EMEA Morning Briefing : Stock Futures Rise After Short-Lived Russia Revolt

MARKET WRAPS

Watch For:

Germany Ifo business climate index, Bundesbank monthly report; UK CBI distributive trades survey; trading updates from Carnival, Naspers, Associated British Foods

Opening Call:

European shares may start the week higher in the wake of an aborted mutiny in Russia over the weekend. In Asia, stock benchmarks traded mixed; the dollar fell slightly; Treasurys were little changed; while oil futures steadied and gold rose.

Equities:

European stock futures rose slightly early Monday, seemingly shrugging off concerns relating to the short-lived Wagner mutiny in Russia, though investors will likely continue to keep an eye on the aftermath of the weekend's events.

"As Monday's global markets are set to begin trading, investors are laser-focused on whether the short-lived Russia insurrection was only the beginning of a much deeper thunderbolt set to rock geopolitical, economic and market stability in the days and weeks ahead," said Greg Bassuk, chief executive officer at AXS Investments.

While a weakened Russia raises the prospects of a favorable outcome for Ukraine 16 months after Putin's decision to invade, the potential for further internal strife in the nation with the world's largest nuclear arsenal is less comforting, observers noted.

AXS Investment's Bassuk said further turmoil "could drive a bloodbath of market volatility amid its impact on the war with Ukraine, a shifting balance among the G-8 superpowers, and the already heightened potential for a U.S. and global recession."

But the quick termination of the rebellion could make it more of a "nonevent" for capital markets as trading resumes, said Marc Chandler, managing director at Bannockburn Global Forex.

While conventional wisdom sees signs of Putin's weakness, the Russian leader has often been underestimated, he said.

"The war in Ukraine is likely unaffected, and Kyiv's counteroffense thus far seems rather muted. The risk is that the war escalates if Kyiv resorts to medium- and long-range missiles to hit Russian assets in Crimea, and possibly in Russia proper," Chandler said.

Forex:

The dollar weakened slightly in Asia.

Risks are for a further strengthening in USD due to the deteriorating outlook for the global economy, which favors the safe-haven U.S. currency, CBA said. Also, political instability in Russia could support USD, the bank added.

Bonds:

Treasurys were little changed early Monday after yields fell Friday following a spate of interest-rate increases by global central bankers that left investors in a risk-averse mood.

"After bigger than expected rate hikes in the UK and Norway [on Thursday], the markets are nervous about upside rate surprises, and that was helping the dollar overnight, even before we saw the European PMI data," said Kit Juckes, chief FX strategist at Societe Generale.

"U.S. resilience is clear, but saying a recession looks unlikely is only encouraging if inflation can be brought down without one," Juckes said.

Energy:

Oil futures were steady early Monday, recovering from losses in the past week.

Everbright Futures said oil is likely to face elevated levels of uncertainty in the near term amid geopolitical risk from the Russia-Ukraine war. Global recession concerns are also likely to linger as an additional swing factor, it added.

Metals:

Gold futures rose in Asia, marking a recovery from broad losses in recent sessions, as investor worries about a global recession and further Fed tightening weighed on prices.

First Gold said the metal may face further downward pressure, given Fed officials' signal to further raise interest rates. It also noted that technical analysis suggests limited rebound momentum for the metal for now.

-

Copper prices rebounded from losses last week. Galaxy Futures said the base metal's recent weakness is likely a result of hawkish remarks from Fed officials, as well as tighter monetary policies by several central banks outside of the U.S.

The brokerage reckons downward pressure may emerge for copper trading in the near term, as imported supplies are rising in China, which could weigh on buying interest in the spot market and pressure prices across the board.

-

Iron ore prices fell in China as the commodity continued to pull back from a multiday rally earlier this month. The steelmaking material is likely to trade in a range-bound manner in the near term amid mixed signals, Everbright Futures said.

On the bright side, elevated steel production levels in China should support iron ore demand. But the brokerage warned of negative signals such as Fed officials' latest hawkish comments, geopolitical uncertainties and global recession worries, which could weigh on buying sentiment for iron ore futures.

TODAY'S TOP HEADLINES

This Bull Market Is Just Getting Started, Traders Bet

Everyone wants a piece of the new bull market.

