range ballistic missiles for its military campaign in Ukraine, U.S. officials said Tuesday.

Iran has already provided Russia with armed drones, guided aerial bombs and artillery shells, U.S. officials said.

Nvidia's Sales Surge, With No End in Sight for AI Boom

Nvidia reported another quarter of record sales and gave a strong revenue outlook, pointing to red-hot demand for chips that underpin the artificial-intelligence boom.

Huge investments in AI by tech giants from Microsoft to https://urldefense.com/v3/__http://Amazon.com__;!!F0Stn7g!FyECz3uTihnufdBy3x2YXpNGFcgi-dycvRFh8IKKCsyKnX09_vCpzV0IyH9UHGd8AEu2_u4q7CT3m-q0uoLzAwxHyfiHCcmUyv3FmSjxkiI$ and by other large corporations have helped propel Nvidia's sales to unprecedented levels in recent quarters.

OpenAI Talks Continue as Sam Altman, Company Push to Reunite

The turmoil and uncertainty at OpenAI rolled into Tuesday, as the startup's leadership tried to negotiate the return of Chief Executive Sam Altman with the company's board that ousted him.

Meanwhile, OpenAI's largest shareholder, Microsoft, is planning a soft landing for those employees who said they might leave the company if Altman doesn't return and moves to the software giant.

Binance Founder Changpeng Zhao Steps Down, Pleads Guilty

The chief executive of Binance, the largest global cryptocurrency exchange, stepped down and pleaded guilty to violating criminal U.S. anti-money-laundering requirements, in a deal that might preserve the company's ability to continue operating, according to court documents.

Changpeng Zhao appeared in Seattle federal court Tuesday and entered his plea, according to court records. Prosecutors accused Binance, which Zhao owns, of facilitating transactions with sanctioned groups. Binance encouraged U.S. users to obscure their location so the firm could avoid complying with U.S. anti-money-laundering laws, prosecutors said.

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Expected Major Events for Wednesday

05:30/NED: Nov Consumer confidence survey

07:00/DEN: Nov Consumer expectations

07:00/DEN: Oct Central Government Finance & Debt

07:00/DEN: 3Q Labour force survey

07:00/NOR: 3Q Labour Cost Index - preliminary figures

09:00/POL: Oct Agricultural prices

09:00/POL: Oct Retail Sales

09:00/ICE: Oct Labour Force Survey

10:00/BEL: Nov Consumer Confidence Survey

10:00/MLT: Oct RPI

11:00/UK: Nov CBI Industrial Trends Survey

15:00/EU: Nov FCCI Flash Consumer Confidence Indicator

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

(END) Dow Jones Newswires

11-22-23 0017ET