EMEA Morning Briefing : Stock Futures Muted as U.S. Data Eyed

MARKET WRAPS

Watch For:

EU retail trade; Germany manufacturing orders; trading updates from Harmony Gold, Currys, Ashmore Group, Norwegian Air

Opening Call:

European stock futures were muted early Thursday. Asian stock benchmarks regained some ground after a selloff earlier this week; the dollar edged lower; Treasury yields and gold were steady; while oil futures rose.

Equities:

Stocks could tread water Thursday as U.S. data remains firmly in focus, including the highly anticipated jobs report due Friday, amid worries over the health of the U.S. economy.

Investors are on edge ahead of the monthly jobs report, which could influence the pace of the Federal Reserve's expected rate cuts-and signal whether the economy is closer to a recession or a soft landing.

"The print on Friday is going to be a major inflection point for the 'immaculate disinflation' narrative," said Adam Hetts, global head of multi-asset at Janus Henderson, referencing investors' ideal scenario in which inflation abates without a spike in unemployment.

Forex:

Since August, "the market is now pricing a Fed easing cycle that is so large in relative terms, that the dollar is expected to lose its top-3 high-yielding status by next year," said George Saravelos, global head of currency research at Deutsche Bank. "This would be a material development and in our framework shift the dollar into a much more bearish regime."

"So the key question for our medium-term dollar view is do we agree with this pricing? We don't," said Saravelos. "As long as the dollar remains a high-yielder, there is very convincing evidence that it stays strong."

Bonds:

Yields on 2- and 10-year U.S. government debt finished Wednesday's session at their lowest levels since May and July of 2023, after data on job openings reinforced investors' concerns about a slowing U.S. economy.

"The markets may not be as nervous as they were a month ago, but they're still looking for confirmation the economy isn't cooling off too much. So far this week, they haven't gotten it," said Chris Larkin, managing director of trading and investing at E-Trade from Morgan Stanley.

"The market is also fighting an uphill seasonal battle, since September has historically been the market's weakest month," Larkin said.

Energy:

Oil futures advanced early Thursday after falling overnight to below $70 a barrel for the first time since 2023.

However, sentiment remains bearish amid demand concerns, ANZ said. China's indicators of factory activity showed a contraction for a fourth straight month in August while weakness in its property sector persists. Meanwhile, the Fed's Beige Book showed declining U.S. economic activity, while the prospect of easier monetary policy has failed to excite investors, ANZ added.

Metals:

Gold was little changed in Asia. The precious metal erased earlier gains amid further signs of a cooling labor market, ANZ said, noting that U.S. job openings fell in July to their lowest level since the start of 2021. The market will be watching key jobs data due Friday to provide clues to the extent of interest rate cuts by the Fed, ANZ added.

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Copper edged higher in Asian trade amid a softer dollar. Sentiment remains volatile and markets are more sensitive toward macro data as expectations for a U.S. recession are rising as investors doubt the resiliency of the economy, Nanhua Futures said. However, fundamentals for the base metal remain stable, it added. Overall, copper prices may remain relatively weak, Nanhua Futures said.

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Iron ore has fallen to $90 a ton recently as traders focus on continued weakness in China's property market, Westpac said. The property slump bodes poorly for demand for construction materials.

TODAY'S TOP HEADLINES

Two-thirds of Fed districts report flat or declining activity, Beige Book says

Nine out of 12 Federal Reserve regional districts reported flat or declining economic activity in August, according to the central bank's so-called Beige Book report released on Wednesday. That's up from five districts that reported weak conditions in the last report in mid-July.

The four districts that have experienced weaker conditions than in the prior report appeared to be Philadelphia, Richmond, Atlanta and St. Louis.

Investors Are In a Love-Hate Relationship With the Stock Market

Investors can't seem to decide whether they love or hate this market. That isn't necessarily a bad thing.

The S&P 500 has so far been pummeled this week, with Tuesday's 2.1% fall being followed by flat Wednesday trading. The malaise has spread beyond the U.S.: Japan's Nikkei 225, the Stoxx Europe 600 and the MSCI Emerging Markets Index all tumbled after the U.S. decline.

A new recession warning is about to flash as investors await August unemployment report

An earlier version of this article incorrectly identified the month of Friday's U.S. jobs report. The error has been corrected.

The U.S. bond market was about to flash another recession signal on Wednesday, with a closely followed plot along the Treasury yield curve on the doorstep of closing in positive territory for the first time since 2022.

Jeep Cuts Output of Wranglers and Grand Cherokees

Jeep's parent company has pressed pause on making two of its top-selling U.S. models.

Factories temporarily stopped producing the Jeep Wrangler and Grand Cherokee sport-utility vehicles in the past week, people familiar with the matter said. Those models were among Jeep's bestsellers through the first half of the year.

Nvidia Invests in Japanese AI Company's $100 Million Funding Round

Nvidia is investing in Sakana AI and partnering with the artificial-intelligence research company to spur AI development in Japan.

Sakana AI, founded by Google engineers in 2023, announced the collaboration with the U.S.-based chip giant on Wednesday, saying it raised over $100 million from a group of investors.

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Expected Major Events for Thursday

05:45/SWI: Aug Unemployment

06:00/ROM: Jul Retail trade

06:00/GER: Jul Manufacturing orders

06:00/GER: Jul Manufacturing turnover

06:30/HUN: Jul Retail Sales

06:30/HUN: Jul Preliminary External Trade

07:00/SVK: 2Q GDP

07:00/SVK: Jul Internal trade, incl Wholesale & Retail

07:00/CZE: Jul Retail Trade

07:00/SPN: 2Q Housing Price Index

08:00/UK: Aug UK monthly car registrations figures

08:00/BUL: 2Q GDP - preliminary data

08:30/UK: Aug S&P Global UK Construction PMI

08:30/GER: Ifo Economic Forecast

09:00/GRE: Jul Labour Force Survey

09:00/EU: Jul Retail trade

09:00/CYP: Aug CPI

10:00/IRL: 2Q GDP

10:00/IRL: 2Q Balance of Payments

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

09-05-24 0017ET