Traders are piling into bullish options bets that would profit if the recent stock rally continues. There has been a flurry of trading tied to continued advances in everything from artificial-intelligence stocks to smaller, economically sensitive companies and regional banks.

What's next for markets after aborted Wagner mutiny leaves Russia's Putin weakened

Investors will start the week nervously sorting through the aftermath of a short-lived rebellion by the mercenary Wagner Group that's seen leaving Russian President Vladimir Putin weakened.

"As Monday's global markets are set to begin trading, investors are laser-focused on whether the short-lived Russia insurrection was only the beginning of a much deeper thunderbolt set to rock geopolitical, economic and market stability in the days and weeks ahead," Greg Bassuk, chief executive officer at AXS Investments in New York, told MarketWatch on Sunday in emailed comments.

Why Economies Haven't Slowed More Since Central Banks Hit the Brakes

The world's central banks raced at an extraordinary pace over the past year to cool inflation, but it hasn't proved enough-yet.

Economic growth remains mostly solid and price pressures strong across affluent countries despite sharply higher interest rates.

After Weekend of Chaos in Russia, Questions Remain Over Fate of Wagner

A day after Wagner's mutiny showed the unexpected fragility of President Vladimir Putin's regime, all the main players in Russia's worst political crisis in decades stayed out of sight-leaving Russians, and the world, to wonder whether the drama was really over.

Key unanswered questions include the future of Wagner's 25,000 heavily armed troops, of the paramilitary group's owner Yevgeny Prigozhin and of Russia's military leadership, which failed to stop his rapid advance toward Moscow. The details of agreements brokered by Belarusian President Alexander Lukashenko to halt looming bloodshed have yet to be made public.

Germany Is Dragging Down Europe's Economy

Europe's largest nation and its main growth engine has become the biggest drag on its economy.

At the heart of Germany's weakness is its high reliance on manufacturing, a feature of its economy that many Western governments are now trying to replicate with industrial strategies aimed at protecting or nurturing national corporate champions.

U.K. stock-market index turns negative for the year. 'Buy humiliation,' strategist advises.

Once up as much as 8%, the main U.K. stock-market index turned negative for the year on Friday, just a day after the Bank of England made a surprise half-point rate hike that some say will drag the economy into a recession.

In late afternoon trade on Friday, the FTSE 100 UK:UKX fell 0.7% to take the index into negative territory, putting the index on track to decline for a fifth consecutive session.

IBM Nears $5 Billion Deal for Software Provider

IBM is close to a deal to acquire software company Apptio for about $5 billion, according to people familiar with the matter, in a move that would bring the technology giant greater automation capabilities.

Apptio, owned by private-equity firm Vista Equity Partners, provides tools to help companies keep track of the software and services they use and better manage costs. The business has counted financial giants Allstate and Bank of America among its clients, according to its website.

Demand for Airliners Soars: 'We Cannot Make Planes Fast Enough'

LE BOURGET, France-Economies are wobbling around the world, but that isn't deterring travelers clamoring for airplane tickets.

The voracious postpandemic demand for flying doesn't show signs of cooling soon, according to aviation executives who gathered at this week's Paris Air Show. They point to recent large aircraft orders such as Indian budget carrier IndiGo's record 500-jet deal earlier this week.

Google's YouTube Is Testing an Online-Games Offering

YouTube is internally testing a product for playing online games, according to an email sent to employees at parent company Google, signaling ambitions to move beyond video hosting into games that can easily be played and shared between users.

Google recently invited employees to begin testing a new YouTube product called Playables, which gives users access to games on mobile devices or desktop computers, according to the email, which was viewed by The Wall Street Journal.

Write to [e-mail]

Expected Major Events for Monday

05:00/FIN: May PPI

07:00/CZE: Jun Business cycle survey (consumer/business confidence)

07:00/SPN: May PPI

08:00/GER: Jun Ifo Business Climate Index

08:00/POL: May Unemployment

08:00/ICE: May PPI

10:00/UK: Jun CBI Distributive Trades Survey

15:59/UKR: May PPI

23:01/UK: Jun Shop Price Index

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

Write to us at [e-mail]

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

(MORE TO FOLLOW) Dow Jones Newswires

06-26-23 0017ET